2016 (11) TMI 1106 - AT - Central Excise

Cenvat credit relating to common input services - Large Tax Payer Unit - Input Service Distributor - trading activity - Held that: - the Tribunal has come to the conclusion that as regards the issue as to whether trading activity can be called as a service, it is quite clear that since the trading activity is nothing but purchase and sales and is covered under sale tax law, it may not be appropriate to call it a service. Therefore, it has to be held that trading activity cannot be called a service and therefore, it cannot be considered as an exempted service also. It is pertinent to note that the trading activity has been specifically covered as exempted service with effect from 1.4.2011. This amendment in the definition in Rule 2(e) was brought into effect on 1.4.2011 and as per the learned A.R., this amendment is only a clarification and is applicable prospectively. Further this issue whether the appellant is entitled to take Cenvat credit with regard to common input service attributable to trading activity has been recently considered by the Hon’ble High Court of Madras in the case of M/s F L Smidth Pvt. Ltd. Vs. C.C.E. [2014 (12) TMI 699 - MADRAS HIGH COURT] where in it was held that On an understanding of the Rule 2(l) of the Cenvat Credit Rules, there is no manner of doubt that input service means goods which is used by the manufacturer directly or indirectly in relation to the manufacturing of final product and clearance of final product from the place of removal. In the present case, the Department has allowed cenvat credit in respect of the value of goods amounting to ₹ 5.41 crores and denied for the balance. We find no error in such determination, which is in consonance with Rule 2(l) of the Cenvat Credit Rules.

There is no infirmity in the impugned orders whereby the Commissioner (Appeals) has denied the Cenvat credit of common input services attributable to trading activity by holding that the trading activity is exempted service even prior to 1.4.2011. Further, as far as invoking extended period of limitation and imposition of mandatory penalty, I am of the considered view that since the appellants have not declared in their ST3 Returns that input service credit was used in relation to trading activity. This amounts to suppression of facts and therefore, the extended period of limitation is correctly invoked as the appellants are following the self assessment procedure and are taking credit on their own.

CENAVT credit not allowed - extended period of limitation invoked - appeal disposed off - decided against appellant-assessee.