2023 (12) TMI 1208

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....quently, on the basis of audit of their records, a show-cause notice was issued to them on 08.04.2009 for recovery of the said credit with interest and penalty; an amount of Rs.79,22,225/- paid along with interest of Rs.15,38,789/- proposed to be appropriated. On adjudication, the demand of Rs.79,22,225/- and interest of Rs.15,38,789/- attributable to trading activities and demand of Rs.15,83,168/- being credit availed at Bangalore pertaining to manufacturing units located at Ahmedabad and Pune was confirmed with a penalty of Rs.95,05,393/- without having ISD registration. Hence the present appeal. 3.1. At the outset, the learned advocate for the appellant submitted that the disallowance of cenvat credit comprises of two issues. The first issue relates to denial of cenvat credit of Rs.79,22,225/- relating to their trading activities during the period in question. He has submitted that as per the provisions of Rule 6(5) of Cenvat Credit Rules, 2004, they are entitled to avail cenvat credit on 'Management Consultancy Service' unless the said service is used exclusively in or in relation to the manufacture of exempted goods or providing exempted service. He has further submitted th....

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....ents:- i. CCE Vs. Sanmar Speciality Chemicals Ltd. [2016(43) STR 347 (Kar.)] ii. CCE Vs. Zyg Pharma Pvt. Ltd. [2017(358) ELT 101 (MP)] iii. Continental Foundation Joint Venture Vs. CCE [2007(216) ELT 177 (SC)] iv. Jaiprakash Industries Ltd. Vs. CCE [2002(146) ELT 481 (SC)] 4.1. Per contra, the learned AR for the Revenue reiterated the findings of the learned Commissioner. He has submitted that cenvat credit availed on services attributable to trading activity cannot be admissible in view of the series of judgments by Hon'ble High Courts and Tribunal on the subject. In support, he has referred to the judgment of Hon'ble Delhi High Court in the case of Lally Automobiles Pvt. Ltd. Vs. CCE [2018(17) GSTL 422 (Del.)]; Aksh Optifibre Ltd. Vs. CCE, Jaipur-I [2018(10) GSTL 551 (Tri. Del.)]; CST, New Delhi Vs. AVL India Pvt. Ltd. [2017(4) GSTL 59 (Tri. Del.)]; Secure Meters Ltd. Vs. CCE, Jaipur-II [2017(3) GSTL 485 (Tri. Del.)] and Ruchika Global Interlinks Vs. CESTAT, Chennai [2017(5) GSTL 225 (Mad.)]. 4.2. Further, he has submitted that the appellant has wrongly availed credit pertaining to their units at Ahmedabad and Pune without taking ISD regi....

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....rificatory. As accepted by Mr. Jayachandran, the appellant had not being paying Service Tax on trading activity during the relevant period. 10.3 Therefore, given the rule position, what would govern the matter would be the determination of the issue as to whether or not, a particular service is amenable to Service Tax under Section 66 of the Finance Act. 10.4 Since, the trading activity was not amenable to Service Tax at the relevant period, surely, the apportionment as provided in Rule 6(3)(c) would get triggered. This is apparent, upon a bare perusal of Rule 6(3)(c) the relevant part of which is as follows. RULE 6. Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services. - (1) xxxx (2) xxxx (3) Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer or the provider of output service, opting not to maintain separate accounts, shall follow either of the following conditions, as applicable to him, namely:- (a) xxxx (b) xxxx (c) The provider of output service shall utilize credit only to extent of an amount not exceeding twenty per cen....

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....ed to inform the department that they are not maintaining the separate records for input services used for taxable and exempted services. It is already noted that the law requires an assessee to maintain separate records of Cenvat credit received on taxable or non-taxable services. In case the separate records are not maintained, the Cenvat credit is to be reversed as per Rule 6(3) of the Cenvat Credit Rules, 2004;. I find that : M/s. Lally Automobiles Private Ltd. have not reversed the same by suppression of material facts. The excess credit availed utilized by them is liable to be recovered in terms of Rule 14 of Cenvat Credit Rules, 2004 read with proviso to Section 73(1) of Finance Act, 1994." 19. This Court is of opinion that the lack of any method in the rules in such cases, would only mean that a reasonable and logical principle should be applied, not concededly that what should and could not be claimed as input credit, (but was in fact so claimed) ought to be "left alone" because of the composite nature of the assessee's business. While any assessee has a right to organize its business in the most convenient and efficient manner, it cannot claim that that such orga....