Tribunal Upholds Commissioner's Decision on Cenvat Credit for Trading Activities

The Tribunal upheld the Commissioner (Appeals) order confirming the demand, interest, and penalty imposed on the appellants for availing Cenvat credit on input services related to trading activities. The Tribunal ruled in favor of the Revenue, citing precedents that disallowed Cenvat credit for trading activities. It found the appellant's failure to declare input service credit usage for trading as suppression of facts, justifying the extended period invocation. As a result, all eight appeals by the appellant were dismissed, and the impugned order was upheld.

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Issues:
Appeals against Commissioner (Appeals) order dated 7.3.2013, identical issues in all eight appeals.

Analysis:
The appellants engaged in manufacturing and clearance of excisable goods and providing taxable output services received various input services and availed Cenvat credit under Cenvat Credit Rules, 2004. The Department issued Show-Cause Notices questioning the credit availed on input services related to trading. The Assistant Commissioner confirmed the demand, interest, and penalty. The Commissioner (Appeals) upheld the Order-in-Original, leading to the filing of eight appeals before the Tribunal by the appellant.

The appellant argued that trading activity was not considered exempted service before 1.4.2011, and the amendment making it exempted was prospective, not retrospective. They contended that Rule 6 of Cenvat Credit Rules did not apply during the dispute period, and the extended period should not be invoked as trading details were in the Balance Sheet. They claimed no intent to evade duty and reversed credit before utilization. However, the A.R. argued that Rule 2(e) of Cenvat Credit Rules before 1.4.2011 considered trading as an exempted service, citing amendments and judicial precedents supporting the disallowance of Cenvat credit for trading activities.

The Tribunal, after hearing both parties and considering the arguments and precedents, upheld the impugned order. It found in favor of the Revenue, citing the judgment of the Hon'ble Madras High Court, which held that Cenvat credit for service tax related to common input services attributable to trading activity is impermissible. The Tribunal noted the appellant's failure to declare input service credit usage for trading in their ST3 Return as suppression of facts, justifying the invocation of the extended period. Consequently, all appeals of the appellant were dismissed, and the impugned order was upheld.

The judgment was pronounced on 23/11/2016 by the Tribunal.

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