2020 (4) TMI 381 - AT - Service Tax

Extended period of limitation - CENVAT credit - exempt service or not - activity of trading - case of appellant is that the activity of trading is not a service and not an exempted service - non-maintenance of separate records for the receipt and utilization of the input services - period 2009-10 to 2012-13 - HELD THAT - The merits of the tax liability prior to 1 July 2012 need not be decided, as it has not been pressed by the learned Counsel for the Appellant. Extended period of limitation - HELD THAT - The Appellant had contended that audit had been done and the amount was reflected in the Books of Account and the Balance Sheet. Thus, the extended period of limitation could not have been invoked - The matter would have to be remanded to the Adjudicating Authority to re-determine the amount of Service Tax for the normal period. The imposition of penalty was also set aside as there was no malafide on the part of the Appellant. The submissions of learned Counsel for the Appellant that trading activity would not be a service after 1 July 2012 is an issue which can also be examined by the Commissioner - Appeal allowed by way of remand.

Summary

Issues:
1. Whether the Appellant is liable to pay an amount under Rule 6 of the Cenvat Credit Rules for exempted services.
2. Whether the extended period of limitation can be invoked.
3. Whether trading activity qualifies as a service.
4. Imposition of penalty under Section 78 of the Finance Act 1994.

Analysis:

Issue 1: Liability under Rule 6 of Cenvat Credit Rules:
The Appellant, engaged in trading of vehicles, availed Cenvat Credit for Service Tax paid on input services. The Commissioner alleged non-payment of service tax on exempted services due to lack of separate records for input services. The Commissioner held that trading activity falls under exempted services post clarification. The Appellant's contention was rejected, and penalty under Section 78 was imposed.

Issue 2: Extended Period of Limitation:
The Appellant argued against invoking the extended period of limitation, citing audit and proper reflection in the Books of Account. The Division Bench's decision in a similar case supported this argument, leading to the remand of the matter for re-determination within the normal period.

Issue 3: Classification of Trading Activity as a Service:
The Appellant claimed that trading activity is not a service post-July 2012, seeking reversal of credit. The Department argued that trading falls under the Negative List of Service, making Rule 6(3) applicable. The Division Bench suggested reconsideration by the Commissioner.

Issue 4: Penalty Imposition:
The penalty under Section 78 was set aside due to the absence of malafide intent. The Division Bench's decision supported this stance, emphasizing the lack of suppression with malicious intent in the Appellant's actions.

Conclusion:
The Tribunal upheld the Appellant's arguments regarding the extended limitation period and penalty imposition. The matter was remanded to the Commissioner for further determination on liability under Rule 6 and the classification of trading activity as a service. The impugned order was modified accordingly, and the appeal was disposed of.

This detailed analysis covers the key issues addressed in the judgment, outlining the arguments presented by both parties and the Tribunal's decisions on each matter.