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TMI Blog2015 (11) TMI 1045X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to trading activity and exclude the same from the records maintained for availment of credit, which in the present case, admittedly has not been done by the appellant. - matter remanded back for computation of amount of credit to be reversed - Decided against the assessee. Levy of penalty - Appellant was not in a position to maintain separate records with regard use of input services for the taxable services and for trading activity (which was not an exempted service at the material time), I am of the view that there is no contravention of the Cenvat rules, and as such, imposition of penalty under Section 77 of the Finance Act, 1994 is not justified. Further, in absence of any specific findings by the authorities below regarding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice as well as for trading activity, an exempted service. Show cause proceedings initiated for reversal of Cenvat credit attributable to the trading activity, culminated in the adjudication order dated 26.11.2012, wherein cenvat demand of ₹ 2,44,641/- along with interest was confirmed. Besides this, equal amount of penalty under Section 78 and also penalty under Section 77 of the Finance Act, 1994 have also been imposed in the said adjudication order. For confirmation of the Cenvat demand, the original authority had applied the formula prescribed under Rule 6 (3A) of the Cenvat Credit Rules, 2004. Feeling aggrieved with the said adjudication order, the appellant had preferred appeal before the Commissioner (Appeals). The appeal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tri. Mum.), Orion Appliances Ltd. reported in 2010 (19) STR 205 (Tri. Ahmd.), Loreal India Private Ltd. vs. CCE, Pune-I reported in 2012 (281) ELT 113 (Tri.) and Mercedez Benz India Pvt. Ltd., reported in 2014 (36) STR 704 (Tri. Mum.). 4. Heard the ld. Counsel for both sides and perused the records. 5. Under the Cenvat statute, the service provider of output services is entitled to take Cenvat credit of service tax paid on the input services. Rule 6 of the Cenvat Credit Rules, 2004 mandates that where an output service provider provides both taxable as well as exempted services, then he shall maintain separate accounts for the receipt and use of input services for the provision of the output service chargeable to service tax as well f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant. 7. With regard to the findings of the authorities below that the appellant should discharge the cenvat benefit availed on the trading activity by applying the formula prescribed in Rule 6 (3A) of the Cenvat Credit Rules, 2004, I am of the view that the said rule has the application for the service provider, who provides both taxable as well as exempted services. Since trading activity was neither a taxable service nor an exempted service during the relevant period, the provisions of the said rule will have no application and the appellant is not required to pay/ reverse the Cenvat credit as per the formula prescribed therein. However, since the appellant is not permitted to take cenvat credit of service tax paid on the disputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ituation 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. 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 ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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