TaxTMI 
TaxTMI 
2016 (4) TMI 933
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.... 4. It would be necessary to reproduce the questions which the Appellants/Assessees term as substantial questions of law. They read as under: "(a) Whether the credit of service tax paid on common input services used in relation to manufacture and sale of cars as well as import and sale of cars is not available in full including that portion import and sell of cars? (b) Whether the demand raised against Appellants is correct when no mechanism was provided in Cenvat Credit Rules, 2004 till 31-03-2011, to calculate proportionate service tax credit to be reversed, in respect of 'input service used for trading of goods? (c) Whether the entire amount of credit of common input services mentioned I Rule 6(5) of the Cenvat Credit Rules, 2004 is available to Appellants? (d) Whether in the facts and circumstances of case, Appellate Tribunal erred in not setting aside the demand for the period prior to 31.3.2008? (e) Whether in calculating amount of the eligible cenvat credit of service tax paid on common input services margin/value addition on trading of goods is to be considered and not entire sale price/turnover of traded goods? (f) Whet....
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....e Appellants also import Completely Built-up Units ("CBU") from the parent company, Daimler AG, Germany on payment of appropriate Customs Duties. These are imports made to meet the customer demand and expectations in India. The intent is to provide a wider choice to the customers. However, these vehicles are also sold by the Appellants through their same dealer network to the ultimate customers. The Appellants claim that they have not availed of credit of Countervailing Duty ("CVD") paid on imported cars for sale in the domestic market. The details of such imported CBUs on payment of CVD are set out in a table at page 5. The Appellants are taking and are allowed, according to them, CENVAT credit of duties paid on inputs relatable to manufacture and sale of cars. The Appellants claim that they are eligible for CENVAT credit of service tax paid on input service relatable to manufacture and sale of cars. The Appellants accept that they are not entitled to CENVAT credit on input service relatable to import and sale of cars. They say that they have not taken such credit and, therefore, presently they are not claiming CENVAT credit on input service exclusively relatable to activity of im....
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....ause this substantive portion is inserted from a subsequent date would not make any difference. The computation can be made on the basis that the Rule always read as above and not otherwise. 13. We have extensively heard Mr. Sridharan and with his assistance perused that part of the order passed by the Tribunal wherein this question is discussed. We have also taken the written submissions of Mr. Sridharan on record together with the case law relied upon. We have a compilation before us of the Rules and it has been extensively referred during the course of the oral arguments. 14. Mr. Bhate, learned Advocate appearing on behalf of the Revenue, has also been heard and he would support the conclusion of the Tribunal. He would submit that this question not being a substantial question of law but a matter of mere computation having been considered and dealt with reasonably, the Tribunal's order is neither perverse nor vitiated by any error of law apparent on the face of the record. 15. To be fair to both Advocates in so far as other questions and to which we have referred above, the matter is left to Court. In all fairness, however, the Revenue also agrees that the Tribunal's or....
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....March 2011 and covered by Appeal No. E/1019/2012 and demanding 6% of the trading turnover is not correct. To that extent, the Tribunal agrees with the Assessee and renders a finding against the Revenue. The Revenue has not challenged the same before us. In paragraph 16 onwards after reiterating this conclusion, the Tribunal deals with the apportionment of the credit of the common input service where such input services have been used both in relation to the manufacture of goods and trading activities in respect of the imported goods. From there onwards, we find that the Tribunal has referred to the arguments of the Assessee's Senior Advocate. It refers to a judgment relied upon and that is by the High Court of Justice of England and Wales, Queen's Bench Division. Another judgment which was relied upon was in the case of Commissioner of Wealth Tax, Meerut v Shravan Kumar Swarup & Sons. (1994) 6 SCC 623 The Tribunal in paragraph 17 comes to a conclusion that clause (c) of Explanation 1 has no application for determining the apportionment of the credit of service tax on input services. 18. For that purpose, we reproduce the relevant Rule with the Explanation which has come into for....
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....g options, as applicable to him, namely :- [(i) pay an amount equal to five percent of value of the exempted goods and exempted services; or (ii) pay an amount as determined under sub-rule (3A); or (iii) maintain separate accounts for the receipt, consumption and inventory of inputs as provided for in clause (a) of sub-rule (2), take CENVAT credit only on inputs under sub-clauses (ii) and (iv)of said clause (a) and pay an amount as determined under sub-rule (3A) in respect of input services. The provisions of sub-clauses (i) and (ii) of clause (b) and sub-clauses (i) and (ii) of clause (c) of subrule (3A) shall not apply for such payment: Provided that if any duty of excise is paid on the exempted goods, the same shall be reduced from the amount payable under clause (i): Provided further that if any part of the value of a taxable service has been exempted on the condition that no CENVAT credit of inputs and input services used for providing such taxable service, shall be taken then the amount specified in clause (i) shall be five percent of the value so exempted:] CENV Explanation I. - If the manufacturer of goods or the provide....
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.... the total value of exempted services provided, during the preceding financial year and D denotes total CENVAT credit taken on inputs during the month minus A; (iii) the amount attributable to input services used in or in relation to manufacture of exempted goods [and their clearance upto the place of removal] or provision of exempted services (provisional) = (E/F) multiplied by G, where E denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the preceding financial year, F denotes total value of [output] and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the preceding financial year, and G denotes total CENVAT credit taken on input services during the month; (c)the manufacturer of goods or the provider of output service, shall determine finally the amount of CENVAT credit attributable to exempted goods and exempted services for the whole financial year in the following manner, namely :- (i) the amount of CENVAT credit attributable to inputs used in or in relation to manufacture of exempted goods, on the basis of total quantity o....
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....s per condition (d) and (f) respectively, the following particulars, namely :- (i) details of CENVAT credit attributable to exempted goods and exempted services, monthwise, for the whole financial year, determined provisionally as per condition (b), (ii) CENVAT credit attributable to exempted goods and exempted services for the whole financial year, determined as per condition (c), (iii) amount short paid determined as per condition (d), alongwith the date of payment of the amount short-paid, (iv) interest payable and paid, if any, on the amount short-paid, determined as per condition (e), and (v) credit taken on account of excess payment, if any, determined as per condition (f); (h)where the amount equivalent to CENVAT credit attributable to exempted goods or exempted services cannot be determined provisionally, as prescribed in condition (b), due to reasons that no dutiable goods were manufactured and no [output] service was provided in the preceding financial year, then the manufacturer of goods or the provider of output service is not required to determine and pay such amount provisionally for each month, but shall determine....
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....h an exemption notification, if any, relating to such rate, when applied for calculation of service tax results in the same amount of tax as calculated under the option availed; (c) in case of trading, shall be the difference between the sale price and the cost of goods sold (determined as per the generally accepted accounting principles without including the expenses incurred towards their purchase) or ten per cent. of the cost of goods sold, whichever is more; 19. The Tribunal gives a illustration and tries to work out a denominator. However, in doing so we find that at page 103 of the paper-book, in paragraph 17 of its order, the Tribunal has misdirected itself completely. We reproduce that part of the order. "17. ... In fact, we have gone through clause (c) of Explanation 1 added with effect from 1.4.2011 and are of the view that perhaps the said new method has been adopted to encourage the trading of the goods rather than the manufacturing of the goods (otherwise criterion should have been same viz. Based upon turnover or value addition). We, therefore hold that for the period under dispute the credit of service tax paid on the common input services should....