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TMI Blog2023 (12) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... , courier service, manpower service, renting of immovable property service, security service, testing and telecommunication service etc. They avail cenvat credit of the service tax on these input services and utilize the same for discharging their service tax liability on taxable services. 2. On verification of financial statements as well as the ST-3 returns of the appellant for the period from April 2013 to March 2017, it was noticed by the audit team that, apart from providing taxable service, the appellant was also engaged in trading activity which is deemed to be an exempted service w.e.f 01.04.2011. It appeared to the department, that the appellant was availing input tax credit on common input services such as advertisement, banking and finance, courier service, manpower service, renting of immovable property service, security service, telecommunication service etc. for trading also. As per Rue 6 (2) of Cenvat Credit Rules, 2004, an output service provider availing common inputs services for rendering both taxable and exempted services has the option of maintaining separate accounts or avail credit only on those input services that pertain directly to the corresponding taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R, 2004. It may be noted that the CENVAT credit to the extent it was attributable to the trading turnover was not distributed to the trading units but was expensed. 4.4 The activities performed by the respective centers/units of the Appellant and their pattern of availment of Central Value Added Tax Credit ("CENVAT credit") is tabulated below for brevity. S. No. Unit No. of units/centers Activity performed Pattern of availment of CENVAT credit 1. Manufacturing 6 Goods are manufactured and cleared on payment of appropriate excise duty. Credit in respect of inputs and input services pertaining to manufacturing activity was availed by the Appellant (either directly or through ISD) and the same is not in dispute. 2. Trading 33 Purchase and Sale of goods. Various inputs and input services were procured. However, no credit was availed by the Appellant either directly or through ISD. The same is not in dispute. 3. Service 253 Only taxable Service of AMC is performed Credit pertaining to service activity was availed by the Appellant (directly and through ISD). This is under dispute in the present proceedings in light of Rule 6 of CCR, 2004. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om different segments which is summarised below, 4.12 Subsequently, on 18.07.2019, the Appellant in terms of Rule 6(3A) of CCR, 2004, paid a portion of the demand amount of Rs. 17,56,113/- along with interest of Rs.11,04,318/- and 25% penalty of Rs. 4,39,028/- under protest vide Service Tax Department Challan No. 1907017255 and 1907017358. The Appellant intimated the payment made under protest to the Respondent vide letter dated 06.08.2019. 5. The Ld. Counsel further pleaded that impugned order may be set aside on the following grounds : A. There is no trading activity as envisaged in the impugned order. The Ld. Principal Commissioner is relying on the invoices issued by the trading unit to hold that service unit undertakes trading activity is erroneous. A.1. As stated in the facts above, the trading units and service units are physically separated and there is no unit in which both activities co-exist. The fact that the units are separate is nowhere disputed by the department which makes it an accepted fact. Rule 6(3) is applicable only in such a case where there are common input services received in a single unit where both trading and service activities are carried out. A.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has an option under Rule 6(3A)(b) of the CCR, 2004 to reverse the proportionate credit pertaining to common input services. B.3 The Appellant has exercised the said option and reversed the CENVAT credit in terms of Rule 6(3A) of the CCR amounting to Rs, 17,56,113/- for the period April 2013 to March 2017. The detailed computation of the aforesaid liability is tabulated in the Appellant's memorandum of appeal at paragraph B.5 and reproduced below for reference, Year Value of taxable service (in Rs.) Value of Exempted Service (in Rs.) Total Turnover (in Rs.) Total CENVAT Credit (in Rs.) Proportionate Credit to be reversed (In Rs.) (1) (2) (3) = (1) + (2) (4) (5)=(2)/(3)*(4) 2013-2014 81,97,00,000 5,79,64,244 87,76,64,244 91,83,887 6,06,538 2014-2015 88,69,00,000 5,02,07,038 93,71,07,038 77,37,480 4,14,548 2015-2016 94,18,00,000 3,75,45,013 97,93,45,013 72,24,987 2,76,983 2016-2017 97,48,00,000 6,31,70,963 1,03,79,70,963 75,26,178 4,58,043 Total 3,62,32,00,000 20,88,87,258 3,83,20,87,258 3,16,72,532 17,56,113 B.4 Further, the Appellant submits that exercising the option to reverse the CENVAT credit by informing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortionate credit computed in terms of Rule 6(3A) read with Rule 6(3)(ii) of CCR, demand cannot be made for reversal at 6% on the value of exempted goods. D. The quantification of the demand is incorrect and must be restricted to the amount of credit availed by the Appellant. D.1 In the instant case, the total demand of Service Tax is Rs.12,53,61,238/-. whereas, the total credit availed by the Appellant is Rs.3,16,72,532/- The Impugned Order is in essence proposing to extract illegal amount from the assessee. Therefore, the Impugned Order merits to be set aside on this ground alone. D.2 It is submitted that the amount to be reversed under