2021 (11) TMI 339 - CESTAT KOLKATA - Service Tax

Head Note / Extract:
Reversal of Cenvat Credit - provision of service as well as trading of goods which was an exempt service - show cause notice was issued demanding 6% of the trading turnover as ineligible Cenvat credit availed by the Appellant during the period under dispute - HELD THAT:- the Appellant has availed Cenvat credit of ₹ 41,17,269/- during the period under dispute while the confirmation of demand for recovery is ₹ 3,29,07,268/-. In this regard we are in agreement with the decision of the Tribunal in the case of Mercedes Benz [2015 (8) TMI 24 - CESTAT MUMBAI]. It is not disputed by the Revenue that the Appellant has availed Cenvat credit only to the extent of Rs. ₹ 41,17,269/- during the period under dispute. Hence, we are of the opinion that the demand as confirmed by the Adjudicating Authority cannot be sustained at all. Further, it is seen that the Department has mechanically applied 6% of the entire balance sheet turnover of the Appellant without detailing as to why the said turnover has been taken and why not the value of trading as provided in the Rules viz. the difference between the sale price and the cost of goods sold (determined as per the generally accepted accounting principles without including the expenses incurred towards their purchase) or ten percent of the cost of goods sold, whichever is more. Thus, we find that the entire computation of demand in the instant case has been done without applying the legal provisions and hence the same cannot be sustained in our view. When the audit wing had already verified the books of accounts of the Appellant and had sought reversal of Cenvat credit of ₹ 1,82,114/- along with interest and penalty which was subsequently paid by the Appellant, then issuance of the instant SCN seeking reversal of Cenvat credit under Rule 6 of CCR 2004 by invoking extended period of limitation cannot be sustained. In view of the above discussions and the settled legal judicial precedence and provisions contained in statutes referred to above, the demand cannot be sustained and is therefore set aside.