TMI Blog2018 (8) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods? - Held that:- Tribunal in its various decisions has held that it has never been intention of the legislature to recover from the assessee what is actually attributed to have been used for providing exempted service. In another case of the assessee - reliance placed in the case of M/S. MERCEDES BENZ INDIA (P) LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-I [2015 (8) TMI 24 - CESTAT MUMBAI] - thus, the appellant is not entitled for taking Cenvat credit on common input services going for trading of goods. Penalty u/s 11AC of Central Excise Act, 1944 - Held that:- Since the position of the CENVAT credits attributable towards the trading of goods have already been reversed by the appellant voluntarily before issue of show cause notice, there is no justification in imposing penalty under section 11AC of Central Excise Act, 1944 on the appellant. Matter remanded back for denovo adjudication to the Original Adjudicating Authority to see whether the party’s claim of reversal of common input service credit is correct or not and to decide the same - Excise Appeal No. 50498 of 2016 - Final Order No. 52729/2018 - Dated:- 8-8-2018 - Hon ble Shri C. L. Mahar, Member ( Te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re entitled for Cenvat credit of common input services used for trading of the goods or not. In this regard, the matter is no longer res-integra as it has already been decided in the case of M/s Mercedes Benz India Pvt. Ltd. vs. CCE, Pune I 2014 (36) S.T.R. 704 (Tri. Mumbai) and followed in many other decisions on the subject by this Tribunal wherein it has categorically been held by this Tribunal that the assessee is not entitled to input service Cenvat credit on the exempted goods which also cover trading activity. This order of this Tribunal has also been upheld by Hon ble Bombay High Court. The relevant extract of the above judgment are reproduced hereunder :- 12. In the case of various services, there is a service provider and a service receiver. In this case of trading, there is no service provider or service receiver. Here the appellant assessee purchases goods from their principals and store it and thereafter sell it to various customers for profit. So in that sense trading is not a service and as has been held so in various judgments and quoted by both the ld. Sr. Advocate as also ld. AR. 13. The main contention of the ld. Sr. Advocate is that their busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtisement or sales promotion or market research or storage up to the place of removal, etc., are activities which may not be directly used in the manufacture of the goods but are required for sale of manufactured goods. Further, there are certain services which are not directly related to the manufacture or ultimate sale of the goods but would be used by the manufacturer in his day-to-day business activity such as accounting, auditing, financing, recruitment, quality control, etc. Here again such services are linked to his manufacturing activity. The definition of input service makes it very clear that the input service credit is available to a manufacturer and has to be related to the final products being manufactured by that manufacturer. Thus, if advertisement is relating to the goods manufactured by the manufacturer, then the manufacturer would be entitled for the credit of the same as an input service. Similarly, if the manufacturer s activity relating to accounting, financing, recruitment and quality control, etc., are relating to the goods manufactured by him, then the manufacturer would be entitled to the credit of tax paid on input service. In our view the term business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter decision of the Hon ble High Court of Bombay, Nagpur Bench in the case of Ultratech Cement Ltd. has dealt with the scope of the said phrase and held as under : 29. The expression activities in relation to business in the definition of input service postulates activities which are integrally connected with the business of the assessee. If the activity is not integrally connected with the business of the manufacture of final product, the service would not qualify to be a input service under Rule 2(l) of the 2004 Rules. It is also relevant to note that the decision in the case of Ultratech Cement Ltd. has been rendered after considering the decision in the case of Coca Cola (Paragraphs 37 38). 31.3 It is further noticed that the Hon ble High Court of Bombay in the case of Manikgarh Cement has also interpreted the expression relating to business and held as under : However to qualify as an input service, the activity must have nexus with the business of the assessee. The expression relating to business in Rule 2(l) of Cenvat Credit Rules, 2004 refers to activities which are integrally related to the business activity of the assessee and not welfare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have also relied upon the order of this Tribunal in case of Lally Automobiles Pvt. Ltd. V/s Commissioner of Service Tax, Delhi 2018 (10) GSTL 310 (Tri.