Appeal partially allowed on Cenvat credit for service tax, with trading of 3rd party goods credit deemed inadmissible.

The Tribunal partly allowed the appeal by M/s Secure Meters Ltd, setting aside certain demands related to Cenvat credit on service tax paid on commission for supplying electrical energy meters, citing procedural shortcomings and admissibility of credit for manufacturing and service activities. However, the Tribunal sustained demands regarding trading of 3rd party goods as a service, deeming the Cenvat credit inadmissible under Rule 6 of Cenvat Credit Rules, 2004.

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Issues:
1. Admissibility of Cenvat credit on service tax paid on commission for supply of electrical energy meters.
2. Cross-utilization of Cenvat credit for manufacturing and service activities.
3. Nexus between input services and final product for Cenvat credit eligibility.
4. Applicability of Rule 7 of Cenvat Credit Rules, 2004 in demand confirmation.
5. Interpretation of Director General's circular on cross-utilization of input and input services.
6. Recognition of trading of 3rd party goods as a service for Cenvat credit eligibility.

Analysis:
1. The appellant, M/s Secure Meters Ltd, appealed against an order finding recoverable Cenvat credit of Rs. 68,03,841 along with interest and imposing a penalty of Rs. 2000 under Rule 15(3) of Cenvat Credit Rules, 2004. The issue revolved around the admissibility of Cenvat credit on service tax paid on commission for supplying electrical energy meters to State Electricity Boards.

2. The appellant contended that they were entitled to avail Cenvat credit on the total service tax paid on the commission agent's service, even if the supply portion was traded goods. They argued that no one-to-one correlation was required for utilizing Cenvat credit. The appellant also cited relevant case laws and circulars supporting cross-utilization of Cenvat credit for manufacturing and service activities.

3. The Revenue argued that the Cenvat credit taken by the appellant for input services used in the manufacture activity of other units was not admissible. They emphasized the lack of nexus between the input services, such as commission agent services, and the final product, i.e., electrical energy meters. The Revenue contended that trading of goods not manufactured by the appellant was an independent activity and should not be eligible for Cenvat credit.

4. The Tribunal noted that the demand of Cenvat credit of Rs. 37,27,241 was confirmed without invoking Rule 7 of Cenvat Credit Rules, 2004 in the Show Cause Notice. Citing relevant case law, the Tribunal held that the demand based on Rule 7 could not be sustained due to procedural shortcomings.

5. Regarding the demand of Rs. 13,83,183, the Tribunal referred to the Director General's circular on cross-utilization of input and input services. Relying on a specific case law, the Tribunal found the Cenvat credit admissible for the appellant, who was engaged in both manufacturing and service provision, allowing them to utilize the credit for excise duty or service tax payment.

6. The Tribunal sustained the demand of Rs. 16,93,417 related to service tax paid on a commission agent's service for trading 3rd party goods. As trading of goods was not recognized as a service under service tax law, the Cenvat credit on such services was deemed inadmissible under Rule 6 of Cenvat Credit Rules, 2004.

In conclusion, the Tribunal partly allowed the appeal, setting aside certain demands while sustaining others based on the admissibility of Cenvat credit in specific scenarios.

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