TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Join Channel
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: (i) Whether CENVAT credit on input services used for trading activities could be taken and utilised for payment of service tax on taxable output services, and whether trading could be treated as an exempted service; (ii) Whether the extended period of limitation and penalty were invocable on the facts of the case; (iii) Whether interest was payable on the credit merely taken in the books or only on the credit actually utilised.
Issue (i): Whether CENVAT credit on input services used for trading activities could be taken and utilised for payment of service tax on taxable output services, and whether trading could be treated as an exempted service.
Analysis: Under the Service Tax Credit Rules, 2002 and the Cenvat Credit Rules, 2004, credit was available only in relation to input services used for rendering output services, and the scheme of Rule 6 could not be extended to trading unless the statute itself created such a fiction. Trading in goods was neither a taxable service nor an exempted service during the relevant period. The explanation inserted in 2011 treating trading as an exempted service was held to operate prospectively from 01.04.2011.
Conclusion: The assessee was not entitled to take or utilise credit on input services used exclusively for trading for the period in dispute.
Issue (ii): Whether the extended period of limitation and penalty were invocable on the facts of the case.
Analysis: The availment and utilisation of credit for trading activities was held to be contrary to the governing credit rules, and the record did not support a bona fide interpretational doubt sufficient to displace the extended limitation. At the same time, the penalty was sustained with the statutory option to pay 25% of the penalty within the prescribed time after determination of the revised interest liability.
Conclusion: Invocation of the extended period was upheld, and the penalty was confirmed subject to the mandatory option to pay the reduced amount within time.
Issue (iii): Whether interest was payable on the credit merely taken in the books or only on the credit actually utilised.
Analysis: Interest liability under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 75 of the Finance Act, 1994 attaches only to the amount of credit actually utilised for discharge of tax liability. The adjudication orders did not examine the actual utilisation figures, and the matter required recomputation on that basis.
Conclusion: Interest was to be recomputed only on the credit actually utilised, and the matter was remanded for that limited purpose.
Final Conclusion: The demand and appropriation of reversed credit were sustained, the penalty was maintained with an option for reduced payment, and the question of interest was remanded for fresh computation on the basis of actual utilisation of credit.
Ratio Decidendi: Credit on input services used for trading could not be availed or utilised as if trading were an exempted service during the relevant period, and interest is chargeable only on the portion of credit actually utilised to discharge tax liability.
TaxTMI 
