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2022 (8) TMI 877 - AT - Service TaxCENVAT Credit - input services used in manufacture of dutiable goods/taxable services as well as in trading activity (exempted service) - demand of amount paid in excess of 20% of service tax payable from the credit account - period from April 2006 to March 2008 - demand of 8%/6% of the value of traded goods (exempted service) - period from April 2008 to March 2011 - whether the Explanation to rule 2(e) is prospective in nature as submitted by the appellant or it merely clarifies that trading activities were always an ‘exempted service’, as is contended by the department? - Extended period of limitation - HELD THAT:- To understand the scope of ‘Explanation’, it would be useful to refer to the decision of the Supreme Court in Sedco Forex [2005 (11) TMI 25 - SUPREME COURT]. The Supreme Court clarified that if ‘Explanation’ widens the scope of the main provision, then it would be presumed to have only prospective effect, unless a contrary intention is expressed by the legislature. The same view was expressed by the Supreme Court in Martin Lottery. The Supreme Court, in effect, held that the use of the phrases, ‘it is hereby declared’ or ‘removal of doubts’, in itself will not enable a presumption to be drawn that the Explanation is retrospective. The Tribunal in Trent Hypermarket [2019 (6) TMI 1327 - CESTAT MUMBAI], while dealing with the definition of ‘exempted service’ under rule 2(e) of the Credit Rules, held that trading cannot be treated as an ‘exempted service’ for the period prior to 01.04.2011 and the Explanation added on 01.04.2011 was prospective and not retrospective. Thus, it is, therefore, clear that trading was not an ‘exempted service’ prior to 01.04.2011. The demand confirmed in the impugned order cannot, therefore, be sustained and is liable to be set aside - Even otherwise, the demand for the period 2006 to 2008 would not survive as there was no restriction on availment of credit as the restriction was in respect of utilization. It also needs to be remembered that for not exercising the option under rule 6 of the Credit Rules, the option of payment of 6/8 percent of trading of goods (‘exempted service’) cannot be thrust upon the appellant. This view finds support from the decision of the Telangana High Court in Tiara Advertising [2019 (10) TMI 27 - TELANGANA AND ANDHRA PRADESH HIGH COURT] and the decision of the Tribunal in Agrawal Metal Works [2022 (7) TMI 924 - CESTAT NEW DELHI]. Thus, the demand of Rs. 5,98,82,040/- for the period from April 2008 to March 2011 cannot also be sustained. It is not necessary to examine the contention advanced by the learned counsel for the appellant regarding invocation of the extended period of limitation. Appeal allowed.
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