TMI Blog2017 (3) TMI 1355X X X X Extracts X X X X X X X X Extracts X X X X ..... the said Rule 14 has also been provided for recovery of amount mentions in Sub-rule (3) of Rule 6 of CCR under Explanation 2 under Sub-rule 3 of said Rule 6. The provision at Explanation 2 under Sub-rule (3) of said Rule 6 provide for recovery of Cenvat Credit which was admissible at the time of taking credit In the present case, admittedly, there is no allegation in the said SCN that the appellants had taken credit of any inadmissible Cenvat credit. Further the SCN dated 09/05/2011 states that Rule 6 of CCR, 2004 is not applicable in the present case. Therefore, the said SCN did not make out a case for invocation of provisions of Rule 14 of Cenvat Credit Rules, 2004. Therefore, SCN was not sustainable for the reasons that the contention in the SCN did not allow recovery of Cenvat Credit u/r 14 of CCR, 2004. Appeal allowed - decided in favor of appellant. - Appeal No. E/3138-3142/2012-EX [DB] - Final Order No. 70166-70170/2017 - Dated:- 23-1-2017 - Mr. Anil Choudhary, Member (Judicial) And Mr. Anil G. Shakkarwar, Member (Technical) Shri V. Lakshmi Kumaran, Advocate Shri Atul Gupta, Advocate, for Appellant Shri Rajeev Ranjan, Joint Commissioner (AR), for Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... void ab-initio and there was no application of Rule 6 to trading activity. They, further, stated in the said Show Cause Notice that in such a situation the remedy lied in reversal of Cenvat credit in the ratio of turnover of trading goods to total turnover on the strength of case law in the case of M/s Orion Appliances Ltd. Versus CST, Ahmedabad [2010-TION-752-CESTAT-AHM] M/s Metro Shoes Pvt. Ltd. Versus Commissioner of Central Excise, Mumbai-I [2008(10) S.T.R. 383 (Tri. Mumbai)] wherein it has been held that no Credit is admissible on services attributable to trading activities. They, further, stated in the said Show Cause Notice that Rule 6 of Cenvat Credit Rules, 2004 also stipulated that no Credit could be allowed on input and input services which were used in the manufacture of exempted goods or for provision of exempted services and that there was no provision for allowing Credit of Service tax paid on input services which was not used or utilized either or in relation to manufacture of excisable goods or for providing output service and that Cenvat credit of Service tax paid on input services used for trading activities was not allowed as the said trading activities could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not applicable in the present case and that said Rule 6 is invokable only when Cenvat credit can be attributable to exempted goods or exempted services and trading was not service and that there was no restriction in the said Cenvat Credit Rules, at the relevant time on taking of credit attributable to trading activity. They, further, submitted that once it is clear that the service is an input service to the assessee then entire Service tax paid was available as credit to them and that they were entitled to the entire Cenvat cfredit used in or in relation to manufacture of goods or activities in relation to business. They further submitted that in the absence of statutory provisions the claim of the Department that they were not entitled to Cenvat credit was not sustainable. They, further, stated that Rule 6 of Cenvat Credit Rules, 2004 stipulates that Cenvat credit was not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or for provision of exempted services and trading activity was not exempted by the definition of services. Therefore, the provisions of Rule 6 of Cenvat Credit Rules, 2004 were not applicable in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in such a situation only correct and legal position appears to be that it is for the appellant to choose and segregate the quantum of input services attributable to trading activity and exclude the same from the records maintained for availment of credit and further held that this cannot be done in advance since it will not be possible to forecast what would be the quantum of trading activity and other activity which is liable to Service tax and further he has come to the conclusion that the only obvious solution that would be legally correct appears to ensure that once in a quarter or in a six month, the quantum of input service credit attributable to trading activities according to the standard accounting principles is deducted and the balance only availed for the purpose of payment of Service Tax of output service. He has further held that this proportion is not against the law in view of the final order of Tribunal in the case of M/s Metro Shoes Pvt. Ltd. He has further held that the provisions for extended period were appropriately invoked in the present case and he confirmed the demand of ₹ 45.63 crores under Rule 14 of Cenvat Credit Rules, 2004 read with proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods traded. E) They contended that there was no suppression by appellant as they disclosed all the information required in the returns filed and therefore demand for extended period was not sustainable. They, further, contended that earlier investigation included the aspect covered by the present Show Cause Notice and Show Cause Notice dated 28/08/2008 was issued wherein the allegations in the present said Show Cause Notice were not made. Therefore, the matter was in the knowledge of department much before 28/08/2008. Therefore, the Show Cause Notice dated 09/05/2011 was issued much beyond one year after the department came to know the issue and hence the present Show Cause Notice was not sustainable and was barred by limitation. In this regard, they have relied on the ruling by Hon ble Supreme Court in the case of Nizam Sugar Factory Versus Commissioner of Central Excise, Andhra Pradesh reported at 2008 (9) S.T.R. 314 (S.C.) F) They contended that since the extended period was not invokable, penalty under Section 11AC of Central Excise Act, 1944 was also not imposable. G) In respect of personal penalty under Rule 26 of Central Excise Rules, 2002 they cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation the difference between sale price and purchase price should be taken as provided by law after 01/04/2011 and not the total turnover. He has further contended that as submitted in the grounds of appeal extended period of limitation was not invokable in the present case. He has further submitted that the Show Cause Notice has relied on final order passed by this Tribunal in the case of M/s Orion Appliances Ltd. M/s Metro Shoes Pvt. Ltd. (supra) and has submitted that the case law of M/s Metro Shoes Pvt. Ltd. was relied on in the case of Mercedes Benz India Pvt. Ltd. Versus Commissioner of Central Excise, Pune-I reported at 2014 (36) S.T.R. 704 (Tri. Mumbai). He has further stated that in the said case law of Mercedes Benz India Pvt. Ltd. the final order by this Tribunal in the above stated case of M/s Orion Appliances Ltd. was also considered and it was held in para 17 that on the basis of turnover of manufactured goods and trading of goods, the proportionate Cenvat credit can be divided into two components and the Cenvat credit attributable to the components of trading can be reversed. The said Final Order of this Tribunal was challenged before the Hon ble High Court of Bomb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken and utilized wrongly or has been erroneously refunded the same along with interest shall be recovered from the manufacturer or the provider of the output service and provisions of Section 11A of Central Excise Act, 1944 Section 73 of Finance Act, 1994 was applied for effecting such recoveries. It is very clear that for recovery of Cenvat credit under said Rule 14 first it is to be established that Cenvat credit has been either taken wrongly or utilized wrongly. Further, the said Rule 14 has also been provided for recovery of amount mentions in Sub-rule (3) of Rule 6 of Cenvat Credit Rules under Explanation 2 under Sub-rule 3 of said Rule 6. The provision at Explanation 2 under Sub-rule (3) of said Rule 6 provide for recovery of Cenvat Credit which was admissible at the time of taking credit. In order to invoke provisions of said Rule 14 it is to be first established that either the Cenvat credit was not admissible or Rule 6 was applicable in the transaction then only Cenvat credit could be recovered under Rule 14 of Cenvat Credit Rules, 2004. In the present case, admittedly, there is no allegation in the said Show Cause Notice that the appellants had taken credit of any inad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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