2010 (5) TMI 85 - CESTAT, AHMEDABAD

Cenvat Credit – Trading Activities – applicability of rule 3 and 6(3) - As per the cenvat credit return filed along with the ST-3 returns, it was observed that the appellants were availing the credit on advertising, security, courier, telephone and banking services. These services were not entirely used in providing Maintenance and Repair services but also used in trading activity. Credit of input services, which were entirely used in trading activity, was not available to the appellants for payment of service tax.

Held that: It is not correct to apply rule 3 or 6(3) in relation to trading activity since trading activity is not at all a service - we have a situation where an assessee would not be eligible to take input service tax credit on an output which is neither a service nor excisable goods and at the same time 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 appellant to choose and segregate the quantum of input service attributable to trading activity and exclude the same from the records maintained for availment of credit.

The matter is remanded to the Original Adjudicating Authority before whom the appellants shall present the details relating to service tax paid on input services attributable to trading activity and other services separately and after verification if felt necessary, the adjudicating authority shall quantify the amount to be reversed or payable by the appellant.