2018 (8) TMI 691 - AT - Service Tax

CENVAT Credit - common input services used in trading activity - Department is of the view that the appellant have wrongly utilised Cenvat Credit of input services pertaining to services used in trading of automobile cars - Rule 6 (3a) of Cenvat Credit Rules, 2004. Held that - It is a matter of record that the appellant has been engaged in trading of automobile cars along with servicing of the cars and other automobile from the same premises and they have availed Cenvat Credit of various common input services which has been utilised towards both taxable services as well as for trading activity - trading activity abinitio cannot be considered as a service because the trading in the cars only involves transfer of property on financial consideration from the appellant dealer to various buyers of automobile cars. The Cenvat Credit facility of input services is only available to the output services rendered by any assessee and thus the Cenvat Credit of input services used in Trading activity is not allowable as per Cenvat Credit Rules, 2004. The appellant are not entitled for Cenvat Credit of common input services taken for trading of cars - Appeal dismissed - decided against appellant.

Summary

Issues:

1. Availment of Cenvat Credit on input services for trading activity.
2. Interpretation of Cenvat Credit Rules, 2004.
3. Requirement of maintaining separate accounts for input services.
4. Applicability of Cenvat Credit prior to 01/04/2011.
5. Legal status of trading activity as a service.
6. Precedents from Hon'ble Madras High Court and Tribunal's order.

Analysis:

1. The appellant was accused of availing Cenvat Credit on various input services for trading activity. The Department contended that trading does not qualify as a service under the Finance Act, 1994, and Cenvat Credit Rules, 2004. The absence of separate accounts for input services led to a demand for payment under Rule 6(3a) of the Cenvat Credit Rules, 2004.

2. The appellant argued that trading became an exempted service only from 01/04/2011, as per an amendment in the Cenvat Credit Rules, 2004. Therefore, they claimed that Cenvat Credit for input services could not be demanded before this date.

3. The Tribunal noted that the appellant engaged in both trading and servicing of automobile cars, utilizing common input services for both taxable services and trading. However, the Cenvat Credit facility is only available for output services, not for trading activities.

4. The Tribunal held that trading activity does not qualify as a service since it involves property transfer for financial consideration, which is not covered under the Cenvat Credit Rules, 2004.

5. Relying on the judgment of the Hon'ble Madras High Court and a Tribunal order, the Tribunal concluded that trading is neither a taxable nor an exempted service. Therefore, the appellant was not entitled to Cenvat Credit for input services related to trading activities. The appeal was dismissed based on this interpretation.

6. The Tribunal's decision was influenced by legal precedents emphasizing that trading does not fall under the purview of Cenvat Credit Rules, 2004, and is not considered a service for the purpose of availing Cenvat Credit. The judgment reinforced the ineligibility of Cenvat Credit for common input services used in trading activities, supporting the Department's stance on the matter.