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2021 (6) TMI 60 - AT - Central ExciseReversal of CENVAT Credit - value of service in case of trading - proportionate amount of CENVAT credit of common input services attributable to the exempted services is reversed - HELD THAT:- Undisputedly, trading is a form of service and no service tax is leviable on it and hence it is an exempted service. Usually the amount one pays to a service provider is the value of the services. For example, what one pays a doctor, dentist, lawyer, hair dresser, etc. represents the value of their services. Unlike other services, the amount transacted in trading represent not only the service rendered by trader but also the value of the goods delivered. The service element cannot be the total turnover of the goods traded but is only a small fraction of the turnover. This turnover represents the value of the goods plus the value of the service rendered by the trader - Explanation I(c) to this Rule for both the relevant periods (2015-16 and April 2016 to June 2017) clearly specifies that in case of trading service, the value of the service is the difference between the buying and selling price or 10% of the traded goods whichever is higher. The adjudicating authority erred in not taking this Explanation into account while calculating the amount required to be reversed as per Rule 6(3A) and reckoning the total trading turnover as the value of the exempted services rendered. Whether only the CENVAT credit taken on common input service should be considered or the entire CENVAT credit taken should be considered for calculating the proportionate amount of CENVAT to be reversed as per Rule 6(3A)? - HELD THAT:- The appellant has taken no credit on inputs or input services used exclusively for exempted services and had taken credit only on the inputs and input services used in manufacture of dutiable goods. The only dispute is regarding the credit on common input services used in their headquarters which was transferred to the field units through ISD invoices. This credit cannot be attributed wholly to either the dutiable goods manufactured or the exempted service rendered viz., trading. This should therefore, be apportioned. Since the appellant has followed Rule 6(2) and has not taken any CENVAT credit on the input services which were used exclusively for providing exempted services, the formula under Rule 6(3A) can only be used to only proportionately divide the credit taken on common input services and deny credit to the extent it is attributable to the exempted service viz., trading during the periods relevant to both appeals, viz., 2015-16 and April 2016 to June 2017 - the main basis on which the demands were raised in both the Show Cause Notices have already been dropped by the adjudicating authority since the appellant had reversed proportionate amount of credit. Only the computation of the amount to be reversed is in dispute. The impugned orders cannot be sustained - Appeal allowed - decided in favor of appellant.
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