Rule 6(3) of CCR, 2004 shall be restricted to the amount of credit. In this regard, reliance is placed upon the amendment made to Rule 6 of the Cenvat Credit Rules vide Notification No. 13/2016- CE (NT) dated 1st March 2016 and Notification No 23/2016-CE (NT) dated 1st April 2016. The Appellant submits that this amendment is clarificatory in nature and is thus retrospective in nature. In this regard, reliance is placed upon GOI vs Indian Tobacco Association [2005-TIOL-109-SC]. D.3 Thus, the quantification of the demand should have been made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... araman appeared and argued for the Department. Ld. A.R adverted to para-7 of the findings of the adjudicating authority. It is submitted that the appellant has three kinds of units - (i) Manufacturing (ii) Trading and (iii) Service / AMC. The trading units are not registered with the department as they are engaged in buying and selling of goods and are outside Central Excise jurisdiction. The present demand has been proposed only in respect of the 253 service/AMC units across India, which have a centralized registration. These units provide various taxable services like Business Auxiliary Services, Erection & Commissioning Service, Consulting Engineer Services, Maintenance & Repair Services etc. The contention of the appellant is that they have not availed any credit related to trading. However, it is seen from the records that the trading units are also providing output services. The Ld. A.R adverted to page 7 of the impugned order wherein the scanned copy of sample invoice has been enclosed by the adjudicating authority. The said document would show that as per this invoice the appellant has sold one number of 10KVA UPS system. Appellant has paid VAT on the amount and also collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On 06.06.2023, the Bench called for a report from the department to verify as to the nature of invoices referred in the impugned order and whether the trading units have availed credits on input services. During the hearing today, the department has filed a report dt. 04.10.2023 issued by the Assistant Commissioner of Mylapore Commissionerate. The relevant part of the report reads as under : "....It is evident from the invoices referred to in the OIO No.19/2019 Ch.N. GST (Commr.) dated 14.06.2019 pertaining to M/s.Novateur Electrical & Digital Systems Private Limited that these invoices are raised by appellant's units with Service Tax Registration No.AACCE4671NSD015 and apart from sale of goods, installation charges are also collected through the referred invoices. Hence, it is submitted that units which have raised the invoices cannot be treated as units engaged in trading activity since the units are also engaged in service activity." From the above report, there is nothing to show that the department has verified as to whether the trading units have availed credit on input services. It is merely stated that the trading units have provided installation services for which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduct and also installation charges along with service tax. In the invoice again the service tax registration number of the service unit has been mentioned. The address of the unit mentioned would show that it is a trading unit as per the list of location details furnished by the appellant. However, the adjudicating authority has erroneously concluded that this invoice is raised by the service unit. 14. In page 9 of the OIO, the adjudicating authority has referred to an invoice dt. 22.05.2014. Here again, the appellant has collected installation charges along with service tax. The service tax registration number of the service unit has been mentioned. The address as per invoice would show that the unit is a trading unit. The adjudicating authority has erroneously construed the invoice to be issued by the service unit. Similar error has been captured in the invoice placed in page 10 & 11 of the impugned order. 15. On going through the entire facts and documents placed before us, we find that merely because the appellant trading unit had mentioned the service tax registration number of the service unit while issuing invoices, the department has assumed that the appellant trading un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then the appellant has already reversed the proportionate credit along with interest and penalty in terms of Rule 6 (3A) of CCR, 2004. It is explained in the reply to SCN that the books of account of the appellant are maintained in such a way that expenses pertaining to a particular unit is recorded based on the unique plant/unit code. Certain input services like warehousing, courier services etc. which are exclusively used for running the trading business are not availed by the appellant and the same is expensed out. It is further categorically stated in para 3.30 of the reply to SCN that appellant does not avail any credit on common input services to the extent they are attributable to trading premises and the ISD has not distributed such credits. The department has not been able to adduce any evidence contra to these averments. The invoices relied by them are noting but trading invoices. The allegation raised in SCN therefore fails. 20. It is submitted by appellant that they have reversed the credit for the disputed period by applying the formula in Rule 6 (3A). The formula is :- Value of Exempted service /Total turnover of Exempted and Taxable services X Credit availed input ..... X X X X Extracts X X X X X X X X Extracts X X X X
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