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Issues: Whether the billing of goods by the subcontractor in the course of executing the BOOT works contract could be treated as trading or an exempted service so as to require reversal of common input service credit under Rule 6 of the CENVAT Credit Rules, 2004.
Analysis: The contract was found to be a single, indivisible works contract for a water transmission project. The transfer of property in goods used in execution of the contract was held to be an incident of the works contract and not a separate trading activity. The value attributable to deemed sale of goods in such a contract could not be converted into an exempt service for the purpose of Rule 6. The factual record also showed separate accounting of activities and no established wrongful availment of credit. Accordingly, the basis for invoking Rule 6(3) and Rule 6(3A) failed.
Conclusion: The billing of goods in execution of the works contract was not trading or an exempted service, and reversal of CENVAT credit was not warranted; the finding is in favour of the assessee.
Final Conclusion: The demand, interest and penalties founded on Rule 6 of the CENVAT Credit Rules, 2004 could not be sustained, and the assessee was entitled to the relief granted in appeal.
Ratio Decidendi: In an indivisible works contract, the transfer of goods used in execution does not by itself amount to trading or an exempted service for Rule 6 purposes, and common input service credit cannot be denied on that basis alone.
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