TaxTMI 
TaxTMI 
2025 (5) TMI 1750
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....dit Rules, 2004. Accordingly, the Appellants were filing monthly statutory ER-1 and ST-3 returns duly disclosing the availment of CENVAT Credit. 2.1. On 18.12.2007, the Appellant got registered with the Central Excise department as a 'dealer' vide Registration No. AAACI6950QXD003 in order to engage in the purchase and sale of imported articles viz. Coil Formers, EMC Modules i.e., IDM-12 and IDM-13 etc. After such registration as a "dealer", the Appellant started the aforesaid activity of purchase and sale of such products for the first time with articles imported vide Bill of Entry No. 389045 dated 25.01.2008. 2.2. During the course of CERA audit conducted in November 2009, a Spot Memo dated 01.12.2009 was issued calling upon the Appellant to reverse the amount of credit attributable to "trading" activity since such credit of service tax paid on input services attributable to activities of trading imported goods would not be admissible. In response to such CERA Audit, the Appellant on 04.12.2009 duly reversed the CENVAT Credit amounting to Rs. 22,534/- used for the trading activity along with interest amounting to Rs. 2,903/-. The said reversal of CENVAT Credit along with interes....
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.... do not envisage availing of credit of service tax paid on input services received for purchase and sale of goods by a dealer/trader. However, this is not the case of the Revenue. The appellants submit that the Rules envisage a person who is a manufacture of final products cum service provider, manufacturer of final products cum service provider cum seller of goods etc. However, the impugned order seems to have overlooked this aspect. Therefore, the impugned order is liable to be set aside. 3.2. The appellant submits that the Rules only envisage a situation to deny credit of service tax paid on input service when input services are used in manufacture of exempted goods or for providing exempted output services. In other words, the conditions laid down under the CENVAT Credit rules for denial and recovery of credit to the extent the same are used for exempted services are enshrined under Rule 6 only. In the instant case, admittedly, Rule 6 of the said rules have not been invoked in the Show Cause Notice and the Ld. Commissioner also holds that Rule 6 of the said rules will have no application in the present case since trading is not an exempted service. Once this is the admitted po....
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.... Credit attributable to 'trading' activity which has been reversed by the Appellant. It is a trite law that a certificate from an expert in the accounting profession, the same has immense evidentiary value. Therefore, such certificate ought to be objectively examined. Reliance is placed on the decision of the Hon'ble CESTAT Delhi in the case of Hero Motocorp Ltd. v. Commissioner of Customs (Import & General) - 2014 (302) E.L.T. 501 (Del.). 3.6. In the light of the fact that the CENVAT Credit attributable exclusively to the trading activity stands reversed along with interest prior to issuance of the underlying SCN, the Appellant should have been provided the benefit of Section 11A(2B) of the Central Excise Act, 1944 and the SCN must not have been issued. Hence, the proceedings are not sustainable and is liable to be set aside. 3.7. The Appellant submits that as per Rule 2(l) and Rule 3 of the CENVAT Credit Rules, 2004, they are eligible to avail CENVAT Credit on the input services that is used in or in relation to the manufacture of final products. Therefore, merely because the Appellant carried out 'trading' activity during the relevant period, it cannot be a valid ground in ord....
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....f the value of such input services with respect to manufacturing and trading activity. 6.1. We observe that there is no dispute that appellants are manufacturer of final products (Ferrite Core and Ferrite Powder). Once this fact is not in dispute, credit cannot be denied to the appellants. It is not the case that the appellants are only importing and selling Coil Formers, IDM-12 etc. and are not manufacturers of final products. Had that been the case, the revenue could have alleged that CENVAT Credit rules do not envisage availing of credit of service tax paid on input services received for purchase and sale of goods by a dealer/trader. However, this is not the case of the Revenue. The appellants submit that the Rules envisage a person who is a manufacture of final products cum service provider, manufacturer of final products cum service provider cum seller of goods etc. 6.2. We observe that in the present case, the issue involved is whether the entire quantum of CENVAT Credit availed on input services can be denied where some services have been used towards trading. We observe that "trading" activity as an exempted service under Rule 2(e) of CENVAT Credit Rules, 2004 has been in....
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.... trading in Chapter V of Finance Act, 1994 which deals with the provisions of law related to levy of service tax. We, therefore, hold that there was no provision of law for disallowance of CENVAT Credit availed on service tax paid on input services which also were utilized for trading activity during the relevant period." [Emphasis supplied] 6.5. Reliance in this regard is also placed on M/s Orient Bell Limited, M/s Orient Ceramics And Industries Ltd. Versus Commissioner Of Customs, Central Excise And Service Tax, Noida And (Vice-Versa) 2018 (3) TMI 7 - CESTAT Allahabad wherein the Hon'ble CESTAT held as follows: 5. It stands contended by the appellant that the trading activities were introduced as exempted services w.e.f. 01.04.2011. As such prior to the said date trading was not a service activity and hence was not an exempted service so as to deny the CENVAT Credit availed in respect of common input services. Reference stands placed on various decisions of the Tribunal. 6.6. We observe that the entire proceedings have been initiated against the Appellant in order to deny the CENVAT Credit under Rule 2(l) and Rule 3 of the CENVAT Credit Rules, 2004 by invoking Rule 14 of th....
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....erest shall be recovered from the manufacturer or the provider of the output service and provisions of Section 11A of Central Excise Act, 1944 & Section 73 of Finance Act, 1994 was applied for effecting such recoveries. It is very clear that for recovery of CENVAT Credit under said Rule 14, first it is to be established that CENVAT Credit has been either taken wrongly or utilized wrongly. Further, the said Rule 14 has also been provided for recovery of amount mentions in sub-rule (3) of Rule 6 of CENVAT Credit Rules under Explanation 2 under sub-rule (3) of said Rule 6. The provision at Explanation 2 under sub-rule (3) of said Rule 6 provide for recovery of CENVAT Credit which was admissible at the time of taking credit. In order to invoke provisions of said Rule 14 it is to be first established that either the CENVAT Credit was not admissible or Rule 6 was applicable in the transaction then only CENVAT Credit could be recovered under Rule 14 of CENVAT Credit Rules, 2004. In the present case, admittedly, there is no allegation in the said show cause notice that the appellants had taken credit of any inadmissible CENVAT Credit. Further the show cause notice dated 9-5-2011 states tha....