Denial of Service Tax Credit on Trading Activities Upheld

The appellant's claim for credit of service tax paid on input services used for trading activities was denied, leading to confirmation of demand, interest, and penalty by the adjudicating authority. The Commissioner (Appeals) upheld the decision, citing the Cenvat Credit Rules that considered trading activity as an exempted service. The judge, relying on a Tribunal decision in a similar case, dismissed the appeal, finding no fault in the lower authority's decision to deny the credit for service tax in trading activities.

---

---

Issues: Denial of credit for service tax paid on input services used for trading activities.

Analysis:
The appellant, engaged in the manufacture of excisable goods and trading activities, availed credit for service tax paid on input services used for trading. A show cause notice was issued, denying the credit, leading to confirmation of demand, interest, and penalty by the adjudicating authority. The Commissioner (Appeals) upheld the decision. The appellant contended that since trading activity is not an exempted service, the denial of credit was not justified. However, the Cenvat Credit Rules, effective from 1.4.2011, considered trading activity as an exempted service. The Revenue supported the lower authority's findings and cited a Tribunal decision in a similar case.

The Cenvat Credit Rules allow credit for service tax paid on services used for manufacturing or providing output services. In this case, trading activity does not fall under either category. Referring to the Tribunal decision in a similar case, which upheld the confirmation of demand and penalties, the judge found no fault in the impugned order. Consequently, the appeal was dismissed.

---