2023 (6) TMI 701 - AT - Service Tax

Tribunal overturns tax demand of Rs.21,76,056 due to inconsistencies in Revenue's arguments

The Tribunal set aside the demand of Rs.21,76,056/- raised by the Commissioner of Central Excise and Service Tax, Large Taxpayer Unit, Chennai, against ... CENVAT Credit - trading activity - proportionate input credit attributable to the trading activity of the appellant, confirmed under Rule 14 of the CENVAT Credit Rules (CCR), 2004 read with Section 73 (1) of the Finance Act, 1994 - whether the demand raised by the Commissioner of Central Excise and Service Tax, Large Taxpayer Unit, Chennai, is in order? - HELD THAT:- The stand of the Revenue is volatile, that is to say, from the findings of the Commissioner in the impugned order, the proposed demand in the Show Cause Notice did not have any legal sanctity as the same, apparently, was not as per the law as prevalent during the period in dispute. Moreover, there is a mention about the claim of the appellant to have maintained separate accounts in respect of input services utilized for taxable and exempted services. There is also an admission as to the appellant maintaining separate accounts at paragraph 13.1 of the impugned order, which is also extracted above as ready reference, but however, for something happened in the earlier years, for which the adjudicating authority is clearly functus officio, he concludes to hold that the appellant are not maintaining separate books of accounts for taxable and exempted services - The authority should have gone strictly by the facts and documents as available, since it is well understood that each year is independent and the facts may vary. Hence, it cannot be accepted that the above conclusion of not maintaining separate accounts which is a baseless allegation made without proper application of mind. The demand proposed in the Show Cause Notice and that which was confirmed in the impugned order, are not sustainable, for which reason the same deserves to be set aside - Appeal allowed. Issues Involved:1. Whether the demand raised by the Commissioner of Central Excise and Service Tax, Large Taxpayer Unit, Chennai, is in orderRs.Summary of Judgment:Issue: Whether the demand raised by the Commissioner of Central Excise and Service Tax, Large Taxpayer Unit, Chennai, is in orderRs.This appeal is filed by the assessee against the Order-in-Original confirming a demand of Rs.21,76,056/- under Rule 14 of the CENVAT Credit Rules (CCR), 2004 read with Section 73 (1) of the Finance Act, 1994, for the period April 2010 to March 2011. The Show Cause Notice alleged that the appellant was engaged in providing various taxable services and also selling bought-out goods used in their services, without availing input credit on these goods.The appellant argued that trading is an exempted service even prior to 2011 and that no inputs were used exclusively for trading. They contended that the demand was misplaced as Rule 3 and Rule 2 (l) of the CCR, 2004 are general provisions, whereas Rule 6 specifically deals with situations where common input services are used for both taxable and exempted services. The appellant also disputed the quantification of the demand, stating they had already reversed excess credit.The respondent argued that the trading activity was neither a taxable service nor a manufacturing activity, justifying the quantification by the Adjudicating Authority. The Commissioner observed that trading was not considered an output service under Rule 2(p) of the CCR, 2004, and thus, input service credit attributable to trading did not qualify as 'input service' under Rule 2(l) ibid.Upon review, the Tribunal found inconsistencies in the Revenue's stand, noting that the Commissioner himself acknowledged the absence of specific statutory provisions for determining the value of trading activity prior to 01.03.2011. The Tribunal also noted that the appellant had maintained separate accounts for taxable and exempted services, contrary to the Commissioner's conclusion.The Tribunal concluded that the demand proposed in the Show Cause Notice and confirmed in the impugned order was not sustainable due to the inconsistent and baseless allegations by the Revenue. Consequently, the demand was set aside, and the appeal was allowed with consequential benefits as per law.(Order pronounced in the open court on 15.06.2023)