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TMI Blog2023 (6) TMI 701X X X X Extracts X X X X X X X X Extracts X X X X ..... o their customers in the form of establishing enterprise networking. They were also providing end-to-end network services, security services, hosting and application services to large organizations. It appeared from their books that during the course of providing the above services, the appellant was also selling bought-out goods like routers, interface cards, power adapters, cables, WAN slots, modem, network cards, anti-virus software, scanners, modular routers, power adapters, cable connectors, etc., which were used in connecting the system into network connection and data transfer to their end customers and it appeared that the above goods were imported on payment of duty, indigenously procured on payment of duty and also procured from wholesalers and dealers, on which they were not availing any input credit. 2.2 It appeared that the appellant was engaged in providing taxable services like telecommunication service, franchise service, online information, database access/retrieval, leased circuit services, franchise service, business auxiliary service, advertisement, intellectual property service, etc. 2.3 It also appeared that the appellant adopted a system to separately accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... availed attributable to trading would not fall within the meaning of "input service" as defined under Rule 2(l) ibid. After holding so, he has proceeded to quantify the credit attributable to the trading activity wherein he has arrived at the demanded amount of Rs. 21,76,056/-. 5. It is against this order that the present appeal has been filed before this forum. 6.1 Shri Raghavan Ramabadran, Learned Advocate, appeared for the appellant and Smt. K. Komathi, Learned Additional Commissioner, represented the respondent. 6.2 Both the counsel admit categorically that the Revenue has not filed any appeal before this forum against the Order-in-Original impugned here, in this appeal. 7.1 The submissions of the Learned Advocate for the appellant are summarized below: - (i) The appellant did not use any inputs exclusively for trading, which fact is also not denied by the Revenue. (ii) Trading is an exempted service even prior to 2011. Rule 2 (e) ibid., amended vide Notification No. 03/2011-C.E.(N.T.) dated 01.03.2011 has clarified that 'exempted service' would include trading. (iii) The Hon'ble High Court of Judicature at Madras in the case of M/s. Ruchika Global Interlinks v. CEST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activity had to be considered as an exempted service prior to 01.04.2011 also, which is not applicable to their case. 8.1 Per contra, the Learned Additional Commissioner for the respondent relied on the findings of the Adjudicating Authority. She would also contend that the trading activity carried on by the appellant was neither a taxable service nor a manufacturing activity and therefore, the quantification has been rightly arrived at by the Adjudicating Authority. 8.2 She would also submit that all the Strategic Business Units (SBUs) of the appellant assessed by the LTU are considered as a single entity under one registration and therefore, the total turnover, trading turnover and total CENVAT Credit are to be considered in respect of all units belonging to the LTU. 9. We have heard the rival contentions and have gone through the documents and written submissions filed by the rival parties. We have also gone through the various decisions / orders relied upon during the course of arguments. 10. Upon hearing both sides, we find that the only issue to be decided by us is: whether the demand raised by the Commissioner of Central Excise and Service Tax, Large Taxpayer Unit, Chen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be done SBU wise (as in the above Table), is not acceptable. I therefore hold that, the trading turnover and total turnover for the purpose of the present calculation, have to be taken for the entire group (across all SBUs). 14. .... .... Hence, such supply / trading in goods, is only incidental to their main service providing activities and is not part of their main course of business. In such circumstances, it is logical that only a tiny fraction of the input service credit will in fact be attributable to trading activity. I find that the generalized method used by the show cause notice for quantifying input service credit attributable to 'trading' viz. (Total turnover / Trading Turnover) x Total Cenvat availed, is unscientific and throws up a disproportionately large figure which is not in the interest of justice and equity. On the other hand, it is also seen that there were no explicit statutory provisions detailing the method to be adopted for such quantification, at that point of time. 15. .... .... Without going into the legal issue of whether these amendments are clarificatory and hence retrospective in nature or not, I feel that the above method of valuation c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 13. The authority should have gone strictly by the facts and documents as available, since it is well understood that each year is independent and the facts may vary. Hence, we do not propose to accept the above conclusion of not maintaining separate accounts which, according to us, is a baseless allegation made without proper application of mind. 14.1 Further, the adjudicating authority has, at paragraph 14, held that there is no specific provision under the statute for determining the value of trading activity prior to the insertion of Explanation with effect from 01.03.2011, which observation is repeated at paragraph 15, which is also extracted elsewhere in this order, and proceeds to determine the value of trading activity in a manner unknown to law. 14.2 Further, at paragraph 17, a part of which is extracted elsewhere in this order, he has referred to the rulings of the Ahmedabad and Mumbai CESTAT Benches wherein it was held that CENVAT Credit could not be availed on trading activity and that portion of credit attributable to trading had to be reversed. This again is passed without proper application of mind to the pleadings of the appellant, which is extracted by the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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