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of <h1>Trading activity without separate inventory requires proportionate CENVAT credit reversal with 15% interest under Rule 6(3A)</h1> <h3>Commissioner of Central Tax, GST Commissionerate, Bengaluru East Versus M/s. Motorola Mobility India Pvt Ltd.</h3> Commissioner of Central Tax, GST Commissionerate, Bengaluru East Versus M/s. Motorola Mobility India Pvt Ltd. - TMI Issues Involved:1. Eligibility of CENVAT Credit on services used in trading activities.2. Applicability of interest on reversed CENVAT Credit.Summary:1. Eligibility of CENVAT Credit on services used in trading activities:The department filed an appeal against the Order-in-Original No. 29/2018 dated 09.04.2018, which allowed M/s. Motorola Mobility India Pvt. Ltd. to avail CENVAT Credit on ineligible services used in trading activities. The audit officers found that the respondent was engaged in trading, an exempted service since 01.04.2011, and thus not eligible for CENVAT Credit on services used in trading. The Commissioner observed that the respondents were predominantly engaged in taxable services during 2011-2012 and 2012-2013 and had reversed Rs.1,14,64,277/- proportionate credit on 26.04.2016 as per Rule 6(3)(ii) read with Rules 6(3A). The Commissioner held that Rule 6(3) provides three options for credit reversal and accepted the proportionate credit reversal citing previous decisions (Mercedes Benz India (P) Ltd., Cranes and Structural Engineers, Aster Private Limited).2. Applicability of interest on reversed CENVAT Credit:The Commissioner dropped the interest on the reversed credit, reasoning that the respondent had sufficient balance in their CENVAT credit account throughout the relevant financial years and had reversed the credit promptly after audit observations, following the decision in CCE, ST & LTU Bangalore vs Bill force Ltd. The Revenue contended that as per Rule 6(3A) of CCR, 2004, interest is mandatory on any short or delayed payment. The Tribunal upheld the Commissioner's order on the service tax demand of Rs.1,14,64,277/- but ruled that interest is payable on this amount in terms of Rule 6(3A) of CCR, 2004, emphasizing that interest is compensatory and must be paid when credit is reversed late.Conclusion:The Revenue's appeal was allowed only to the extent of demanding interest on the reversed CENVAT Credit of Rs.1,14,64,277/-.(Order pronounced in Open Court on 30.04.2024.)
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