2018 (11) TMI 1199 - AT - Central Excise

CENVAT Credit - common input services for trading as well as manufacturing activity - non-maintenance of separate records - Rule 6(3) of the CENVAT Credit Rules, 2004 - Held that - The issue decided in the case of M/S. SHANTI GEARS LTD. VERSUS PRINCIPAL COMMISSIONER OF GST & CENTRAL EXCISE (COIMBATORE) 2018 (6) TMI 378 - CESTAT CHENNAI where it was held that The appellants have reversed the credit, as under Rule 3(5), when they have cleared the goods as such. In a normal trading activity, the goods which are procured, are sold and there is no question of availing the credit of such goods or clearing them on the payment of duty. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Manufacture of gears, availing CENVAT Credit on common input services, removal of inputs to customers, alleged "trading" activity, maintenance of separate accounts for common inputs, invocation of extended period of limitation under Section 11A of the Central Excise Act, 1944.

Analysis:
The appellants, engaged in manufacturing gears and gear assembly, availed CENVAT Credit on service tax paid on common input services from 2011-12 to 2014-15. They also removed inputs to customers on payment of duty higher than the cost price, leading to an allegation of engaging in a "trading" activity. The issue raised was the eligibility of the appellants for credit on such activities and the requirement to maintain separate accounts for common inputs as per Rule 6(3) of the CENVAT Credit Rules, 2004. A Show Cause Notice dated 04.04.2016 was issued invoking the extended period of limitation under Section 11A, proposing a demand on the value of exempted clearances during the period. The Deputy Commissioner confirmed the demand, interest, and imposed a penalty, leading to the appeal.

During the hearing, the appellant's advocate highlighted a previous ruling by the Tribunal in a similar case, where it was established that the appellant had reversed credit under Rule 3(5) when clearing goods as such. The Tribunal's previous ruling emphasized that the trading activity in question involved availing credit on inputs and clearing goods under Rule 3(5), which did not fall under exempted services. The Tribunal's decision in the previous case was cited, leading to the conclusion that the demand could not be sustained, and the impugned order was set aside, allowing the appeal with consequential reliefs.

Based on the precedent set by the Tribunal in a previous case involving similar circumstances, the current appeal was allowed with consequential reliefs. The Tribunal reiterated that the trading activity in question, involving the clearance of inputs on payment of duty, did not constitute an exempted service under Rule 6 of the CENVAT Credit Rules, 2004. Therefore, the demand made by the Revenue was deemed unsustainable, and the impugned order was set aside, granting relief to the appellant.