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TMI Blog2023 (5) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... it is imperative to identify and reverse that amount of credit attributable to the trading activity. We find no infirmity in the findings of the original authority on merit or on quantification. The appellants have claimed that credit attributable to input services used in the manufacture of dutiable goods cleared by them was also sought to be denied. In terms of Rule 2(l), the input services used in the manufacture of dutiable goods cleared by them qualify to be called input services and therefore, credit cannot be denied on the same. Moreover, the appellants submit that the amount actually liable to be reversed is Rs.41,82,096.48/-. This requires to be checked and properly arrived at. For this reason, the case needs to be remanded back to the adjudicating authority. Levy of penalty - HELD THAT:- Tribunal in the case of M/S LALLY AUTOMOBILES PVT LTD VERSUS CST, DELHI [ 2017 (12) TMI 27 - CESTAT NEW DELHI] observed that the appellants have no reason to avail credit on services which they are fully aware were being used for trading activity also; it is not open to the appellant to claim that they were under bona fide belief that the provisions of Rule 6(3) will not apply t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ju, learned counsel for the appellants takes us through the provisions of CENVAT Credit Rules, 2004 and in particular Rule 6(1) and Rule 6 (3) and fairly submits that though there were some restrictions, on availment of CENVAT credit of Service Tax paid on common input services to the extent they are used in exempt services/ products, prior to 1st April,2011, exempt services do not include trading of goods and therefore, there was no need for reversal of any credit on common input services. He relies upon Faber Heatcraft Industries Limited- 2008 (232) ELT 182, Micro Labs Vs CCE, Bangalore 2012-TIOL-1451-CESTAT-BANG, Magus Construction Pvt. Ltd. Vs UOI-2008 (11) STR 225 (Guwahati) and Orion Appliances Ltd. Vs CST Ahmedabad- 2010-VIL-10-CESTAT-AGM (CESTAT Ahmedabad). He also submits that Tribunal in a recent case Adani Energy Ltd. Vs CST-Service Tax- Ahmedabad- 2022 (3) TMI 696- CESTAT Ahmedabad has decided the issue in favour of the appellants. 4. He further submits that the Department while computing the amount recoverable has also included the CENVAT credit attributable to input services used in the manufacture of goods which is blatantly illegal. After giving allowance to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . VS CCE, Pune-I-2014 (36) STR 704 (Tri. Mumbai) Loreal India Pvt. Ltd. Vs CCE Pune-I- 2012 (281) ELT 113 (Tri. Mumbai) Orion Appliances Ltd. Vs CST, Ahmedabad- 2010 (19) STR 205 (Tri. Ahmd.) Metro Shoes Pvt. Ltd. VS CCE, Mumbai- 2008 (10) STR 382 (Tri. Mum.) CCE, Belapur Vs Elder Pharmaceuticals Ltd.- 2015 (37) STR 241 (Tri. Mum.) CCE, Ghaziabad Vs Rathi Steel Power Ltd.- 2015 (321) ELT 200 (All.) CCE, Madras Vs Systems Components Pvt. Ltd. 2004 (165) ELT 136 (SC) 7. We find that the issue involved had a chequered history of litigation. Different Benches of Tribunal have decided for or against the Revenue as cited above. We find that Hon ble Supreme Court in the case of Lally Automobiles Ltd. Vs Commissioner, 2019 (24) GSTL J115 (SC) has set to rest the controversy by deciding that CENVAT credit is not admissible on input services attributable to trading activity. This was affirmation of the Order passed in the same case by the Delhi Bench of Tribunal as well as the Hon ble Delhi High Court. We find that the Tribunal in this case 2018 (10) GSTL 310 (Tri. Del.) have held that: 6. We have heard both the sides and perused appeal re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndoubtedly, there cannot be an exact correlation between one kind of input and corresponding. That is the reason the Rules cover situations where assessees provide both exempted and taxable services. Wherever someone undertakes activities that cannot be called a service or which is not manufacture , that activity goes out of the purview of both Central Excise Act as well as Finance Act, 1994. In such cases, an assessee would be ineligible for claiming input-service tax credit on an output which is neither a service nor excisable goods. There is no provision to cover situations where an assessee is providing a taxable service and is undertaking another activity which is neither a service nor manufacture. In such a situation, the only correct legal position appears to be that it is for the assessee to segregate the quantum of input service attributable to trading activity and exclude the same from the records maintained for availing credit. This cannot be done 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot separate ground plans approved for trading and manufacturing activities. Thus, they are expected to be aware of the provisions of law regarding the admissibility of credit. While availing CENVAT credit, the appellant should have taken all precautions. We find that Tribunal in the case of Lally Automobiles Ltd. (supra) observed that the appellants have no reason to avail credit on services which they are fully aware were being used for trading activity also; it is not open to the appellant to claim that they were under bona fide belief that the provisions of Rule 6(3) will not apply to this situation; as already noted, we find that there is no ground for such belief. We find that the facts of the impugned case are comparable. Therefore, we are of the opinion that the appellants ought to have availed credit correctly. As contended by the Authorized Representative, the appellants failed to prove their bona fides. Therefore, the appellants have rendered themselves liable to pay penalty under Rule 15 of the CENVAT Credit Rules, 2004. However, looking into the contradictory judgments on the issue by different Benches of the Tribunal, we find that while imposition of equal penalty wou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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