CENVAT credit on trading-related input services was inadmissible pre-2011, and penalty for irregular availment was maintainable.

For the pre-01.04.2011 period, common input services used for both manufacturing and trading could not give rise to CENVAT credit to the extent attributable to trading activity, because trading was not separately recognised in the credit regime then in force. The appellant did not dispute the attribution of credit to trading, and binding precedent held that such credit was inadmissible. The same precedent also upheld penalty for irregular availment and rejected the contention that penalty was not imposable under the rule. The impugned order was therefore upheld and the appeal rejected.

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Issues: Whether CENVAT credit on common input services attributable to trading activity could be availed for the period prior to 01.04.2011, and whether the penalty imposed for irregular availment of such credit was sustainable.

Analysis: The period in dispute was prior to 01.04.2011, when trading activity was not separately defined in the credit regime. The appeal concerned common input services used both for manufacturing and trading, and the appellant did not dispute the calculation of credit attributable to trading activity. The binding precedent relied upon held that credit relatable to trading activity was not available and that the penalty imposed on that issue was justified. The challenge that penalty could not be imposed under the rule was also answered against the appellant by the same precedent.

Conclusion: The appellant was not entitled to avail the CENVAT credit attributable to trading activity, and the penalty was sustainable.

Final Conclusion: The impugned order was upheld and the appeal was rejected.

Ratio Decidendi: For the relevant pre-01.04.2011 period, common input services attributable to trading activity could not be fully availed as CENVAT credit, and penalty for such irregular availment was maintainable.

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