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TMI Blog2018 (7) TMI 339X X X X Extracts X X X X X X X X Extracts X X X X ..... as required under Rule 6 (2) of the Cenvat Credit Rules, 2004. The Department came to issue of a show cause notice on the matter dated 29/04/2013 demanding Cenvat credit of Rs. 2,96,86,162/- on the value of the exempted services received during the period from April 2008 to December 2012. 2. The above demand was confirmed by the learned Commissioner alongwith interest and equal amount of penalty on the appellant. 3. The learned Advocate for the appellant has argued that confirmation of demand of Rs. 2,96,86,162/- and imposition of interest and equal amount of penalty is not as per the law and, therefore, need to be set aside on the following grounds :- (i) that the trading activity has been inserted under Rule 2 (e) of the Cenvat Credit Rules, 2004 w.e.f. 01/03/2011 by Notification No. 3/2001 - CE (NT) dated 01/03/2011, wherein the definition of the exempted services was made inclusive of (trading activity) ; while demand period pertains to April 2008 to December 2012; and therefore changes in the rules cannot be given retrospective effect ; (ii) that the total amount of Cenvat credit taken on common input services from April 2008 to December 2012 comes to an amount of Rs. 6, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal, and includes services used in relation to setting up, 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 upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation up to the place of removal; (Emphasis supplied). We observe the definition of "input service" has two parts. The first part provides for use by a provider of a taxable service for providing output service. The second part provides for use by a manufacturer in or in relation to the manufacture of final products. Further, the said definition relating to manufacture not only relates to the services which are used in the manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal by majority view observed as - "30.2 The proposed order by the Hon'ble Member (Technical) allowing the credit in respect of five services and the proposal to remand for fresh consideration of the eligibility of nine services has been made in the light of decision in Coca Cola case holding that - "all services which constitute activities related to business need not have a nexus with manufacture in a manner different from what was found in the Coca Cola India Pvt. Ltd. case by the Hon'ble High Court to become input Service". On the other hand, Hon'ble Member (Judicial) took note of the decision in the case of Ultratech Cement Ltd. relevant portion of which reads as follows : "29. The expression "activities in relation to business" in the definition of "input service" postulates activities which are integrally connected with the business of the assessee. If the activity is not integrally connected with the business of the manufacture of final product, the service would not qualify to be a input service under Rule 2(l) of the 2004 Rules." In view of the above judgment, he was of the opinion that "a manufacturer claiming the benefit of Cenvat credit on any service under R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court's judgment in the case of Ultratech Cement Ltd. In the case of the appellant assessee, there are distinct streams, the first one is manufacturing of cars in India and the second one is importing the cars and selling the cars in the Indian market, viz. trading activity. In view of above position, we are of the view that the credit of input services which are used both in the manufacturing and trading cannot be entirely allowed. It will also be interesting to see various common services of which credit has been taken and are matter of dispute in the present case. The main common services on which the credit has been taken are advertisement, event management service, business auxiliary services, business support services. These services are related to sales promotion and are included in the definition before the words "activities relating to business such as..........." In respect of these services, there can be no doubt that these have to be linked with manufactured product (and not to the traded goods). We also note that all services used in business are not included in the definition of input service. This part of the definition reads - activities relating to busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Cenvat credit on sales promotion service by way of sale of dutiable goods on commission basis. Further, by inserting the Explanation in the Rule 2(l), it has confirmed the Board Circular and resolved the different views of the High Courts. Taking into circumstances under which the Explanation was inserted in Rule 2(l) of Rules, 2004 and consequence of the Explanation to extend the benefit to the assessee as per Board Circular, we hold that the Explanation inserted in Rule 2(l) of Rules, 2004 by Notification No. 2/2016-CX (N.T.) (supra) should be declaratory in nature and effective retrospectively. 22. An explanation inserted in a Section/Rule, is generally to explain the meaning of the words contained in the Section/Rules. The purpose of explanation is to explain the meaning and intendenments of the Section/Rule. Sometimes, the explanation may be inserted to clarify a doubtful point of law, which would be effectively retrospectively. In the present case, the expressions in the explanation as inserted by Notification No. 2/2016-C.E. (supra), make it clear that it is for explaining the meaning of clause "sales promotion" in the context ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... denying the input service credits of services going into 'trading activity'. 8. Now, we come to point No. (iii), the learned Advocate has pointed out that it is also an admitted fact as per the show cause notice and order-in-original states that a total amount of common input service credit from April 2008 upto December 2012 comes to only Rs. 6,45,782/. In this regard also issue is no more res- integra and settled that the statute does not have any intention under Rule 6 (3) of the Cenvat Credit Rules, 2004 of earning any profit out of wrongly availed credit by an assessee. This view also been held in the case of M/s Mercedes Benz India (P) Ltd. vs. CCE, Pune - I - 2015 (40) S.T.R. 381 (Tri. - Mumbai). With regard to the appellants claim that they have reversed back the common input service Cenvat credit used for exempted services (including trading). Same view has been held by this Tribunal. The relevant extract of the decision is reproduced hereunder :- "5.4 We find that the appellant admittedly paid an amount of Rs. 4,06,785/- plus interest, this is not under dispute. Therefore in our view, the appellant have complied with the condition prescribed under Rule 6(3)(ii) re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption notification, etc., which are not identical to the fact of the present case, Moreover, in the present case the substantive provisions under Rule 6(3)(ii) and sub rule (3A) i.e. payment of equivalent to the Cenvat credit, which the appellant have complied with and if at all there is delay, the required interest has also been paid, therefore in the present case, there is no case of noncompliance of procedure and condition. Therefore the judgments cited by the ld. A.R. are not applicable". 9. Following the above judgment, we are of the view that as per the existing law the Department is right in recovering back the input service credits which are only attributable to the exempted services including 'trading activity'. Since, the amount of such common input credit is already available, we are of the view that the Department should recover back the input service credits which have gone only into exempted services. In view of this, since the above-mentioned amount of Rs. 6,45,782/- is attributable to both exempted as well as taxable services, therefore, we remand back this order-in-original to re-adjudicate the matter only with regard to the apportionment of above- mentioned commo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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