TMI Blog2019 (8) TMI 429X X X X Extracts X X X X X X X X Extracts X X X X ..... under Rule 6(3)(c) is not confined to any form of CENVAT credit but is related to the value of output taxable services rendered by the appellant. The credit cannot be utilised in excess of 20% of the amount of service tax payable on taxable output services. Therefore, if service tax is paid utilising the CENVAT, it does not amount to paying service tax and service tax can be demanded. Credit on banking and financial services, insurance/auxiliary services and security agency services - Rule 6(5) OF CCR - HELD THAT:- On a plain reading of Rule 6(5) shows that exception has been made with respect to some services in it and if the services on which the appellant claimed credit are covered by Rule 6(5), they are entitled to full credit to tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lve the same issue in respect of the same appellant and hence are being disposed of together. 2. Heard both sides and perused the records. The appellant herein is a manufacturer of air conditioners and refrigeration products. They also undertake works contract service, erection commissioning and installation service, maintenance and repair service, business auxiliary services and goods transport agency services and have been registered with the service tax department. They availed CENVAT credit on various inputs, input services and capital goods. Some of these services are also used by them for trading activity. Apart from manufacture and the aforesaid services, the appellant also sells air conditioners and this trading activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke CENVAT credit only on that quantity of inputs or input services which are intended for use in the manufacture of dutiable goods or in providing taxable output services. iii. If the manufacturer/service provider is neither able to follow Rule 6(1) or Rule 6(2) then under Rule 6(3) they had an option which states that notwithstanding anything contained in sub-rule (1) and (2), a manufacturer or the provider of output service opting not to maintain separate accounts shall follow either of the following conditions as applicable to him namely: (a).... (b).... (c) The provider of output service shall utilise credit only to the extent of an amount not exceeding 20% of the amount of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Apex court. In the case of Ruchika Global Interlinks [2017 (5) GSTL 225 (Mad)], the Hon ble High Curt of Madras has categorically held that trading activity both before and after the amendment shall be exempted service and since assessee was not paying service tax on trading activity during the relevant period in that case, they were not entitled to credit of input services and they had to follow the formula prescribed under Rule 6(3)(c). On the same issue in the case of Lally Automobiles Pvt Ltd Vs CST Delhi, the principal bench of the Tribunal, as reported in 2018 (10)GSTL 310 (Tri-Del)], has held that trading being not a taxable service is not covered under the scope of CENVAT Credit Rules 2004 and therefore credit needs to be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered by the appellant. The credit cannot be utilised in excess of 20% of the amount of service tax payable on taxable output services. Therefore, if service tax is paid utilising the CENVAT, it does not amount to paying service tax and service tax can be demanded. 6. Assessee s third line of argument was that in terms of Rule 6 (5) of CENVAT Credit Rules 2004 not withstanding anything contained in sub-rules 1, 2 3, credit of the whole of service tax paid on taxable services as specified in sub-clauses (g), (p), (q), (r), (v) (wza), (zm), (zp), (zy), (zzd), (zzg), (zzh), (zzi), (zzk), (zzq) and (zzr) of clause 105 of Section 65 shall be allowed unless such service is used exclusively in or in relation to manufacturing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... force in the argument of the learned counsel that extended period of limitation cannot be invoked in their case. 8. On the question of penalty, she would argue that the entire question is one of interpretation as to whether trading is to be treated as an exempted service or not. Therefore the appellant had a bonafide belief that they are entitled to the benefit of CENVAT credit even if it is decided against them in the current proceedings therefore the penalty imposed upon them under Sections 76 78 may be set aside. We find force in the argument of the learned counsel that they had a reasonable cause for their failure in over-using CENVAT credit in violation of Rule 6(3) and thereby not discharging full amount of service ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
