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TMI Blog2016 (4) TMI 933X X X X Extracts X X X X X X X X Extracts X X X X ..... ge 99 of the paper-book, the Tribunal holds that changes made by the Explanation are substantive. The Explanations have been made in Rules by a Notification without giving it retrospective effect and though the same was issued on 1st March 2011 it came into force on 1st April 2011. Thus, it cannot have retrospective effect. The Revenue’s action in considering trading as an exempted service for the period from August 2010 to March 2011 and covered by Appeal and demanding 6% of the trading turnover is not correct. To that extent, the Tribunal agrees with the Assessee and renders a finding against the Revenue. The Revenue has not challenged the same before us. In paragraph 16 onwards after reiterating this conclusion, the Tribunal deals with the apportionment of the credit of the common input service where such input services have been used both in relation to the manufacture of goods and trading activities in respect of the imported goods. From there onwards, we find that the Tribunal has referred to the arguments of the Assessee’s Senior Advocate. Tribunal misdirected itself completely to work out a denominator. We had put it to Mr. Bhate as to how in the teeth of such finding co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to manufacture and sale of cars as well as import and sale of cars is not available in full including that portion import and sell of cars? (b) Whether the demand raised against Appellants is correct when no mechanism was provided in Cenvat Credit Rules, 2004 till 31-03-2011, to calculate proportionate service tax credit to be reversed, in respect of input service used for trading of goods? (c) Whether the entire amount of credit of common input services mentioned I Rule 6(5) of the Cenvat Credit Rules, 2004 is available to Appellants? (d) Whether in the facts and circumstances of case, Appellate Tribunal erred in not setting aside the demand for the period prior to 31.3.2008? (e) Whether in calculating amount of the eligible cenvat credit of service tax paid on common input services margin/value addition on trading of goods is to be considered and not entire sale price/turnover of traded goods? (f) Whether in the facts and circumstances of the case, extended period of limitation under Section 11A of the Act is applicable? (g) Whether in the facts and circumstances of the case, penalty under Section 11 AC of the Act? (h) Whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wider choice to the customers. However, these vehicles are also sold by the Appellants through their same dealer network to the ultimate customers. The Appellants claim that they have not availed of credit of Countervailing Duty ( CVD ) paid on imported cars for sale in the domestic market. The details of such imported CBUs on payment of CVD are set out in a table at page 5. The Appellants are taking and are allowed, according to them, CENVAT credit of duties paid on inputs relatable to manufacture and sale of cars. The Appellants claim that they are eligible for CENVAT credit of service tax paid on input service relatable to manufacture and sale of cars. The Appellants accept that they are not entitled to CENVAT credit on input service relatable to import and sale of cars. They say that they have not taken such credit and, therefore, presently they are not claiming CENVAT credit on input service exclusively relatable to activity of import and sale of cars. The credit availed of in this respect in the past is also reversed with interest. However, the contention is that there are common input services used for manufacture and sale of cars as also import and sale of cars. The Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with his assistance perused that part of the order passed by the Tribunal wherein this question is discussed. We have also taken the written submissions of Mr. Sridharan on record together with the case law relied upon. We have a compilation before us of the Rules and it has been extensively referred during the course of the oral arguments. 14. Mr. Bhate, learned Advocate appearing on behalf of the Revenue, has also been heard and he would support the conclusion of the Tribunal. He would submit that this question not being a substantial question of law but a matter of mere computation having been considered and dealt with reasonably, the Tribunal s order is neither perverse nor vitiated by any error of law apparent on the face of the record. 15. To be fair to both Advocates in so far as other questions and to which we have referred above, the matter is left to Court. In all fairness, however, the Revenue also agrees that the Tribunal s order does not discuss the questions and to be precise questions (c) and (d). As far as other questions are concerned, according to the Revenue, there are findings of fact and, therefore, the Appeal should not be entertained. 16. After havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us. In paragraph 16 onwards after reiterating this conclusion, the Tribunal deals with the apportionment of the credit of the common input service where such input services have been used both in relation to the manufacture of goods and trading activities in respect of the imported goods. From there onwards, we find that the Tribunal has referred to the arguments of the Assessee s Senior Advocate. It refers to a judgment relied upon and that is by the High Court of Justice of England and Wales, Queen s Bench Division. Another judgment which was relied upon was in the case of Commissioner of Wealth Tax, Meerut v Shravan Kumar Swarup Sons. (1994) 6 SCC 623 The Tribunal in paragraph 17 comes to a conclusion that clause (c) of Explanation 1 has no application for determining the apportionment of the credit of service tax on input services. 