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TMI Blog2019 (11) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... value of taxable services, provided value of such consumables is shown separately - however, The law underwent a change with effect from 20.06.2012 with the inclusion of exempted service under Rule 2 (e) of the CENVAT Credit Rules, 2004, which under its ambit covered trading of goods. The above Circular dated 05.03.2003 is therefore issued much earlier, obviously without having the benefit of the subsequent development. The issue on hand is squarely covered by the dictum of the Hon ble High Court in M/s. Lally Automobiles Pvt. Ltd. [ 2018 (7) TMI 1679 - DELHI HIGH COURT ] where it was held that . - there are no merit in the appellant s claim - appeal dismissed on this ground. Extended period of limitation - HELD THAT:- It is a fact borne on record that the appellant itself has chosen to follow the procedure laid down under Rule 6 (3A) on and from 01.04.2014 by reversing the proportionate input service credit attributable to the exempted service of trading, which clearly shows the knowledge of the appellant as to the requirement of law, which was also done prior to the issuance of the Show Cause Notice - extended period rightly invoked. Appeal dismissed - decided against appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trading activity since the authorities failed to appreciate the crucial differences between a conventional trading activity as opposed to the sale of consumables in the present case. 5.2 He further submitted that the primary and only activity of the appellant was servicing of cars and that it is only during the course of rendering such service, if needed, they would use engine oil, coolants as top-up and/or worn-out parts were also replaced; that the same was not provided independently to any buyer/customer. This, according to the Ld. Advocate, amounted to the rendering of a bundled service with repair and maintenance being predominant; that the same is not complete without the use of consumables. Therefore, the supply of the above consumables was only incidental to the provision of service which could not be segregated. 5.3 Ld. Advocate placed reliance on the C.B.E.C. Circular No. 699/15/2003-CX dated 05.03.2003 in his support. He also relied on the decision of the Hon ble jurisdictional High Court in the case of Commr. of C.Ex., Salem Vs. M/s. Salem Co-operative Sugar Mills Ltd. reported in 2014 (35) S.T.R. 450 (Mad.). 6.1 Per contra, Ld. A.R. for the Revenue supported the findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of these consumables to the customer. Therefore, the sale of consumable during the course of providing service is akin to sale of parts and accessories and therefore value of such consumables is not includible in the value of taxable services, provided value of such consumables is shown separately. 9.2 The law underwent a change with effect from 20.06.2012 with the inclusion of exempted service under Rule 2 (e) of the CENVAT Credit Rules, 2004, which under its ambit covered trading of goods. The above Circular dated 05.03.2003 is therefore issued much earlier, obviously without having the benefit of the subsequent development. 9.3 The Hon ble High Court of Delhi in the case of M/s. Lally Automobiles Pvt. Ltd. (supra) has dealt with a somewhat similar issue. Following are the relevant paragraphs: 14 . It was submitted that in this case, the assessee was engaged in trading activities in common premises. Those activities were not subjected to service tax, as they involved distribution, sale or vending of goods. The question of any such activity being exempt on account of the 2011 amendment Rules, does not arise. The amendment only stated the obvious. However, that did not mean that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in advance as it may not be possible to foretell the quantum of trading activity as compared with taxable activity. The obvious solution would be to ensure that once in a quarter or once in a six months, the quantum of input service tax credit attributed to trading activities according to standard accounting principles is deducted and the balance only availed for the purpose of payment of Service tax of output service. 17 . In the present case, the assessee s argument that there is no mechanism to reverse credit, once taken, in the opinion of this Court, cannot be accepted. The assessee was well aware of the exact nature and extent of its service tax liability. It was also aware of the eligible service tax inputs. Therefore, when it did claim successfully and unchallenged input credits in respect of activities that were not subjected to service tax levy, it was aware that the claim was excessive and could not be justified. If, for instance, input credits were claimed in respect of goods or rents, attributable to retail business, those credits were clearly impermissible. In these circumstances, this Court finds no infirmity with the concurrent findings of the lower authority and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med) ought to be left alone because of the composite nature of the assessee s business. While any assessee has a right to organize its business in the most convenient and efficient manner, it cannot claim that that such organization is so structured that its tax liabilities cannot be clearly discerned. In this case, the adjudicating authority adopted the proportionate percentage to the turnover method approach, which in this Court s opinion, is reasonable. 20 . This Court is also of the opinion that the invocation of the extended period of limitation was warranted in the circumstances of the case. Being conscious of its trading activity and that it was not liable to service tax (since it did not include the amounts earned from that business, in its returns) meant that the assessee was aware of what it was doing. It cannot now take shelter under the plea that non-trading activity was expressly exempt from claiming credit, in 2011. That amendment made no difference, given that trading was never taxable under the Finance Act, 1994. In these circumstances, the Revenue was justified in invoking the extended period of limitation in this case. 21 . In the light of the above findings, all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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