TMI Blog2019 (11) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.06.2012 with the inclusion of exempted service under Rule 2 (e) of the CENVAT Credit Rules, 2004, which under its ambit covered trading of goods. The above Circular dated 05.03.2003 is therefore issued much earlier, obviously without having the benefit of the subsequent development. The issue on hand is squarely covered by the dictum of the Hon ble High Court in M/s. Lally Automobiles Pvt. Ltd. [ 2018 (7) TMI 1679 - DELHI HIGH COURT ] where it was held that . - there are no merit in the appellant s claim - appeal dismissed on this ground. Extended period of limitation - HELD THAT:- It is a fact borne on record that the appellant itself has chosen to follow the procedure laid down under Rule 6 (3A) on and from 01.04.2014 by reversing the proportionate input service credit attributable to the exempted service of trading, which clearly shows the knowledge of the appellant as to the requirement of law, which was also done prior to the issuance of the Show Cause Notice - extended period rightly invoked. Appeal dismissed - decided against appellant. - Service Tax Appeal No. 40793 of 2019 - FINAL ORDER NO. 41273 / 2019 - Dated:- 13-11-2019 - MR. P. DINESHA, MEMBE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities below were not correct in treating the consumables sold while rendering services under ASS as trading activity since the authorities failed to appreciate the crucial differences between a conventional trading activity as opposed to the sale of consumables in the present case. 5.2 He further submitted that the primary and only activity of the appellant was servicing of cars and that it is only during the course of rendering such service, if needed, they would use engine oil, coolants as top-up and/or worn-out parts were also replaced; that the same was not provided independently to any buyer/customer. This, according to the Ld. Advocate, amounted to the rendering of a bundled service with repair and maintenance being predominant; that the same is not complete without the use of consumables. Therefore, the supply of the above consumables was only incidental to the provision of service which could not be segregated. 5.3 Ld. Advocate placed reliance on the C.B.E.C. Circular No. 699/15/2003-CX dated 05.03.2003 in his support. He also relied on the decision of the Hon ble jurisdictional High Court in the case of Commr. of C.Ex., Salem Vs. M/s. Sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . . 2. During the course of providing service, an authorised service station also replaces engine oil, gear oil and coolants, etc. as per the request of the customer. The price charged by authorised service station for engine oil, gear oil, and coolants is towards sale of these consumables to the customer. Therefore, the sale of consumable during the course of providing service is akin to sale of parts and accessories and therefore value of such consumables is not includible in the value of taxable services, provided value of such consumables is shown separately. 9.2 The law underwent a change with effect from 20.06.2012 with the inclusion of exempted service under Rule 2 (e) of the CENVAT Credit Rules, 2004, which under its ambit covered trading of goods. The above Circular dated 05.03.2003 is therefore issued much earlier, obviously without having the benefit of the subsequent development. 9.3 The Hon ble High Court of Delhi in the case of M/s. Lally Automobiles Pvt. Ltd. (supra) has dealt with a somewhat similar issue. Following are the relevant paragraphs: 14 . It was submitted that in this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. There is no provision to cover situations where an assessee is providing a taxable service and is undertaking another activity which is neither a service nor manufacture. In such a situation, the only correct legal position appears to be that it is for the assessee to segregate the quantum of input service attributable to trading activity and exclude the same from the records maintained for availing credit. This cannot be done in advance as it may not be possible to foretell the quantum of trading activity as compared with taxable activity. The obvious solution would be to ensure that once in a quarter or once in a six months, the quantum of input service tax credit attributed to trading activities according to standard accounting principles is deducted and the balance only availed for the purpose of payment of Service tax of output service. 17 . In the present case, the assessee s argument that there is no mechanism to reverse credit, once taken, in the opinion of this Court, cannot be accepted. The assessee was well aware of the exact nature and extent of its service tax liability. It was also aware of the eligible service tax inputs. Therefore, when it d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obiles Private Ltd. have not reversed the same by suppression of material facts. The excess credit availed utilized by them is liable to be recovered in terms of Rule 14 of Cenvat Credit Rules, 2004 read with proviso to Section 73(1) of Finance Act, 1994. 19 . This Court is of opinion that the lack of any method in the rules in such cases, would only mean that a reasonable and logical principle should be applied, not concededly that what should and could not be claimed as input credit, (but was in fact so claimed) ought to be left alone because of the composite nature of the assessee s business. While any assessee has a right to organize its business in the most convenient and efficient manner, it cannot claim that that such organization is so structured that its tax liabilities cannot be clearly discerned. In this case, the adjudicating authority adopted the proportionate percentage to the turnover method approach, which in this Court s opinion, is reasonable. 20 . This Court is also of the opinion that the invocation of the extended period of limitation was warranted in the circumstances of the case. Being conscious of its trading ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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