18. For that purpose, we reproduce the relevant Rule with the Explanation which has come into force from 1st April 2011. RULE 6. [Obligation of a manufacturer or producer of final products and a [provider of output service]]. - (1) The CENVAT credit shall not be allowed on such quantity of [input used in or in relation to the man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory of inputs as provided for in clause (a) of sub-rule (2), take CENVAT credit only on inputs under sub-clauses (ii) and (iv)of said clause (a) and pay an amount as determined under sub-rule (3A) in respect of input services. The provisions of sub-clauses (i) and (ii) of clause (b) and sub-clauses (i) and (ii) of clause (c) of subrule (3A) shall not apply for such payment: Provided that if any duty of excise is paid on the exempted goods, the same shall be reduced from the amount payable under clause (i): Provided further that if any part of the value of a taxable service has been exempted on the condition that no CENVAT credit of inputs and input services used for providing such taxable service, shall be taken then the amount specified in clause (i) shall be five percent of the value so exempted:] CENV Explanation I. - If the manufacturer of goods or the provider of output service, avails any of the option under this subrule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by him, and such option shall not be withdrawn during the remaining part of the financial year. [Explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d services (provisional) = (E/F) multiplied by G, where E denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the preceding financial year, F denotes total value of [output] and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the preceding financial year, and G denotes total CENVAT credit taken on input services during the month; (c)the manufacturer of goods or the provider of output service, shall determine finally the amount of CENVAT credit attributable to exempted goods and exempted services for the whole financial year in the following manner, namely :- (i) the amount of CENVAT credit attributable to inputs used in or in relation to manufacture of exempted goods, on the basis of total quantity of inputs used in or in relation to manufacture of said exempted goods, denoted as H; (ii) the amount of CENVAT credit attributable to inputs used for provision of exempted services = (J/K) multiplied by L, where J denotes the total value of exempted services provided during the financial year, K denotes the total value of dutiable goods manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmined as per condition (c), (iii) amount short paid determined as per condition (d), alongwith the date of payment of the amount short-paid, (iv) interest payable and paid, if any, on the amount short-paid, determined as per condition (e), and (v) credit taken on account of excess payment, if any, determined as per condition (f); (h)where the amount equivalent to CENVAT credit attributable to exempted goods or exempted services cannot be determined provisionally, as prescribed in condition (b), due to reasons that no dutiable goods were manufactured and no [output] service was provided in the preceding financial year, then the manufacturer of goods or the provider of output service is not required to determine and pay such amount provisionally for each month, but shall determine the CENVAT credit attributable to exempted goods or exempted services for the whole year as prescribed in condition (c) and pay the amount so calculated on or before 30th June of the succeeding financial year. (i)where the amount determined under condition (h) is not paid within the said due date, i.e., the 30th June, the manufacturer of goods or the provider of output service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or ten per cent. of the cost of goods sold, whichever is more; 19. The Tribunal gives a illustration and tries to work out a denominator. However, in doing so we find that at page 103 of the paper-book, in paragraph 17 of its order, the Tribunal has misdirected itself completely. We reproduce that part of the order. 17. ... In fact, we have gone through clause (c) of Explanation 1 added with effect from 1.4.2011 and are of the view that perhaps the said new method has been adopted to encourage the trading of the goods rather than the manufacturing of the goods (otherwise criterion should have been same viz. Based upon turnover or value addition). We, therefore hold that for the period under dispute the credit of service tax paid on the common input services should be apportioned in the same ratio as the turnover of the manufactured and traded cars. 20. We had put it to Mr. Bhate as to how in the teeth of such finding could the Tribunal then sustain the formula and the working of the denominator arrived at by it. The Tribunal must firstly refer to the substantive Rule and as operative prior to 1st April 2011 and then arrive at a conclusion in relation to the Explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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