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TMI Blog2024 (12) TMI 1297X X X X Extracts X X X X X X X X Extracts X X X X ..... CCR, 2004 read with Section 11AC of the Act ibid. 2.1 Appellant having Central Excise registration No. AACCR7807BXM001 are engaged in manufacture of M.S. Bars and providing taxable services and exempted services (Trading). The party is also availing the facility of CENVAT credit. 2.2 During the audit of records of the appellant for the period 2014, it was observed that appellant was not paying amount in compliance of rule 6(3) of the cenvat Credit Rules, 2004 (in short CCR, 2004). 2.3 As per explanation to rule 2(e) of the CCR, 2004 'exempted service' includes trading. As per rule 6(2) of the CCR, 2004, where a manufacturer or provider of output service avails of cenvat credit in respect of inputs or input services and manufactures such final products or provides such output service which are chargeable to duty or tax as well as exempted goods or services then, the manufacturer or provider of output service shall maintain separate account and shall take cenvat credit only on input pr input services used in relation to manufacture of dutiable goods and taxable output services. Rule 6(3)(i) of the CCR, 2004 provides that the manufacturer or provider of output service, opt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of CCR, 2004. 2.8 As per provisions of Rule 6(3) of the CENVAT Credit Rules, 2004 the liability on appellant for the period from 2012-13 to 2015-16 was calculated as under: Year Cost of traded goods Sale price traded goods Profit earned (Col C-Col B) 10% of the cost of goods sold Value of exempt Service (traded goods) as per Explanation I(c) of Rule 6(3D) of CCR 2004 Amount to be paid in accordance with rule 6(3) as per @6% of value determined under Rule 6(3D) of CCR 2004 A B C D E F G 2012-13 522738538 623173834 100435296 52273854 100435296 6026118 2013-14 494048064 612288321 118240257 49404806 118240257 7094415 2014-15 595171828 626888206 31716378 59517183 59517183 3571031 2015-16 933749350 1125333460 191584110 93374935 191584110 11495047 Total 28186611 2.9 Appellant had not disclosed trading activities to the department. They did not disclose complete income from these activities to the department. The facts of availment of cenvat credit on common input services in respect of manufacturing and taxable as well as exempted services (trading) was wilfully suppressed from the knowledge of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not provided any taxable service on which cenvat credit was availed. * The CENVAT Credit is availed on the input services exclusively on inputs services used for the manufacture of goods. * Security services were received and utilized exclusively at the factory premises. * Royalty was paid by the Appellant to Kamdhenu Ispat Ltd., for manufacture of Kamdhenu Bars under the franchise agreement. * Repair Chrges were paid for repair and maintenance of plant and machinery. * Legal Charges were exclusively in respect legal services availed for the factory. * They have not availed any credit on the transportation of traded goods for the reason that the freight paid transportation of traded goods was below Rs 750/- and exempted as per Notification No 34/2004-ST. * Appellant maintained separate account for taxable and exempted trading services. * Kaleesuwari Refinery Pvt Ltd. [2007 (220) ELT 335 (T-Chennai)] * News and Entertainment Television [2016 (3) TMI 105 -CESTAT New Delhi] * Demand is grossly unjust against proportionate credit pertaining to the input services for trading. * Philips India Ltd [2006 (200) ELT 106 (T-Mum)] * Ballarpur Industries Ltd. [2006 (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoice value and where such invoice value is not available , such value shall be determined by using reasonable means consistent with the principles of valuation contained in the Excise Act and the rules made thereunder. Explanation 3. For the purposes of this rule, exempted services s activity, which is not a defined in clause (le) of rule 2 shall include an 'service' s defined in section 658(44) of the finance Act, 1994 [provided that such activity has used inputs or input services]. Explanation 4. Value of Such an activity as specified above in Explanation 3, shall be he invoice/agreement/contract value and where such alue is not available, ch value shall be determined by using means consistent with the principles of valuation contained in reasonable the Finance Act,1994 and the rules made thereunder.] 