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2019 (8) TMI 429 - AT - Service TaxCENVAT Credit - common input services used in trading activity/exempt service - periods from September 2004 to March 2011 - Rule 6(3) of the CENVAT Credit Rules - HELD THAT:- The trading activity is an exempted service to which Rule 6(3) applies. This position has not changed with the introduction of explanation (3) to Rule 6(1) - trading activity has always been an exempted service both prior to and after introduction of this explanation - the assessee is not entitled to CENVAT credit to that extent. Reversal of common credit - HELD THAT:- A plain reading of Rule 6(3)(c), shows that the restriction on utilisation of CENVAT under Rule 6(3)(c) is not confined to any form of CENVAT credit but is related to the value of output taxable services rendered by the appellant. The credit cannot be utilised in excess of 20% of the amount of service tax payable on taxable output services. Therefore, if service tax is paid utilising the CENVAT, it does not amount to paying service tax and service tax can be demanded. Credit on banking and financial services, insurance/auxiliary services and security agency services - Rule 6(5) OF CCR - HELD THAT:- On a plain reading of Rule 6(5) shows that exception has been made with respect to some services in it and if the services on which the appellant claimed credit are covered by Rule 6(5), they are entitled to full credit to that extent. Extended period of limitation - Suppression of facts or not - HELD THAT:- The allegation of suppression of facts does not stand. Considering this fact and that the assessee was not required in their ST-3 returns to declare the breakup of the CENVAT credit availed by them, there is a force in the argument of the learned counsel that extended period of limitation cannot be invoked in their case. Penalty - HELD THAT:- The appellant had a bonafide belief that they are entitled to the benefit of CENVAT credit even if it is decided against them in the current proceedings - they had a reasonable cause for their failure in over-using CENVAT credit in violation of Rule 6(3) and thereby not discharging full amount of service tax - Penalty not warranted. The demand within the normal period is only upheld - demand upheld subject to verification and requantification of the credit eligible to the appellant under Rule 6(5) - interest on the demands gets modified accordingly - appeal allowed in part - part matter on remand.
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