Screening and resale of leftover marble lumps did not amount to trading or an exempted service, defeating the demand.

Sale of leftover marble lumps after screening marble powder was not trading or an exempted service where the usable fine powder was consumed in manufacturing calcium carbonate and the input services had been used for dutiable final goods. The clearance of only the unusable remnant material did not change the character of the activity, so the demand to pay 6% on the value of those lumps was unsustainable. The assessee was therefore not liable for the demanded amount and the demand was set aside.

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Issues: Whether the assessee was liable to pay 6% of the value of marble lumps sold after screening marble powder on the premise that the activity amounted to trading and an exempted service, when Cenvat credit had been availed on input services used in the manufacture of dutiable goods.

Analysis: The assessee brought marble powder into the factory, screened it, used the usable fine powder in the manufacture of calcium carbonate and sold only the unusable leftover lumps. Such sale of remnant material could not be treated as a trading activity merely because the lumps were cleared after screening. Since the input services were used in the manufacture of the dutiable final product, the demand based on treating the clearance of leftover lumps as exempted service was unsustainable.

Conclusion: The assessee was not liable to pay 6% of the value of the marble lumps sold after screening, and the demand was set aside in favour of the assessee.

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