6.3. That as per Rule 6(1) of the Cenvat Credit Rules, 2004, the CENVAT credit shall not be allowed on such quantity of inputs used in or in relation to the manufacture of exempted goods or for provision of exempted services, or inputs services used in or in relation to manufacture of exempted goods and there clearance upto the place of removal or for provision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in case of trading has envisaged in explanation to the - Rules which is reproduced as under:- Explanation 1 "Value" for the purpose of sub-rules (3) and (3A),- - (a) shall have the same meaning as assigned to it under section 67 of the Finance Act, read with rules made there under or, as the case may be, the value determined under section 3, 4 or 4A of the Excise Act, read with rules made there under, (b) in the case of a taxable service, when the option available under sub-rules (7),(7A),(7B) or (7C) of rule 6 of the Service Tax Rules, 1994, has been availed, shall be the value on which the rate of service tax under section 668 of the Finance Act, read with an exemption notification, if any, relating to such rate, when applied for calculation of service tax results in the same amount of tax as calculated under the option availed; or (c) in case of trading, shall be the difference between the sale price and the cost of goods sold determined as per the generally accepted accounting principles without including the expenses incurred towards their purchase) or ten per cent of the cost of goods sold, whichever is more. (d) in case of trading of securities, shall be the dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eprate records nor paid an amount equal to 6% of the value of the exempted services i.e. trading which was recoverable from the party. 6.8. In their defence party have submitted that the Department have not specified specific common input service on which CENVAT credit availed by them. The contention of the party is not justified. In para 6 of the show cause notice the common input service such as transportation, security, royalty, repairs and legal charges on which Cenvat credit has been availed by the party has been mentioned. Now, it is upon the party to prove alongwith proper documents that the said services have been used exclusively for providing taxable service or manufacture of dutiable goods and not used in any away for providing exempted service i.e trading, but party failed to do so. Again party have contended that freight paid by them in respect of trading was always below seven hundred and fifty which is exempted from payment of service tax, but party failed to submit proper documents such as bills/invoices issued by transporter to show that during the period from 2012-13 to 2315-16 freight charged from them was always below Rupees seven hundred and fifty. They also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislature for valuation of trading activity to be used for charging amount against these activities Therefore, I find that the party is liable to pay an amount of Rs. 2,81,86,611.00 and the same is recoverable from them under Section 11A of the Central Excise Act, 1944 read with Rule 14 of the CENVAT Credit Rules, 2004. 6.12. That on the question of limitation it may be seen that the party was well aware that trading activity is a service covered under exempted services yet they did not follow the provisions of Rule 6 of the CCR, 2004, by neither maintaining records in respect of input services used in or in relation to trading nor paying amount @ 6% on the value of trading activities as per explanation 1(C) under Rule 6(3D) of the CCR, 2004. The discrepancy was noticed by the Audit party during the course of audit of the records of the party. The party acted in deliberate defiance of provisions of law. Therefore, the case is covered under 11A (4) of the Act. That the provisions of Section 11A(4) of the Act clearly provides that where the duty has not been paid in contravention of any of the provisions of this Act or of the Rules made thereunder with intent to evade payment of du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade payment of service tax, they are liable for penal action under Rule 15 of the CCR, 2004 read with Section 11AC of the Act. 4.3 During the course of arguments appellant specifically submitted that they are having two premises one located at Fazal Ganj Kanpur and the Other located at Fatehpur. They have undertaken the trading activities from their premises at Kanpur and the manufacturing activities were undertaken at their factory located Fatehpur. To establish that they were taking trading activities from the separate premises at Kanpur, they produced copy of VAT Assessment Order dated 17.03.2016 for the year 2012-13 clearly showing the address of their trading premises at Fazalganj Kanpur. They also referred to certificate issued by Chartered Accountant dated 22.02.2017 which is also referred in the Show Cause Notice/ Impugned order which clearly states that "This is to inform that M/s Radhey Ispat Private Limited (CIN U27106UP2002PTC026658) having its registered office AT 122/235, Plot No 17, Fazal Ganj, Kanpur - 208012" . They have not taken credit of any services received at the premises from where they were undertaking the trading activities. All the services against ..... X X X X Extracts X X X X X X X X Extracts X X X X
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