Tribunal overturns demand on traded goods, rules filing declaration not mandatory. Precedents cited.

The Tribunal allowed the appeals, setting aside the demand for payment of a percentage of the value of traded goods due to the appellants not filing a declaration under Rule 6(3A). It held that the requirement of filing a declaration was procedural and not mandatory, citing precedents. The Tribunal also found that demands raised invoking the extended period were baseless as the department was aware of the credit availed on common input services for trading activities. The appeals were successful on both merits and limitation grounds.

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Issues:
1. Eligibility of Cenvat Credit on common input services used for trading activities.
2. Compliance with Rule 6(3A) regarding the exercise of option to reverse credit.
3. Grounds of limitation for raising demands.

Analysis:

Issue 1: Eligibility of Cenvat Credit on common input services for trading activities
The appellants, engaged in manufacturing and trading, availed Cenvat Credit on common input services. The department contended that trading being an exempted service, the appellants were not eligible for credit on input services used for trading. The appellants voluntarily reversed the credit attributable to trading upon notification by the department. The department, however, insisted on the payment of 10% / 8% / 6% of the value of traded goods due to the appellants not filing a declaration under Rule 6(3A). The appellant argued that the requirement of filing a declaration was procedural and not mandatory, citing precedents. The Tribunal, following previous decisions, held that the demand was unjustified, setting it aside and allowing the appeal on merits.

Issue 2: Compliance with Rule 6(3A) regarding the exercise of option to reverse credit
The department contended that the appellants did not comply with Rule 6(3A) by not filing a declaration to exercise the option to reverse credit, leading to the demand for payment of a percentage of the value of traded goods. The appellant argued that the failure to file the declaration did not warrant the mandatory payment, as they had voluntarily reversed the credit. Citing precedents, the Tribunal held that the procedural lapse did not deny the substantive right under Rule 6(3A), remanding the matter for verification by the original authority.

Issue 3: Grounds of limitation for raising demands
The appellant argued that demands raised invoking the extended period were baseless as the department was aware of the credit availed on common input services for trading activities. The appellant had disclosed the credit in returns and provided documents as requested. The Tribunal found no evidence of wilful suppression of facts, noting that the department was fully informed about the trading activities. Consequently, the demand raised invoking the extended period was deemed without factual or legal basis, leading to the success of the appeal on limitation grounds.

In conclusion, the Tribunal set aside the impugned orders on both merits and limitation, allowing the appeals with any consequential reliefs.

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