2016 (4) TMI 1172 - AT - Service Tax

Activity of trading - Rule 6(3) (ibid) - N/N. 3/2011-C.E. (N.T.) dated 1-3-2011 - whether the trading activity has an exempted services or not? - Held that - for the period prior to 1-4-2011 the provisions of Rule 6(3) of Cenvat Credit Rules 2004 are not applicable to the facts of this case. For the period post 1-4-2011 I find that the appellant has availed proportionate Cenvat credit attributable to their taxable service and they have not availed any Cenvat credit attributable to their trading activity therefore again I hold that provisions of Rule 6(3)(ii) of Cenvat Credit Rules 2002 are not applicable to the facts of this case - reliance placed in the case of Orion Appliances Ltd. 2010 (5) TMI 85 - CESTAT AHMEDABAD wherein it has been held that trading activity covered under sales tax law and cannot be called the services therefore trading activity has not an exempted service - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against duty demand for Cenvat credit on input/services for manufacturing and trading activities under Rule 6(3) of Cenvat Credit Rules, 2004 for 2008-2009 to 2011-2012.

Analysis:
1. Issue of Trading Activity Classification:
The appellant argued that trading activity was not considered exempted services before 1-4-2011. They contended that Rule 6(3) should not apply for the period before this date. It was highlighted that post 1-4-2011, the appellant only availed Cenvat credit for taxable services, not for trading activity. The Revenue disputed this, citing Rule 6(3)(ii) applicability. However, the Tribunal referred to a previous case where it was held that trading activity, being covered under sales tax law, cannot be termed as services. Consequently, the Tribunal ruled that Rule 6(3) did not apply to the appellant for the period before 1-4-2011 and that post this date, the appellant had correctly availed Cenvat credit only for taxable services, not for trading activity.

2. Judgment and Relief:
After hearing both parties and considering submissions, the Tribunal found that Rule 6(3) did not apply to the appellant's case. Therefore, the impugned order demanding duty was deemed unsustainable in the eyes of the law and was set aside. The appeal was allowed with any consequential relief. The judgment was dictated and pronounced in open court by the Member (J).

In summary, the Tribunal ruled in favor of the appellant, holding that Rule 6(3) of the Cenvat Credit Rules, 2004 did not apply to the appellant's situation for the relevant periods. The judgment emphasized the non-applicability of the rule to trading activities and the correct availing of Cenvat credit by the appellant for taxable services.