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TMI Blog2016 (11) TMI 1106X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of M/s F L Smidth Pvt. Ltd. Vs. C.C.E. [2014 (12) TMI 699 - MADRAS HIGH COURT] where in it was held that On an understanding of the Rule 2(l) of the Cenvat Credit Rules, there is no manner of doubt that input service means goods which is used by the manufacturer directly or indirectly in relation to the manufacturing of final product and clearance of final product from the place of removal. In the present case, the Department has allowed cenvat credit in respect of the value of goods amounting to ₹ 5.41 crores and denied for the balance. We find no error in such determination, which is in consonance with Rule 2(l) of the Cenvat Credit Rules. There is no infirmity in the impugned orders whereby the Commissioner (Appeals) has denied the Cenvat credit of common input services attributable to trading activity by holding that the trading activity is exempted service even prior to 1.4.2011. Further, as far as invoking extended period of limitation and imposition of mandatory penalty, I am of the considered view that since the appellants have not declared in their ST3 Returns that input service credit was used in relation to trading activity. This amounts to suppressio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009-10 1,27,036 1,27,036 5000 E/2440/2012 2009-10 1,03,677 1,03,677 5000 E/2441/2012 2009-10 54,704 54,704 5000 E/2442/2012 2009-10 23,56,367 23,56,367 5000 E/2443/2012 2009-10 6,08,232 6,08,232 5000 E/2444/2012 2009-10 4,79,693 4,79,693 5000 E/27710/2013 2010-11 7,22,183 7,22,183 5000 E/27711/2013 2010-11 36,477 36,477 5000 E/27712/2013 2010-11 2,34,433 2,34,433 5000 E/27713/2013 2010-11 20,19,026 20,19,02 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n input services attributable to trading activity and also imposed mandatory penalty and penalty on the appellant in the capacity as ISD under Rule 15A of Cenvat Credit Rules. Aggrieved by the Orders-in-Original, the appellant preferred appeals before the Commissioner (Appeals) who upheld the Orders-in-Original by the impugned orders. Aggrieved by those different orders passed by the Commissioner (Appeals), the appellant has preferred these 21 appeals on identical grounds before the Tribunal. 3. I have heard both the parties and perused the material on record. 4. The learned counsel for the appellant submitted that the period of dispute in all the appeals is for the years 2008-09, 2009-10 and 2010-11. He further submitted that the trading activity was regarded as exempted service by amending definition in Rule 2(e) only with effect from 1.4.2011 and prior to 1.4.2011, the trading activity was not construed as exempted service at all. He further submitted that the said amendment is prospective and not retrospective as the Government cannot make amendment retrospectively as held by the Hon ble Supreme Court in the case of Cannanore Spg. Wvg. Mills Ltd. Vs. CCE [1978 (2) ELT 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uninn India Pvt. Ltd. Vs. CCE [2016-TIOL-856- CESTAT-HYD] (vii) Krishna Auto Sales Vs. CCE [2015-TIOL-2994-CESTAT-DEL] (viii) Pushpam Pharmaceuticals Co. Vs. CCE [1995 (78) ELT 401 (SC)] (ix) Nizam Sugar Factory Vs. CCE [2006 (197) ELT 465 (SC)] (x) CCE Vs. Kolety Gum Industries [2016 (335) ELT 581 (SC)] (xi) In Re : Faber Heatkraft Industries Ltd. [2008 (232) ELT 182 (C.A.)] (xii) The Cannanore Spg Wvg. Mills Ltd. Vs. CCE [1978 (2) ELT 325 (SC)] (xiii) ITO V. M.C. Ponnose [AIR 1970 SC 385, 388] 5. On the other hand, the learned A.R. defended the impugned orders passed by the Commissioner (Appeals) and filed written submission in support of his various contentions. The written submission of the learned A.R. is given below : The appellant is a manufacturer of pharmaceutical products and also gets the same manufactured by other manufacturers on loan license basis. This activity of goods manufactured by other manufacturers which are common in pharma industry and the goods manufactured by loan licensee is only traded by the appellant. The appellant avails Cenvat credit at their head office and are registered under service tax provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the explanation added is that no input goods and input services which are used for providing exempted services and this amendment is prospective in nature as held in the case of B.A. Research India Ltd., VS CST., Ahmedabad reported in 2010 (18) STR 604 (Trib. Ahmd). Therefore, before 1.4.2011, the trading was neither a manufacturing activity nor an output service. This view has been upheld by the Hon ble High Court of Madras in the case of M/s FLSmidthpvt., Ltd., Vs CCE., reported in 2014-TIOL-2186-HC-MAD-CX and other citations given on the date of hearing held on 7.11.2016. The Madras High Court has also upheld the suppression aspect as well in such cases, which is akin to the case on hand. The Contentions of the appellant and the department s view are as follows:- i) The trading was a service which was subsequently exempted with effect from 1.04.2011. This view is not correct in as much as trading is neither a manufacturing activity nor a service as per Finance Act, 1994. Therefore, question of availing CENVAT in respect of Trading activity either prior to 1.4.2011 or after that date does not arise, for the reasons given above. ii) There is no mechanism to ascertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity can be called as a service, it is quite clear that since the trading activity is nothing but purchase and sales and is covered under sale tax law, it may not be appropriate to call it a service. Therefore, it has to be held that trading activity cannot be called a service and therefore, it cannot be considered as an exempted service also. It is pertinent to note that the trading activity has been specifically covered as exempted service with effect from 1.4.2011. This amendment in the definition in Rule 2(e) was brought into effect on 1.4.2011 and as per the learned A.R., this amendment is only a clarification and is applicable prospectively. Further this issue whether the appellant is entitled to take Cenvat credit with regard to common input service attributable to trading activity has been recently considered by the Hon ble High Court of Madras in the case of M/s FLSmidth Pvt. Ltd. Vs. C.C.E. reported in 2014-TIOL-2186-HC-MAD-CX where in the Hon ble High Court has framed the following substantial question of law :- 1) Whether in the facts and circumstances of the case, the Tribunal was right in holding that the activity of trading to be considered as exempted service for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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