TMI Blog2018 (12) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... trading activity - Held that:- The admissibility of CENVAT Credit availed on input services used in providing trading activity, is no more res integra and covered by the recent judgment of this Tribunal in the case of Commissioner of Service Tax, New Delhi Vs. AVL India Pvt. Ltd. [2017 (3) TMI 793 - CESTAT NEW DELHI] where this Tribunal analyzing the amendment to the definition of exempted services w.e.f. 1.4.2011 observed that since trading activity itself is not a taxable service or activity subject to excise duty, therefore, subsequent amendment considering trading activity as 'exempted service' cannot entitle the assessee to avail the proportionate credit on various input services attributable to the trading activity. Extended period of limitation - Held that:- The issue is clarified in the case of M/S AKSH OPTIFIBRE LIMITED VERSUS CCE, JAIPUR-I [2017 (11) TMI 1449 - CESTAT NEW DELHI], where it was held that The input services, on which credit was availed by the appellant, were consumed for trading activities and such credit could not have been availed or taken for discharging service tax on the services provided by the assessee, there is no scope for any interpretational ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anism by them being eligible to credit, the same had been availed by them. Thus, the entire transaction is revenue neutral. 4. Regarding the issue of availment of inadmissible credit, the learned Advocate has submitted that during the relevant period they availed credit on common input services used in manufacturing activity, providing taxable output services and also towards their trading activity. It is his contention that Rule 6 of CENVAT Credit Rules, 2004 has last been amended vide Notification No. 13/2016-CE (NT) dated 1.3.2016 and Explanation 3 added to the said Rule 2(e) of the CENVAT Credit Rules, 2004 laid down that 'exempted service' includes an activity which is not a 'service' as defined under the Finance Act, 1994. It is his contention that the explanation is prospective and therefore, prior to 1.3.2016, only if a person is providing taxable services, and an exempted service, he has to maintain separate records for the common inputs utilized. After 1.3.2016, if a person is providing the taxable services and engaged in activity not amounting to a 'service' then he has to maintain separate account of the common inputs used. He has submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voked by the Department. In support, he has refers to the judgment of this Tribunal in the case of AkshOptifiber Ltd. Vs. Commissioner of Central Excise, Jaipur- 2018 (10) GSTL 551 (Tri-Del), M/s Godfrey Philips (I) Ltd. Vs. Commissioner of Central Excise, Mumbai-I-2016-TIOL-3096-CESTAT-MUM. 6. Heard both sides and perused the records. The issues involved in the appeal for determination are:- (i) Liability to Service Tax on the amount paid for services received from the foreign company under reverse charge mechanism. (ii) Liability to reverse proportionate CENVAT Credit availed on common input services used for trading activity under Rule 6(3A) of the CENVAT Credit Rules, 2004. 7. As far as the first issue is concerned, we find that on the basis of investigation initiated on certain information from Delhi Commissionerate, it revealed that the appellant had though paid certain amounts as reflected in the balance-sheet on receipt of the services from the foreign company, but failed to discharge service tax on the same. During the investigation, the appellant had paid the entire amount of Service Tax of 94,69,097/- with interest of ₹ 6,61,087/- and penalty of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second issue, we find that the Cenvat Credit Scheme is available only in respect of an assessee, who is either manufacturing dutiable final products or providing taxable output service. Admittedly, during the relevant time, the trading is not categorized as service at all. It is only in 2011, the explanation was inserted under Rule 2(e) of CCR, 2004. The said clarification stated that exempted service includes trading . Prior to that date, trading is not even considered as exempted service . Going by this fact, it is clear that no credit is available on any input service attributable to trading during the material time. When no such credit is eligible, the respondent cannot avail the benefit of Cenvat credit scheme. Having availed the credit on common input services, without maintaining separate accounts, it is not open to the respondent to claim that there is no need for reversal of proportionate credit attributable to their activity of trading. If trading is not to be considered as an exempted service (or service at all) then the Cenvat Credit Scheme itself is not available to a trader. The respondent, being a trader as well as output service provider, has availed credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no application of Rule 6 as the trading cannot be considered as an exempted service prior to 1-4-2011. We note that legal fiction given in the Explanation in order to remove doubts was introduced on 1-4-2011. Even if it is considered that trading is not an exempted service, it is also a fact that it cannot be considered as a service within the scope of Finance Act, 1994 during the material time. Even in such situation, the appellants cannot take credit on input services, which are utilised for trading activity. As trading is neither a service nor an exempted service during the material time, the appellants are not covered by the Cenvat Credit Scheme with reference to such activity. In such situation, their arguments that there is no application of Rule 6 for account maintenance is not tenable. As it is clear that Cenvat Credit Scheme itself is applicable to the excisable finished goods and output services, the question of taking credit on services, which are utilised either wholly or partly to an activity, which is not covered under service, is not tenable. 10. On the issue of applicability of extended period of limitation, the learned Advocate for the appellant submits tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Penalty imposed in respect of the same is also upheld. It is the primary responsibility of the assessee to take/reverse the credit correctly. The provisions require reversal of credit in these situations. The appellants have not reversed any credit on their own and only when they were investigated that they have reversed as per their own calculation. There was no doubt regarding liability to reverse. In this appeal also they are contesting merely the quantification and not liability to reverse. In these circumstances the extended period has been rightly invoked. The penalty on the appellant company is upheld. 11. Also while upholding the larger period of limitation in AkshOptifibre's case(supra) for recovery of the proportionate credit attributable to trading activity, this Tribunal has observed as follows:- 7. The appellants contested the demand on the ground of limitation also. The ld Counsel submitted that it is a bonafide interpretation error and as such, the extended period is not justifiable. We note that till the fiction was introduced stating trading is an exempted service, by Explanation introduced w.e.f. 1-4-2011 in the Cenvat Credit Rules, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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