-Del). The relevant extract of the judgment are reproduced herein below:- 6. We have heard both the sides and perused appeal records. The admitted facts are that the appellants availed Cenvat credit on input services and they had considerable turnover and income in trading activities. It is also admitted that the services on which credit have been availed are partly relatable to trading activities also. We note that the appellants contested the reversal of credit, to a proportionate extent, on the ground that trading is not an exempted service prior to the insertion of explanation and as such the provisions of Rule 6(3) will not apply. One main aspect is missed by the appellant in such argument. The case of the appellant is that trading cannot be considered as exempted service. It is clear that trading is not a taxable service also. In other words, trading is an activity which is not covered under the scope of Cenvat Credit Rules, 2004. The appellants should not have availed any credit on input services when such services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws of the High Courts. Taking into circumstances under which the Explanation was inserted in Rule 2(l) of Rules, 2004 and consequence of the Explanation to extend the benefit to the assessee as per Board Circular, we hold that the Explanation inserted in Rule 2(l) of Rules, 2004 by Notification No. 2/2016-CX (N.T.) (supra) should be declaratory in nature and effective retrospectively . 22. An explanation inserted in a Section/Rule, is generally to explain the meaning of the words contained in the Section/Rules. The purpose of explanation is to explain the meaning and intendenments of the Section/Rule. Sometimes, the explanation may be inserted to clarify a doubtful point of law, which would be effectively retrospectively. In the present case, the expressions in the explanation as inserted by Notification No. 2/2016-C.E. (supra), make it clear that it is for explaining the meaning of clause sales promotion in the context of Rule 2(l) of the Rules, 2004. It is to provide an additional support to the dominant object of the word sales promotion in Rule 2(l) in order to make it meaningful and purposeful. The language of the explanation is consistent with Board Circular to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P) Ltd. vs. CCE, Pune I. The relevant extract of the order are reproduced here below :- 5.4 We find that the appellant admittedly paid an amount of ₹ 4,06,785/- plus interest, this is not under dispute. Therefore in our view, the appellant have complied with the condition prescribed under Rule 6(3)(ii) read with sub-rule (3A) of Rule 6 of Cenvat Credit Rules, therefore demand of huge amount of ₹ 24,71,93,529/- of the total value of the vehicle amounting to. ₹ 494,38,70,577/- sold in the market cannot be demanded. We are also of the view that Rule 6 of the Cenvat Credit Rules is not enacted to extract illegal amount from the assessee. The main objective of the Rule 6 is to ensure that the assessee should not avail the Cenvat Credit in respect of input or input services which are used in or in relation to the manufacture of the exempted goods or for exempted services. If this is the objective then at the most amount which is to be recovered shall not be in any case more than Cenvat Credit attributed to the input or input services used in the exempted goods. It is also observed that in either of the three options given in sub-rule (3) of Rule 6, there is no pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceed to appropriate the amount of Cenvat credit claimed to have been reversed by the appellant. 10. In view of above, we are of opinion that the appellant is not entitled for taking Cenvat credit on common input services going for trading of goods, however, as per the above cited decisions if they have reversed back the proportionate amount of Cenvat credit, which have gone for exempted services, we are of view that is enough compliance of the Cenvat Credit Rules, 2004. However, since the Original Adjudicating Authority in his order-in-original has not opinioned whether the reversed amount of Cenvat credit is in proportion to the use or turnover of exempted services i.e. trading in this case and this need to be done at the original adjudication level. 11. In view of above, we hold that order-in-original is correct in denying the Cenvat credit of input services used in the exempted services i.e. trading of goods in this case, however, we remand back the case for denovo adjudication to the Original Adjudicating Authority to see whether the party s claim of reversal of common input service credit is correct or not and to decide the same in light of above view of this Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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