TaxTMI 
TaxTMI 
2023 (12) TMI 1108
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....s auxiliary service, consultancy service, courier service, manpower service, renting of immovable property service, security service, testing and telecommunication service etc. They avail cenvat credit of the service tax on these input services and utilize the same for discharging their service tax liability on taxable services. 2. On verification of financial statements as well as the ST-3 returns of the appellant for the period from April 2013 to March 2017, it was noticed by the audit team that, apart from providing taxable service, the appellant was also engaged in trading activity which is deemed to be an exempted service w.e.f 01.04.2011. It appeared to the department, that the appellant was availing input tax credit on common input services such as advertisement, banking and finance, courier service, manpower service, renting of immovable property service, security service, telecommunication service etc. for trading also. As per Rue 6 (2) of Cenvat Credit Rules, 2004, an output service provider availing common inputs services for rendering both taxable and exempted services has the option of maintaining separate accounts or avail credit only on those input services that p....
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....roportion to their turnover in terms of Rule 7 of CCR, 2004. It may be noted that the CENVAT credit to the extent it was attributable to the trading turnover was not distributed to the trading units but was expensed. 4.4 The activities performed by the respective centers/units of the Appellant and their pattern of availment of Central Value Added Tax Credit ("CENVAT credit") is tabulated below for brevity. S. No. Unit No. of units/centers Activity performed Pattern of availment of CENVAT credit 1. Manufacturing 6 Goods are manufactured and cleared on payment of appropriate excise duty. Credit in respect of inputs and input services pertaining to manufacturing activity was availed by the Appellant (either directly or through ISD) and the same is not in dispute. 2. Trading 33 Purchase and Sale of goods. Various inputs and input services were procured. However, no credit was availed by the Appellant either directly or through ISD. The same is not in dispute. 3. Service 253 Only taxable Service of AMC is performed Credit pertaining to service activity was availed by the Appellant (directly and ....
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....s instead of service units while quantifying the demand under Rule 6. 4.11 To summarize the quantification of the demand was based on the following values taken from different segments which is summarised below, 4.12 Subsequently, on 18.07.2019, the Appellant in terms of Rule 6(3A) of CCR, 2004, paid a portion of the demand amount of Rs. 17,56,113/- along with interest of Rs.11,04,318/- and 25% penalty of Rs. 4,39,028/- under protest vide Service Tax Department Challan No. 1907017255 and 1907017358. The Appellant intimated the payment made under protest to the Respondent vide letter dated 06.08.2019. 5. The Ld. Counsel further pleaded that impugned order may be set aside on the following grounds : A. There is no trading activity as envisaged in the impugned order. The Ld. Principal Commissioner is relying on the invoices issued by the trading unit to hold that service unit undertakes trading activity is erroneous. A.1. As stated in the facts above, the trading units and service units are physically separated and there is no unit in which both activities co-exist. The fact that the units are separate is nowhere disputed by the department which makes it an accepted fac....
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....mitting that the Appellant has availed CENVAT Credit of Service Tax paid on input services used for providing both taxable and exempt services, in such a case, the demand set out in the order is incorrect since the Appellant has an option under Rule 6(3A)(b) of the CCR, 2004 to reverse the proportionate credit pertaining to common input services. B.3 The Appellant has exercised the said option and reversed the CENVAT credit in terms of Rule 6(3A) of the CCR amounting to Rs, 17,56,113/- for the period April 2013 to March 2017. The detailed computation of the aforesaid liability is tabulated in the Appellant's memorandum of appeal at paragraph B.5 and reproduced below for reference, Year Value of taxable service (in Rs.) Value of Exempted Service (in Rs.) Total Turnover (in Rs.) Total CENVAT Credit (in Rs.) Proportionate Credit to be reversed (In Rs.) (1) (2) (3) = (1) + (2) (4) (5)=(2)/(3)*(4) 2013-2014 81,97,00,000 5,79,64,244 87,76,64,244 91,83,887 6,06,538 2014-2015 88,69,00,000 5,02,07,038 93,71,07,038 77,37,480 4,14,548 2015-2016 94,18,00,000 3,75,45,013 97,93,45,0....
