2014 (4) TMI 12 - CESTAT MUMBAI

CENVAT Credit - simultaneous manufacturing and trading activity - whether trading activity is exempt service - appellant assessee undertakes trading of motor vehicles in as much as they import motor vehicles from their principals abroad and sell such motor vehicles in India - availment of credit on input services in relation to trading of motor vehicles/cars. Held that:- trading was not a service and therefore, cannot be considered as an exempted service during the period prior to 1.4.2011 and the amended provision with effect from 1.4.2011 will not have retrospective effect.

Appropriation of credit between manufacturing and trading and import of cars - Held that:- though clause (c) of Explanation I added with effect from 1.4.2011 and are of the view that perhaps the said new method has been adopted to encourage the trading of the goods rather than the manufacturing of the goods (otherwise criterion should have been same viz. based upon turnover or value addition) - for the period under dispute the credit of service tax paid on the common input services should be apportioned in the same ratio as the turnover of the manufactured and traded cars.

Extended period of limitation - Held that:- The assessee is following the self assessment procedure and taking credit on its own. They were even taking the credit in respect of input services which were exclusively used in the trading activity. It is also observed that the fact that the appellants were taking credit of service tax in relation to the trading activity has not been disclosed in return or in other document and therefore, the extended period of limitation is correctly invoked. These reasons would be applicable even for penalty under Section 11AC read with Rule 15 of Cenvat Credit Rules including the demand of the normal period issued in the first show-cause notice - Decided against the assessee.