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TMI Blog2018 (7) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... 004. 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. 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. 1.4.2011. I find that prior 1.4.2011 there was no scope at all even to consider the trading activity to be covered under the credit scheme. After the explanation, the position has become 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 - the Appellants 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. The ld. Commissioner (Appeals) is justified in the impugned order in holding that this explanation is clarificatory in nature and has retrospective applicability and therefore the explanation inserted vide N/N. 3/2011 dated 1.3.2011 has retrospective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CENVAT credit availed, were commonly used in relation to their traded goods as well as manufactured goods. Based on the data submitted by the Appellant in respect of the credit taken on ISD invoices, total credit availed by the Appellant during a financial year was worked out and on the basis of ratio of turnover of tiles manufactured and that of tiles traded, excess credit being credit of input services on the traded goods worked out. The said calculation is as under:- Sr.No. Year Cenvat Credit taken on the basis of invoices issued by the ISD by the noticee Ratio % of tiles manufactured Ratio % of tiles imported /traded Inadmissible Cenvat Credit wrongly taken on the basis of invoices issued by the ISD by the noticee 1. 2009-10 3846106 34 66 2538430 2. 2012-13 2506954 70.94 29.09 729273 3. 2013-14 (up to Sep‟2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He also submitted that the show cause notice dated 3.6.2014 has been issued for the period from April, 2011 to September, 2013 and since the entire demand is beyond the period of one year, the same is time barred and liable to be set aside. According to him extended period is not invokable since there was no suppression on the part of the Appellant and there was no intention on the part of the appellant to act dishonestly to evade payment of duty. He also 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. 1-3-2011. 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. He further submitted that all the facts were within the knowledge of the department from 4.9.2009 on the basis of CERA Audit, when certain information was sought from the appellant. It was also his contention that there were some internal correspondence between the department and Senior Audit officer and from those correspondence it is clear that in fact the dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roducts up to the place of removal, and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation up to the place of removal; but excludes services. The admitted facts are that the appellants availed Cenvat credit on input services and they had considerable turnover and income in trading activities. It is also admitted that the services on which credit have been availed are partly relatable to trading activities also. The appellants contested the reversal of credit, to a proportionate extent, on the ground that trading is not an exempted service prior to the insertion of explanation w.e.f. 1.4.2011. But he has failed to consider that trading is not a taxable service also. In other words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied upon by the Appellant for non application of Rule 14 of CCR, 2004, the department has already filed Appeal before the Hon ble High Court of Judicature at Allahabad being Central Excise Appeal No. 250 of 2017 and the Hon ble Division Bench of the High Court vide order dated 6.9.2017 admitted the Appeal and the matter is pending before the Hon ble High Court. Therefore, I upheld the order of the ld. Commissioner (Appeals) on this point also. 6. On the question of extended period of limitation, it is clear that the trading is not an activity or a service covered by the Cenvat scheme prior to the introduction of clarificatory explanation. The appellants have no reason to avail credit on services which they are fully aware were being used for trading activity also. There is no question about the bona fide belief of the appellant contrary to the provisions of law. 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 input services cannot contest the demand on limitation. Filing of ER-1 return giving therein Cenvat Credit figure does not mean that the departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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