2018 (10) TMI 325 - AT - Service Tax

CENVAT Credit - certain common input services that were used / utilized in or in relation to their trading activity also - non-maintenance of separate records - extended period of limitation. Held that - The Department was very well aware of the trading activity carried out by the appellant because the details of trading was available in the balance sheet of the appellant during the relevant period, on the basis of which, the demand has been raised. Therefore there is no suppression of facts on the part of the appellant with intent to evade payment of tax. Further it is found that the period involved in all the appeals is prior to the amendment effected in Rule 2(e) of the CCRS, 2004. The demand for the longer period is set aside and the appellants are liable to reverse the CENVAT along with interest only for the normal period - penalty also set aside - appeal disposed off.

Summary

Issues Involved:
- Demand of service tax credit on common input services attributable to trading activity
- Invocation of extended period of limitation
- Applicability of penalty under CCR
- Interpretation of law regarding trading as a service for tax purposes

Demand of service tax credit on common input services attributable to trading activity:
The appellants filed appeals against Orders-in-Original confirming demands of service tax credit on common input services used in trading activities. The appellant, engaged in manufacturing and taxable output services, was found to have availed CENVAT credits on input services related to trading. Show-cause notices were issued, leading to demands, interest, and penalties. The Tribunal considered the arguments of both parties and analyzed past decisions. It was noted that the Department was aware of the trading activities based on the appellant's balance sheet, indicating no intent to evade tax. The period involved predated an amendment in Rule 2(e) of the CCRS, 2004. Considering precedents and lack of suppression of facts, the demand for the longer period was set aside, and the appellants were directed to reverse CENVAT credits only for the normal period. Penalties imposed were also set aside.

Invocation of extended period of limitation:
The appellant contended that the extended period of limitation was not applicable as facts were known to the Department, and there was no suppression. Citing relevant decisions, the appellant argued against the invocation of the extended period. The Tribunal observed that details of trading were available in the balance sheet, indicating no intent to evade tax. Considering past rulings and lack of suppression, the Tribunal set aside the demand for the extended period and upheld the reversal of CENVAT credits for the normal period only.

Applicability of penalty under CCR:
The appellant relied on a specific case to support their argument against the penalty. The Tribunal considered this argument along with the overall context of the case. After reviewing submissions and relevant decisions, the Tribunal set aside the penalties imposed on the appellants.

Interpretation of law regarding trading as a service for tax purposes:
The learned AR argued that trading is not a service and referenced an amendment in Rule 2(e) to include trading as an exempted service. The Tribunal analyzed the retrospective nature of the amendment and referred to a case where trading activity was held not liable for service tax during the relevant period. By examining past decisions and the retrospective amendment, the Tribunal concluded that the demand for the longer period was set aside, and appellants were directed to reverse CENVAT credits only for the normal period.

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