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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 ..... trading unit while collecting service tax on installation charges has mentioned the service tax registration number of the service unit of the appellant. This might have created confusion to the department to assume that the trading unit has availed credit on input services. 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 unit must be availing credit on input services also. The department has made a conclusion that the trading units are also to be considered as service units and the demand has been raised alleging that the appellant has availed credit in regard to activity of trading. It also requires to be mentioned that while quantifying the duty demand the turnover of the trading units has been applied against the total credit availed by the service units. Thus, the appellant has been required to pay 6% of the value calculated by such formula. The department has failed to establish the allegation in the SCN that credit on common input services have been availed in regard to trading - the demand raised being factually and technicall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as taxable service, and is not maintaining separate accounts they are liable to reverse 6% / 7% of the value of credit availed on exempted services as contemplated under Rule 6 (3) (i) of CCR 2004. 3. It was noted by the department that the appellant did not maintain separate accounts and they did not reverse the credit attributable to exempted services or pay an amount equal to the credit availed on exempted service i.e. trading. Further, the appellant had not intimated to the department their option as to whether they are paying an amount equal to the credit availed on the exempted service as per the formula specified under Rule 6(3A) or reversing the credit attributable to trading. Accordingly, show cause notice dt. 23.10.2018 was issued to the appellant alleging wrongful availment of credit in regard to the trading activity and proposing to demand an amount equal to 6% of value of the exempted service viz. trading. After due process of law, the original authority confirmed the demand along with interest and imposed penalties. Aggrieved, the appellant is now before the Tribunal. 4. Ld. Counsel Shri Raghavan Ramabadran appeared and argued on behalf of the appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice 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. 4.5 The books of account of the Appellant are maintained at the Head Office in Chennai. The Appellant records the expenses including the input services under dispute in their internal SAP System. 4.6 All expenses directly attributable to the different segments are accounted in the respective plant code allocated to such segments. The same is tabulated below. S. No. Plant Code Center 1. 1000 Manufacturing 2. 2000 Trading Centres 3. 3000 Service Centres 4. 5000 Head Office 4.7 The expenses are accounted based on the purchase orders issued by the Appellant which records the unit (plant) code or based on the invoices issued by the suppliers which captures the premises to which service is provided. Thus, the Appellant is maintaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... takes 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. In the present case, the Appellant s Service Unit is not engaged in the activity of trading of goods. Hence, the basic premise on which Rule 6(3) of CCR is applied in the present case is wholly incorrect and erroneous. The impugned order is liable to be set aside on this ground alone. A.3. The invoices relied upon by the Ld. Principal Commissioner pertain to the trading units and not service units. The accounting of the said invoices in the respective trading units have been provided in the Appeal and the details of the same for reference are below: S.No. Relevant Document as relied on by the OIO Relevant Page No. in the Appeal 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orandum 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been settled in Madura Steel Industries Pvt Ltd v. Commissioner of Central Excise, Madurai, [2015-TIOL-567-CESTAT-MAD] and M/s. IPCA Laboratories Ltd. Versus CCE Indore 2015 (10)TMI 2325 CESTAT New Delhi wherein it was held that it is left to the option of the assessee to comply with the mandate of Rule 6 and once the assessee has reversed proportionate 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of imposing interest under Section 75 of the Act and penalty under Section 76 and 78 of the Act does not arise. 7. It is further submitted that, in any case, the Appellant has not availed and utilized any credit attributable to the exempt services and therefore no interest is payable under Rule 14 of the CCR. Ld. Counsel prayed that the appeal may be allowed. 8. Ld. A.R Shri R. Rajaraman 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. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e units are separate and independent. Thus the appellant has categorically stated in the reply to the SCN that they have neither availed or utilized any credit attributable to the exempted service (trading). 11. The Ld. Counsel for appellant thus put forward strongly that the SCN itself is issued on erroneous perception of facts. The Bench then directed the department to file a report in this regard. 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 sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3000 Service Centres 4. 5000 Head Office The code allotted to trading units starts with 2000 and the trading unit of the corresponding invoice in page 7 of the impugned order is located in BusA 2007 . It is thus very much clear that the invoice pertain to trading unit and not a service unit as concluded by the adjudicating authority. 13. Again, in page 8 of the impugned order, another invoice dt. 23.07.2014 is enclosed by the adjudicating authority. The said invoice is for sale of 5 KVA UPS System with CC Power Pack. The appellant has collected VAT on the value of the product 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concluded that all trading units are service units. In fact, the invoices are of trading unit only. 18. It also requires to be stated that the quantification of demand has been done by taking the trading turnover against the total credit availed by the service unit, which is flawed. The Ld. Counsel for appellant has also pointed out that the demand of service tax alleging wrongful availment of credit is Rs.12,53,61,238/- whereas the total credit availed by appellant for the disputed period is only Rs.3,16,72,532/-. 19. The Ld. Counsel for appellant has also put forward various alternate arguments as abundant caution. It is submitted that in case Rule 6 (1) is applicable 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 expen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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