2018 (2) TMI 1238 - AT - Central Excise

CENVAT credit - trading activity - common services used for dutiable goods and trading activity - Held that - prior to 1.4.2011, the trading activity cannot be considered as an exempted service, therefore, the credit availed on the input service common to manufacture of excisable goods and also trading activity cannot be denied - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of CENVAT credit on input services for manufacturing and trading activities.
2. Segregation of input services for dutiable goods and trading activity.
3. Invocation of extended period of limitation for demand notice.

Analysis:
1. The appeal was filed against the Order-in-Appeal dated 21.5.2015 regarding the availment of CENVAT credit on input services for manufacturing excisable goods and trading activities during October 2008 to September 2009. The demand notice was issued to recover the credit availed on input services attributable to trading activity, leading to a dispute.

2. The appellant argued that input services common to manufacturing and trading activities cannot be segregated, especially since trading activity was considered an exempted service only from 1.4.2011. The appellant referenced judgments of the Tribunal to support their stance. It was contended that the credit of service tax paid on input services utilized for trading activity prior to 1.4.2011 should not be recoverable. The appellant also claimed that the demand was time-barred as no facts were suppressed or mis-declared.

3. The Tribunal observed that during the relevant period, the appellant indeed used common input services for manufacturing dutiable goods and trading activities. The demand notice aimed to recover the proportionate credit availed on service tax paid on input services related to trading activity. Referring to previous Tribunal judgments, it was established that trading activity could not be considered exempted before 1.4.2011. Consequently, the credit availed on input services common to manufacturing and trading activities could not be denied. As a result, the impugned order was set aside, and the appeal was allowed.

This judgment highlights the importance of considering the timing of regulatory changes when determining the eligibility of credits and the application of exemptions. It also underscores the significance of legal precedents in interpreting and applying tax laws.