TMI Blog2013 (11) TMI 1422X X X X Extracts X X X X X X X X Extracts X X X X ..... f an amount equal to 10%/5% of the value of the exempted goods and exempted service would also not apply - the appellant has availed input service credit on both dutiable/exempted goods and taxable/exempted service, Rule 3A which came into force w.e.f. 01/04/2008 provides for reversal of credit on the input service attributable to exempted goods/services on a proportionate basis based on the turn over. The appellant has precisely done that ab initio and has not taken any credit in respect of input services attributable to the traded goods - in the absence of any evidence led by Revenue proving that the appellant has taken ineligible credit, the question of appellant violating the provisions of Rule 6 of the CCR, 2004 would not arise – Following M/s. Orion Appliances Ltd. Versus CST Ahmedabad [2010 (5) TMI 85 - CESTAT, AHMEDABAD] - if the assessee reversed input service tax credit attributable to trading activities according to standard accounting principles – Decided in favour of Assessee. - E/635/2012 - Final Order No. A/832/2013-WZB/C-II(EB) - Dated:- 28-8-2013 - P R Chandrasekharan And Anil Choudhary, JJ. For the Appellants : Shri M H Patil, Mr T C Nair, Advs. Ms Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant is also liable to penalty under the provisions of Rule 15 of the CCR, 2004. 2.2. Accordingly, a show cause notice dated 07/10/2011 was issued demanding an amount of Rs.297,77,33,460/- for the period September, 2006 to August, 2010 under the provisions of Section 11A(1) read with Rule 14 and Explanation 3 to Rule 6(3A) of CCR, 2004. Interest on the above amount was also demanded under Section 11AB and it was proposed to impose a penalty under Section 11AC of the Act read with Rule 15 of CCR, 2004. 2.3 The appellant contested the demand. It was pleaded that as far as the trading activity is concerned, the appellant has not taken any credit at all of the service tax paid on various input service and, therefore, the appellant is governed by sub-rule (1) of Rule 6 of CCR, 2004 and, therefore, question of invoking the provisions of sub-rule (2) and (3) of Rule 6 of the CCR, 2004 would not arise at all. It was also pointed out that the appellant has worked out the CENVAT credit attributable to the trading activity on the basis of turn-over of the goods traded and the turn-over of the manufactured goods sold and in proportion thereof they have taken credit of the service t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not taken CENVAT credit on service tax paid on input services used in the trading of the imported goods. Therefore, they have satisfied the requirement of Rule 6(1) of the CCR, 2004. The provisions of sub-rule (2) of Rule 6 would arise only when a manufacture or provider of output service avails CENVT credit in respect of any input or input services and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services. In such an eventuality, the manufacturer has been provided with two options: One option is to maintain separate accounts for the receipt and utilisation of the services for the dutiable /taxable goods/services and the exempted goods/services and the other is to pay 10%/5% of the value of the exempted goods/service. In the present case, since the appellant has not availed any input service tax credit on the traded goods, the question of invoking the provisions of sub-rule (3) which provides for payment of an amount @ 10%/5% of the value of the exempted goods/exempted service would not arise at all. 3.2 The learned counsel also submits that w.e.f. 01/04/2011, rule 2 of CCR, 2004 was amended by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forecast what would be the quantum of trading activity and other activity which is liable to service tax. The only obvious solution which would be legally correct appears to be to ensure that once in a quarter or once in a six months, the quantum of input service tax credit attributed to trading activities according to standard accounting principles is deducted and the balance only availed for the purpose of payment of service tax of output service. This proposition is not against the law in view of the fact that there are several decisions of various High Courts and also of the Tribunal wherein a view has been taken that subsequent reversal of credit amounts to non availment of credit." 3.4 In the present case, the appellant has precisely done what has been envisaged in the said decision of the Tribunal and the appellant has not taken any credit at all on the input services which have been used in the trading of imported goods. Accordingly, it is prayed that the impugned demand is not sustainable in law and the same be set aside. 4. The learned Special Consultant appearing for the Revenue, on the other hand, reiterates the findings of the adjudicating authority. He submits tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this ground alone the impugned notice and the order is not sustainable in law. 5.3 Secondly, as per Rule 6(2) maintenance of separate accounts is envisaged only when a manufacturer or provider of output service avails CENVAT credit. In the present case, the appellant has not availed any CENVAT credit at all in respect of input service relating to the traded goods. Therefore, question of maintenance of separate accounts does not arise at all. Consequently provision of sub-rule (3) of the said Rule 6 mandating payment of an amount equal to 10%/5% of the value of the exempted goods and exempted service would also not apply. Even assuming but not admitting that the appellant has availed input service credit on both dutiable/exempted goods and taxable/exempted service, Rule 3A which came into force w.e.f. 01/04/2008 provides for reversal of credit on the input service attributable to exempted goods/services on a proportionate basis based on the turn over. In the present case, the appellant has precisely done that ab initio and has not taken any credit in respect of input services attributable to the traded goods. Calculation done by the appellant has not been disputed by the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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