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TMI Blog2017 (12) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants should not have availed credit for common input services which are used for taxable output service as well as trading activity, as it is imperative to identify and reverse that amount of credit attributable to the trading activity - decided against assessee. Time limitation - penalty - Held that: - the trading is not at all an activity or a service covered by the Cenvat scheme prior to the introduction of clarificatory explanation - appellants have no reason to avail credit on services which they are fully aware were being used for trading activity also - there is no ground for such belief. Trading activity not being covered by the credit scheme itself during the material period, the appellants having availed the credit on such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides that the exempted services includes services on which no service tax is leviable under Section 66 of the Finance Act, 1944. Trading is a service liable to VAT/sales tax by States and outside the purview of Service Tax. Thus, no service tax is leviable to trading under Section 66 of the Finance Act. This position was clearly upheld by CESTAT in Metro-shoes case 2008 (10) STR 382 (Tri.-Mumbai) wherein it was held that No Cenvat is eligible for inputs/services used for trading as the trading is an exempted service. The explanation added to the Rule 2(e) vide Notification No.3/2011 Central Excise (V.T.) makes it more than clear as it states that for removal of doubts, it is hereby clarified that exempted services includes tradin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f two demands were also imposed under Section 77 of the Finance Act, 1994. 4. The ld. Consultant for the appellant submitted that trading activity cannot be considered as exempted service prior to the introduction of explanation, in Rule 2 of Cenvat Credit Rules, 2004, w.e.f. 01.04.2011. Since trading cannot be considered as exempted service for the period prior to that date, there is no need for the appellant to restrict or to reverse Cenvat credit attributable to such trading activity. It was submitted that there is no provision in the credit rules for trading activities to be covered under Rule 6(3). The ld. Consultant also contested the demand on the ground of limitation and also imposition of penalties. The issue involved is interpr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellants should not have availed any credit on input services when such services are attributable to an activity which is not at all taxable and hence not covered by the scope of Cenvat Credit Rules, 2004. 7. A deemed fiction is apparently created by naming trading as an exempted service by way of explanation in Rule 2 of Cenvat Credit Rule w.e.f. 01.04.2011. We find prior to creation of such fiction, there is no scope at all even to consider the trading activity to be covered under the credit scheme. After the explanation, the position is more clear to the effect that the trading activity can be considered as an exempted service for the operation of scheme under Cenvat Credit Rules. In other words, prior to that clarification, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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