High-sea sales outside excise jurisdiction are not exempted trading for Cenvat credit reversal, securing relief to the assessee.

High-sea sales executed outside the territorial limits of India and before the goods crossed customs frontiers could not be treated as trading within the Cenvat Credit Rules. On that basis, the activity was not an exempted service for Rule 6(3) reversal, and a demand for credit reversal on common input services could not be sustained when the underlying activity lay outside Central Excise jurisdiction. The order confirming demand, interest, and penalty was set aside, and the assessee obtained consequential relief.

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Issues: Whether credit availed on common input services used for high-sea sales could be demanded on the footing that trading was an exempted service.

Analysis: The disputed activity was high-sea sale, which takes place outside the territorial limits and before the goods cross the customs frontiers of India. On that premise, the activity could not be treated as trading within the meaning of the Cenvat Credit Rules so as to attract reversal under Rule 6(3). Once the activity itself was outside the jurisdiction of the Central Excise authorities, the demand founded on alleged use of common inputs and input services for exempted trading could not be sustained.

Conclusion: The demand was not sustainable and was set aside in favour of the assessee.

Final Conclusion: The order confirming demand, interest, and penalty was annulled and the appeal succeeded with consequential relief.

Ratio Decidendi: High-sea sales carried out outside the territorial jurisdiction of the Central Excise authorities cannot be treated as exempted trading activity for the purpose of reversal of Cenvat credit under Rule 6(3) of the Cenvat Credit Rules, 2004.

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