9911796707
TMI Blog2024 (8) TMI 993X X X X Extracts X X X X X X X X Extracts X X X X ..... d out by internal audit, the appellant had reversed the proportional service tax input CENVAT credit of Rs.39,71,696/- on trading activity. The appellant also reversed the credit of other input services amounting to Rs.98,578/-, totalling to Rs.40,70,274/- along with interest of Rs.4,45,146/- under protest. Subsequently, the appellants filed a refund claim for the amount which was reversed. Show Cause Notice dated 1.2.2012 was issued proposing to reject the refund claim. The refund sanctioning authority after due process of law rejected the refund claim on the ground that the input services were not used directly or indirectly in their manufacturing activity and that the said services do not figure in the exhaustive list of inclusive input ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es only from 1.4.2011. Since the amendment is prospective and the period in dispute is prior to 1.4.2011, the ratio of the various High Court decisions relied on by the appellants would squarely apply to the case on hand. In the circumstances the interest amount is also liable to be refunded to the appellants. He prayed for favourable orders. 4. The Ld. AR reiterated the findings in the impugned order. 5. Heard both sides. We find that the issue is not of retrospectivity of an amendment to the Rule or otherwise, as stated by the appellant, but whether the appellant could claim input-service tax credit on an output which is neither a service nor excisable goods. A Coordinate Bench of this Tribunal examined the issue in detail in M/s Woodwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice. It is clear that trading is not a taxable service also. In other words, trading is an activity which is not covered under the scope of Cenvat Credit Rules, 2004. The appellants should not have availed any credit on input services when such services are attributable to an activity which is not at all taxable and hence not covered by the scope of Cenvat Credit Rules, 2004. 7. A deemed fiction is apparently created by naming „trading‟ as an exempted service by way of explanation in Rule 2 of Cenvat Credit Rule w.e.f. 01.04.2011. We find prior to creation of such fiction, there is no scope at all even to consider the trading activity to be covered under the credit scheme. After the explanation, the position is more clear to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 service tax credit attributed to trading activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants averments, Notification No. 3/2011-CE (NT) dated 1.3.2011 did not considered 'trading' as an exempted service prior to the introduction of explanation, in Rule 2 of Rules, w.e.f. 01.04.2011 and the notification did not have retrospective effect. The fact whether 'trading' is an exempted service or not is not a relevant consideration, so long as the output for which the input credit is taken, itself is neither a service nor excisable goods. 7. As stated in the judgment extracted above, 'Lally Automobiles' case being affirmed by the Hon'ble Apex Court has become the law of the land and requires to be followed. Judgments cited by the appellant are hence of no avail. This being so the order of the Ld. Commissioner (Appeal) rejecting the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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