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TMI Blog2010 (5) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... rule 3 or 6(3) in relation to trading activity since trading activity is not at all a service - we have a situation where an assessee would not be eligible to take input service tax credit on an output which is neither a service nor excisable goods and at the same time there is no provision to cover situations where an assessee is providing a taxable service and is undertaking another activity which is neither a service nor manufacture. In such a situation the only correct legal position appears to be that it is for the appellant to choose and segregate the quantum of input service attributable to trading activity and exclude the same from the records maintained for availment of credit. The matter is remanded to the Original Adjudicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts for payment of service tax. The total service tax payable for the half year ending March 2005 was Rs.34,143/-. As per Rule 6(3) of the Cenvat Credit Rules, 2004 the total cenvat credit available to the appellants was Rs.6,828/- (20% of Rs.34,143/-) only and rest of the amount i.e. Rs.27,315/- was to be paid by the appellants in cash only. The appellants had adjusted the service tax amount fully from cenvat credit and had availed the excess cenvat credit of Rs.27,315/- which was not admissible to the appellants. Further it was observed that the total service tax payable for the half year ending September 2004 was Rs.25,363/-. As per Rule 3(5) of the Service Tax Credit Rules, 2002 the total service tax credit available to the appellants wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmits that entire credit has been disallowed without taking this aspect into account even though it had been submitted by the appellant that these services had been used for both the activities. On the other hand learned DR would submit that the lower authorities after verifying the records have come to the conclusion that these services have not been utilized for trading activity. Further, he also submits that duty demand has been made as per Rule 3 of Service Tax Credit Rules, 2002. It is his contention that since trading activity is not at all a service, the provisions of Rule 6 of Cenvat Credit Rules and provisions of Service Tax Credit Rules cannot be applied. 4. The issue is to be decided in this case are: (i) Whether trading ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for use in the manufacture of exempted goods or services and take CENVAT credit only on that quantity of input or input service which is intended for use in the manufacture of dutiable goods or in providing output service on which service tax is payable." 7. Sub Rule 3 of Rule 6 provides that where output service provider does not maintain separate account, he has to follow the procedure or avail the options available under that Rule. But this rule is applicable only when the output service provider is providing services which are chargeable to service tax and as well as exempted services. Similar is the situation when we examine Rule 3 of Service Tax Credit Rules, 2002. Both these rules clearly speak of exempted services. Rule 3 of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f credit. Naturally this cannot be done in advance since it may not be possible to forecast what would be the quantum of trading activity and other activity which is liable to service tax. The only obvious solution which would be legally correct appears to be to ensure that once in a quarter or once in a six months, the quantum of input service tax credit attributed to trading activities according to standard accounting principles is deducted and the balance only availed for the purpose of payment of service tax of output service. This proposition is not against the law in view of the fact that there are several decisions of various High Courts and also of the Tribunal wherein a view has been taken that subsequent reversal of credit amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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