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.... Appellant submits that the issue is no longer res integra and it has been settled in Madura Steel Industries Pvt Ltd v. Commissioner of Central Excise, Madurai, [2015-TIOL-567-CESTAT-MAD] and M/s. IPCA Laboratories Ltd. Versus CCE Indore 2015 (10)TMI 2325 - CESTAT New Delhi wherein it was held that it is left to the option of the assessee to comply with the mandate of Rule 6 and once the assessee has reversed proportionate credit computed in terms of Rule 6(3A) read with Rule 6(3)(ii) of CCR, demand cannot be made for reversal at 6% on the value of exempted goods. D. The quantification of the demand is incorrect and must be restricted to the amount of credit availed by the Appellant. D.1 In the instant case, the total demand of Service Tax is Rs.12,53,61,238/-. whereas, the total credit availed by the Appellant is Rs.3,16,72,532/- The Impugned Order is in essence proposing to extract illegal amount from the assessee. Therefore, the Impugned Order merits to be set aside on this ground alone. D.2 It is submitted that the amount to be reversed under Rule 6(3) of CCR, 2004 shall be restricted to the amount of credit. In this regard, reliance is placed upon the amendment made ....
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.... the demand of Service Tax is unsustainable, the question of imposing interest under Section 75 of the Act and penalty under Section 76 and 78 of the Act does not arise. 7. It is further submitted that, in any case, the Appellant has not availed and utilized any credit attributable to the exempt services and therefore no interest is payable under Rule 14 of the CCR. Ld. Counsel prayed that the appeal may be allowed. 8. Ld. A.R Shri R. Rajaraman appeared and argued for the Department. Ld. A.R adverted to para-7 of the findings of the adjudicating authority. It is submitted that the appellant has three kinds of units - (i) Manufacturing (ii) Trading and (iii) Service / AMC. The trading units are not registered with the department as they are engaged in buying and selling of goods and are outside Central Excise jurisdiction. The present demand has been proposed only in respect of the 253 service/AMC units across India, which have a centralized registration. These units provide various taxable services like Business Auxiliary Services, Erection & Commissioning Service, Consulting Engineer Services, Maintenance & Repair Services etc. The contention of the appellant is that they ha....
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....ring units and service units and stated that these units are separate and independent. Thus the appellant has categorically stated in the reply to the SCN that they have neither availed or utilized any credit attributable to the exempted service (trading). 11. The Ld. Counsel for appellant thus put forward strongly that the SCN itself is issued on erroneous perception of facts. The Bench then directed the department to file a report in this regard. On 06.06.2023, the Bench called for a report from the department to verify as to the nature of invoices referred in the impugned order and whether the trading units have availed credits on input services. During the hearing today, the department has filed a report dt. 04.10.2023 issued by the Assistant Commissioner of Mylapore Commissionerate. The relevant part of the report reads as under : "....It is evident from the invoices referred to in the OIO No.19/2019 Ch.N. GST (Commr.) dated 14.06.2019 pertaining to M/s.Novateur Electrical & Digital Systems Private Limited that these invoices are raised by appellant's units with Service Tax Registration No.AACCE4671NSD015 and apart from sale of goods, installation charges are also ....
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.... with 2000 and the trading unit of the corresponding invoice in page 7 of the impugned order is located in 'BusA 2007'. It is thus very much clear that the invoice pertain to trading unit and not a service unit as concluded by the adjudicating authority. 13. Again, in page 8 of the impugned order, another invoice dt. 23.07.2014 is enclosed by the adjudicating authority. The said invoice is for sale of 5 KVA UPS System with CC Power Pack. The appellant has collected VAT on the value of the product and also installation charges along with service tax. In the invoice again the service tax registration number of the service unit has been mentioned. The address of the unit mentioned would show that it is a trading unit as per the list of location details furnished by the appellant. However, the adjudicating authority has erroneously concluded that this invoice is raised by the service unit. 14. In page 9 of the OIO, the adjudicating authority has referred to an invoice dt. 22.05.2014. Here again, the appellant has collected installation charges along with service tax. The service tax registration number of the service unit has been mentioned. The address as per invoice would show ....
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.... been done by taking the trading turnover against the total credit availed by the service unit, which is flawed. The Ld. Counsel for appellant has also pointed out that the demand of service tax alleging wrongful availment of credit is Rs.12,53,61,238/- whereas the total credit availed by appellant for the disputed period is only Rs.3,16,72,532/-. 19. The Ld. Counsel for appellant has also put forward various alternate arguments as abundant caution. It is submitted that in case Rule 6 (1) is applicable then the appellant has already reversed the proportionate credit along with interest and penalty in terms of Rule 6 (3A) of CCR, 2004. It is explained in the reply to SCN that the books of account of the appellant are maintained in such a way that expenses pertaining to a particular unit is recorded based on the unique plant/unit code. Certain input services like warehousing, courier services etc. which are exclusively used for running the trading business are not availed by the appellant and the same is expensed out. It is further categorically stated in para 3.30 of the reply to SCN that appellant does not avail any credit on common input services to the extent they are attribut....