TMI Blog2017 (6) TMI 635X X X X Extracts X X X X X X X X Extracts X X X X ..... R For the Appellant : Mr.K.Jayachandran For the Respondent : Mr.A.P.Srinivas Standing Counsel JUDGMENT (Judgment of the court was delivered by RAJIV SHAKDER.J.,) This appeal is preferred against the Judgment and order dated 19.02.2015 passed by the Customs, Excise and Service Tax Appellate Tribunal. (in short the Tribunal .) 1.1. The captioned appeal was admitted on 02.07.2015, when the following questions of law were framed for consideration by this Court: a) Whether in the facts and circumstances of the case, Rule 6(3)(c) of Cenvat Credit Rules, 2002, attracted, in cases, where the service tax on input services are not used in respect of trading activity but used only for taxable services? b) Whether in the facts and circumstances of the case, trading activity can be categorized as an exempted service for the purpose of invoking Rule 6 of Cenvat Credit Rules, 2002 prior to 1-4-2011. c) Whether in the facts and circumstances of the case, when trading was not a service or exempted service at the relevant time, requiring the appellant for reversal of any part of the credit on input services is legal? 2. In order to adjudicate upon the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Cenvat Credit not used by the appellant qua their output services. 3. A perusal of the record by the audit party had revealed that the appellant had taken credit to a banking services, which was not a service used for providing the said output service. What is important is that in so far as the first aspect was concerned, i.e., excess utilization of Cenvat Credit for non taxable trading activity, i.e.. trading activity, the appellant, in the first instance, paid the quantified sum of ₹ 6,78,459/- to which, we have made a reference above, along with appropriate interest, which was pegged at ₹ 98,421/-. 3.1. In so far as the second aspect is concerned, which involved, as indicated above, irregular availment of Cenvat Credit for services not used for generating output services. The credit wrongly availed of, which was quantified as ₹ 7,01,979 was reversed, after making a suitable entry in the Cenvat Credit Account Balance leaving a closing balance of ₹ 28,359/- as on 31.03.2008. 3.2. The appropriate interest on this amount, which was quantified at ₹ 1,08,787/- upon paid by the Assessee, the common ground before us is that in so far as this as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Division Bench of the Tribunal in the case of Mercedes Benz India Pvt.Ltd. Vs CCE Pune-I (supra) has clearly held that entire credit on trading activity is not eligible and only proportionate credit with reference to turnover is eligible. The relevant portion of the said judgment is reproduced as under :- 16. In view of the above, we have come to the conclusion 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. The next issue to be decided is how to apportion the credit of input service taken by the appellant, where such input services have been used both in the manufactured goods and trading activities of the imported goods. It is in this context that the Ld. Sr. Advocate for appellant has argued that the same should be computed with reference to clause (c) of Explanation I appended after Rule 6(3D) of Cenvat Credit Rules, 2004. The said provision as noted earlier was inserted with effect from 1-4-2011. The argument of the Ld. Sr. Advocate is that the said explanation only provides that procedure for computation a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o not find any applicability whatsoever of the said judgment in the facts and circumstances of the present case. Another judgment quoted by the Ld. Sr. Advocate is the judgment of the Hon'ble Supreme Court in the case of Commissioner of Wealth Tax, Meerut V. Sharvan Kumar Swarup Sons reported in (1994) 6 SCC 623. In this case, wealth-tax was applicable on various assets. A new rule was inserted with effect from 1-4-1979 to determine the market value of properties. The question was whether the new inserted rule can be used for determining the value of properties for earlier period and hence determine the wealth-tax. It is in this context that the Hon'ble Supreme Court has taken a view that the same would be applicable to all the proceedings pending at the time of its enactment. In the present case, as mentioned earlier, it is not the computation of tax but apportionment of the credit of service tax on input services availed for manufactured goods and traded goods. As we have already held that trading was not a service and therefore cannot be considered as an exempted service before 1-4-2011, therefore, the substantive provision itself did not exist before the said date. Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (e), as correctly argued by Mr.A.P.Srinivas, only stated the obvious that there was no liability to pay service tax of trading activity, during the relevant period has been accepted by Mr.Jayachandran. The argument, though, of Mr.Jayachandran is that, since, the formula of apportionment provided in rule 6(3)(c) is applicable to exempted service, the same can only apply post 01.04.2011, as a clarification was made only on that day onwards. 10. To our minds, such a submission cannot be accepted. If, the appellant has accepted before us that he was not paying service tax on an activity, then the credit of services vis-a-vis input services could only be taken on a pro-rata basis, as per the formula stipulated in Rule 6(3)(c), as it then obtained at the relevant point in time. 10.1 In this context, it may also be relevant to note, how exempted services was defined in Rule 2(e) of the 2004 Rules till 31.03.2011 and thereafter. Rule position till 31-3-2011 Rule 2(e): exempted services means taxable services which are exempt from the whole of the service tax leviable thereon, and includes services on which no service tax is leviable under Sec,.66 of the Finance Act Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X
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