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M/s. Narmada Vehicles Pvt. Ltd. Versus CCE & ST, Bhopal

2015 (11) TMI 1045 - CESTAT NEW DELHI

Cenvat Credit - Authorized Service Station Service and ‘Business Auxiliary Service’- Trading activity - Penalty u/s 77 & 78 - Held that:- the disputed input services have not been entirely used by the appellant for providing the taxable output services. Rather, some portion of the input services has been used for trading activity of selling cars. In my view, trading activity cannot be termed as a service . Accordingly, cenvat credit on input services attributable to trading activity will not be .....

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te records with regard use of input services for the taxable services and for trading activity (which was not an exempted service at the material time), I am of the view that there is no contravention of the Cenvat rules, and as such, imposition of penalty under Section 77 of the Finance Act, 1994 is not justified. Further, in absence of any specific findings by the authorities below regarding the involvement of the appellant in activities concerning fraud, collusion, willful mis-statement or su .....

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.1 The appellant is engaged in the business of trading and servicing of four wheeler motor cars as an authorized dealer of Hundai Motors Limited. As a service provider, the appellant is registered with the service tax Department under the category of Authorized Service Station Service and Business Auxiliary Service . The appellant avails Cenvat credit of service tax paid on various taxable services viz. Telephone, Advertising, Insurance, Banking & other Financial services, Maintenance & .....

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tributable to the trading activity, culminated in the adjudication order dated 26.11.2012, wherein cenvat demand of ₹ 2,44,641/- along with interest was confirmed. Besides this, equal amount of penalty under Section 78 and also penalty under Section 77 of the Finance Act, 1994 have also been imposed in the said adjudication order. For confirmation of the Cenvat demand, the original authority had applied the formula prescribed under Rule 6 (3A) of the Cenvat Credit Rules, 2004. Feeling aggr .....

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.04.2011), the term trading did not find a place in the definition of exempted service as defined in Rule 2(e) of the Cenvat Credit Rules, 2004, and thus, the trading activity undertaken by the appellant for selling of cars was outside the scope of such definition; and therefore, embargo created in Rule 6 of the said rules will have no application for maintenance of separate accounts and for reversal of cenvat credit. 3. Per contra, Shri M.S. Negi, the ld. DR appearing for the respondent submi .....

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he decisions of this Tribunal in the case of Metro Shoes Pvt. Ltd. vs. CCE, Mumbai-I reported in 2008 (10) STR 382 (Tri. Mum.), Orion Appliances Ltd. reported in 2010 (19) STR 205 (Tri. Ahmd.), Loreal India Private Ltd. vs. CCE, Pune-I reported in 2012 (281) ELT 113 (Tri.) and Mercedez Benz India Pvt. Ltd., reported in 2014 (36) STR 704 (Tri. Mum.). 4. Heard the ld. Counsel for both sides and perused the records. 5. Under the Cenvat statute, the service provider of output services is entitled to .....

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er shall be permitted to take Cenvat credit only on the input services used for the provision of the taxable output services. In other words, no Cenvat credit is available to the output service provider with regard to the input service used for providing the exempted services. 6. So far as cenvat credit on the disputed services used for the taxable service i.e. business auxiliary services and authorized service station service, the appellant is eligible to take cenvat credit of service tax paid .....

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vices attributable to trading activity will not be available to the appellant. In such eventuality, the only recourse left to the appellant is to segregate the quantum of input service attributable to trading activity and exclude the same from the records maintained for availment of credit, which in the present case, admittedly has not been done by the appellant. 7. With regard to the findings of the authorities below that the appellant should discharge the cenvat benefit availed on the trading .....

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However, since the appellant is not permitted to take cenvat credit of service tax paid on the disputed services used for the trading activities, the credit so taken is liable to be reversed. In this contest, I rely on the decision of this Tribunal in the case of Orion Appliances (supra), wherein it has been held that the amount attributable to the input service used for the trading activity should be reversed. The relevant paragraph in the said decision is extracted herein below:- 8. Then the q .....

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le services. In cases where an assessee is undertaking activities which cannot be called a service or which cannot be called manufacture, that activity goes out of the purview of both Central Excise Act as well as Finance Act, 1994. Therefore, we have a situation where an assessee would not be eligible to take input Service tax credit on an output which is neither a service nor excisable goods and at the same time there is no provision to cover situations where an assessee is providing a taxable .....

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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 t .....

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