Tribunal clarifies cenvat credit rules for trading activities pre & post April 2011

The Tribunal allowed the appeals and set aside the order denying cenvat credit on common services for trading activities. It was deemed unnecessary to demand reversal of cenvat credit for the period before April 2011, as trading activity was not considered an exempt service during that time. For the period after April 2011, where the appellant was already reversing cenvat credit for trading activity, no further reversal was required. The decision clarified the application of cenvat credit rules for common services in trading activities pre and post April 2011, considering conflicting judicial interpretations during those periods.

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Issues:
Appeal against denial of cenvat credit on common services.

Analysis:
The appellant, engaged in trading of Tata vehicles and operating an authorized service station, was denied cenvat credit on common services attributable to trading activity. Two show cause notices were issued for the period April 2008 to March 2012, invoking Rule 6(3) of the Cenvat Credit Rules, 2004. The appellant argued that prior to April 2011, trading activity was not considered an exempt service based on various judicial pronouncements. Therefore, they contended they were entitled to cenvat credit citing cases like Kundan Cars Pvt. Ltd. vs. CCE, Pune and others. Post April 2011, the appellant agreed to reverse cenvat credit attributable to trading activity for common input services. The respondent relied on the decision of the Madras High Court in the case of Ruchica Global Interlinks.

The Tribunal noted the divergent views on whether trading activity was exempt prior to April 2011. As the show cause notices were issued in 2013 for the period up to March 2012, the demand for reversal of cenvat credit for common input services used in trading activity prior to April 2011 was deemed unnecessary. For the period post April 2011, where the appellant was already reversing cenvat credit for trading activity, the Tribunal found no basis to ask for further reversal. Consequently, the impugned order denying cenvat credit on common services was set aside, and the appeals were allowed with any consequential relief.

This judgment clarifies the applicability of cenvat credit rules concerning common services used in trading activities, considering the period before and after April 2011 and the differing judicial interpretations during those times.

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