TaxTMI 
TaxTMI 
2023 (5) TMI 564
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....e wrongly availed CENVAT credit on trading activity and the same is recoverable under the provisions of Rule 14 of CENVAT Credit Rules, 2004. Five different SCNs were issued periodically from April 2004 to March 2011 and the same were confirmed by the Commissioner of Central Excise confirming the recovery of wrongly availed credit along with interest; penalty under Rule 15(2) was also imposed. Therefore, the appellants are before us. Appeal No. Period OIA/OIO No. E/298/2010 April 2004 to December 2008 49/NS/Adjn./09 dated 10.11.2009 E/920/2011 January 2009 to November 2009 272/CE/APPL/DLHIV/ 2010 dated 21.01.2011 E/185/2012 December 2009 to October 2010 160/CE/APPL/DLHIV/ 2011 dated 31.10.2011 E/55630/2012 November 2010 to March 2011 92/CE/APPL/DLHIV/ 2012 dated 06.11.2012 3. Shri Abhishek Jaju, learned counsel for the appellants takes us through the provisions of CENVAT Credit Rules, 2004 and in particular Rule 6(1) and Rule 6 (3) and fairly submits that though there were some restrictions, on availment of CENVAT credit of Service Tax paid on common input services to the extent they are used in exempt services/ products, prior to 1st....
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.... input services; the appellants did not maintain proper records as per Rule 9 of CENVAT Credit Rules, 2004. He submits that the appellants have suppressed the facts and they cannot claim, that the Department was well aware of the fact that they were utilizing the input services both for manufacturing as well as trading, is factually incorrect as the appellants could not produce any documentary evidence. He submits that this Bench vide Stay Order dated 23.05.2012 observed that "we are also of the view that the appellant would not be eligible for CENVAT credit in respect of services used in their trading activity; since the annual turnover of their trading activity is about 70% of the total turnover, the appellants would not be eligible for Service Tax credit to that extent". He also relies upon the following case laws: • Mercedes Benz India Pvt. Ltd. VS CCE, Pune-I-2014 (36) STR 704 (Tri. Mumbai) • Loreal India Pvt. Ltd. Vs CCE Pune-I- 2012 (281) ELT 113 (Tri. Mumbai) • Orion Appliances Ltd. Vs CST, Ahmedabad- 2010 (19) STR 205 (Tri. Ahmd.) • Metro Shoes Pvt. Ltd. VS CCE, Mumbai- 2008 (10) STR 382 (Tri. Mum.) • C....
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....ed service for the operation of scheme under Cenvat Credit Rules. In other words, prior to that clarification, in the absence of such explanation, trading is not at all covered by the credit scheme. Accordingly, we find the appellants should not have availed credit for common input services which are used for taxable output service as well as trading activity, as it is imperative to identify and reverse that amount of credit attributable to the trading activity. We find no infirmity in the findings of the original authority on merit or on quantification. On an appeal filed by the appellant, Hon'ble High Court of Delhi while deciding the above case in 2018 (17) GSTL 422 (Del) held that: 16. Therefore, the issue is whether the assessee could claim the credit on input which were not services. Input credits can be used for payment of service on output service provided such services are used to provide output services. Undoubtedly, there cannot be an exact correlation between one kind of input and corresponding. That is the reason the Rules cover situations where assessees provide both exempted and taxable services. Wherever someone undertakes activities that cannot be calle....
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....f the credit recoverable, we find that the appellants have claimed that credit attributable to input services used in the manufacture of dutiable goods cleared by them was also sought to be denied. We find that in terms of Rule 2(l), the input services used in the manufacture of dutiable goods cleared by them qualify to be called input services and therefore, credit cannot be denied on the same. Moreover, the appellants submit that the amount actually liable to be reversed is Rs.41,82,096.48/-. This requires to be checked and properly arrived at. For this reason, the case needs to be remanded back to the adjudicating authority. 10. Coming to the penalty imposed, the appellants have taken the plea that the Department was well aware of the activity of the appellant and as such extended period cannot be invoked. On the other hand, the Authorized Representative argues that the appellants have obtained separate registration and got separate ground plans approved for trading and manufacturing activities. Thus, they are expected to be aware of the provisions of law regarding the admissibility of credit. While availing CENVAT credit, the appellant should have taken all precautions....