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2025 (4) TMI 756 - AT - Central ExciseCENVAT Credit - trading activity - Demand of reversal of proportionate credit relating to exempted service - credit availed on Security Services which is also a common input service used by them in relation to manufacture of dutiable goods and trading services - Extended period of limitation - HELD THAT - As per the impugned order adjudication authority rejected the same in a casual manner by quoting that; however in the absence of evidence to prove that the parameters laid down in formula has been correctly followed it is not inclined to take cognizance of the claim that the procedure under Rule 6(3A) has been followed. Therefore the assesses are liable to pay the amount of 5% /6% as the case may be of the value of exempted service in terms of Rule 6(3) (i) of the Cenvat Credit Rules 2004 for the period April 2011 to December 2014. - it is found that without specifying the mistake or omission on the part of the appellant while assessing the proportionate Cenvat credit under Rule 6(3A) the same cannot be rejected. Invoking the extended period of limitation - HELD THAT - There are strong force in the submission made by the appellant. As regarding reversal of proportionate cenvat credit on common security services it was required to be made only from April 2011 when Rule 6(5) of Cenvat Credit Rules was omitted vide Notification No. 3/2011-CE (NT) dated 01.03.2011 w.e.f. 01.04.2011. Fact being so since the appellant had fully reversed the cenvat credit availed against common input services under Courier services and Telephone services and proportionately as per Rule 6(3A) for the Security Service the impugned order is prima facie unsustainable and liable to be set aside. Conclusion - i) Without specifying the mistake or omission on the part of the appellant while assessing the proportionate Cenvat credit under Rule 6(3A) the same cannot be rejected. ii) The extended period of limitation cannot be invoked without just cause particularly when the appellant has demonstrated compliance with credit reversal requirements. Appeal allowed.
ISSUES PRESENTED and CONSIDERED
The primary issue in this appeal concerns the demand for reversal of proportionate Cenvat credit related to exempted services, specifically in the context of a trading activity deemed as an exempted service under the Cenvat Credit Rules, 2004. The core legal questions considered include:
ISSUE-WISE DETAILED ANALYSIS Limitation and Reversal of Cenvat Credit The appellant argued that the demand for the period from March 2010 to January 2014 is barred by limitation, as the extended period was improperly invoked. The appellant had reversed Cenvat credit on common input services when audit objections were raised, which included 'Telephone' and 'Courier Services'. The Tribunal found merit in this argument, noting that the appellant had promptly reversed the credit and provided the methodology for such reversal. The Tribunal emphasized that without specifying any errors in the appellant's method, the rejection of their claim was unjustified. Reversal Requirement Prior to April 2011 The appellant contended that for the period prior to April 2011, they were not required to reverse credit on 'Security Services' due to Rule 6(5) of the Cenvat Credit Rules, 2004, which allowed availing common credit without reversal. The Tribunal agreed, highlighting that the requirement for reversal only arose after the omission of Rule 6(5) effective from April 2011. Compliance with Rule 6(3A) The appellant claimed compliance with Rule 6(3A) for the period from April 2011 to December 2014, having reversed proportionate credit with prior intimation to the Department. The Tribunal noted that the adjudication authority had casually dismissed the appellant's method without evidence of non-compliance with the prescribed formula. The Tribunal found the appellant's method consistent with Rule 6(3A) and criticized the adjudication authority for not specifying any discrepancies. Rejection of Appellant's Method The adjudication authority rejected the appellant's method for reversing Cenvat credit, asserting a lack of evidence for compliance with Rule 6(3A). The Tribunal found this rejection unfounded, as the appellant had provided detailed workings and communicated their methodology to the Department. The Tribunal emphasized that without identifying specific errors, the rejection was arbitrary and unjustified. Liability Under Rule 6(3)(i) The adjudication authority held the appellant liable to pay 5%/6% of the value of exempted services under Rule 6(3)(i). The Tribunal disagreed, noting that the appellant had followed the procedure under Rule 6(3A) and had already reversed the proportionate credit. The Tribunal concluded that the demand under Rule 6(3)(i) was unsustainable. SIGNIFICANT HOLDINGS The Tribunal's decision established several core principles:
The Tribunal set aside the impugned order, allowing the appeal with consequential relief, thereby affirming the appellant's compliance with the Cenvat Credit Rules, 2004, and rejecting the demands made under the impugned order.
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