TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 619
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....nvat Credit Rules, 2004 (CCR) as well as CBEC clarification Circular No. 943/04/2011-CX dt.29.04.2011, it was held that they have not taken/ utilized credit in accordance with the provisions relevant to them during the said period. On the admitted premise that they were taking credit on common input services used both in excisable goods and taxable/exempted services, it was alleged that they did not follow the provisions of Rule 6(2) of CCR and Rule 6(3), as were in force up to 31.03.2008 because they were eligible to utilize the credit only to the extent of 20% of the service tax payable by them on taxable output service. However, they had utilized the said credit much in excess of that cap of 20%. For the period beyond 01.04.2008, in terms of Rule 6(3), in a situation like this, they had to pay an amount equal to 8% (up to 06.07.2009)/ 6% (from 07.07.2009 to till date) of the value of the exempte services and it was also considered appropriate to invoke extended period for the purpose of demand considering the facts of the case. 3. On adjudication, they had essentially relied on the fact that said Rules were not applicable to them as the activity of trading cannot be equated w....
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....s cases including that of Bharat Heavy Electricals Ltd Vs CCE [2020 (43) GSTL 395 (Tri-Hyd)] as also in the following judgments. a) Eaton Fluid Power Ltd Vs CCE & ST, Pune-I [2023 (12) TMI 172 - CESTAT Mumbai] b) Star Agriwarehousing & Collateral Management Ltd Vs CCE [2020-VIL-417-CESTAT-Del-ST] c) Mercedes Benz India (P) Ltd Vs CCE [2015 (40) STR 381 (T)] d) Cranes & Structural Engineers Vs CCE [2017 (347) ELT 112 (T)] e) Alstom T&D India Ltd Vs CCE [2019 (370) ELT 625 (T)] 6. On the grounds of limitation and imposition of equal penalty under Rule 15(3), he has relied on the judgment of Hon'ble Telangana High Court in the case of Bharat Heavy Electricals Ltd in CEA/6/2021 vide order dt.27.04.2021 as also on the following judgments. a) Trent Hypermarket Vs CCE [2019 (6) TMI 1327 - CESTAT Mumbai] b) Krishan Auto Sales Vs CCE & ST [2015 (10) TMI 979 - CESTAT New Delhi] c) Blue Star Ltd Vs CCT [2019 (8) TMI 429 - CESTAT Hyderabad] 7. On the other hand, learned AR has reiterated the findings of the adjudicating authority. 8. Heard both sides and perused the records. 9. The issue to be decided in this c....
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....refore, we find that in the facts of the case, though the appellants had utilized more credit, which was in excess of the cap of 20%, still there was no provision during the material time for it to lapse and therefore, they could have again re-utilized the same during the subsequent period and hence, at best, they will be liable for payment of interest only to the extent they had exceeded the cap of 20% for discharge of service tax liability. Insofar as the issue post 01.04.2008 is concerned, we find that essentially the first issue that needs to be decided is whether the trading activity can be considered as an exempted service or otherwise and secondly, whether amendment brought in Rule 2(e) of CCR vide Notification No.03/2011 dt.01.03.2011 w.e.f. 01.04.2011 would have retrospective effect in order to consider the trading activity as covered within the ambit of exempted service or otherwise. This becomes crucial because if the trading activity is considered as an exempted service even prior to 01.04.2011, then in a situation where common input services have been used and no separate accounts have been maintained, the appellants would be required to follow one of the options given....
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....ssessee on common input services used for both taxable and exempted services and the Court considered the definition of exempted service under Rule 2(e), as amended by the Finance Act, 2011 w.e.f. 01.04.2011, wherein, it was also observed that this issue during the said period was considered by different Benches of the Tribunal in various mattes, wherein divergent views were taken. In the same case, the views of the Tribunals were upheld by the Hon'ble High Court. Therefore, in a similar situation, the extended period was not sustained. In this regard, we also find that the judgment cited by the Revenue in the case of Lally Automobiles Pvt Ltd Vs CCE [2018 (17) GSTL 422 (Del)], which was further upheld by the Hon'ble Supreme Court as reported in [2019 (24) GSTL J115 (SC)] quite relevant to the issue, wherein, the Hon'ble Supreme Court perused the order passed by the Hon'ble Delhi High Court and, inter alia, observed as under: "Delay condoned. We have heard Learned Counsel appearing for the appellant and perused the impugned order passed by the High Court of Delhi. In our considered view, the reason assigned by the High Court in passing the impugned order ....
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....ibutable to trading activity and exclude the same from the records maintained for availing credit. This cannot be done in advance as it may not be possible to foretell the quantum of trading activity as compared with taxable activity. The obvious solution would be to ensure that once in a quarter or once in a six months, the quantum of input service tax credit attributed to trading activities according to standard accounting principles is deducted and the balance only availed for the purpose of payment of Service tax of output service." 13. Therefore, what has happened that in this judgment also it was not agreed that trading activity is an exempted service in the sense that it has been considered as exempted service in terms of explanation inserted vide amendment dt.01.04.2011. On the contrary, it was held that the trading activity was neither manufacture nor a service and therefore, taking of credit itself is void ab initio. It is also relevant to revert to Para 18, 19 & 20 of the said judgment. 18. As regards the method of calculation and invocation of extended period of penalty, the assessee's contentions again, to the Court's mind, are groundless. The assessee conc....
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.... did not include the amounts earned from that business, in its returns) meant that the assessee was aware of what it was doing. It cannot now take shelter under the plea that non-trading activity was expressly exempt from claiming credit, in 2011. That amendment made no difference, given that trading was never taxable under the Finance Act, 1994. In these circumstances, the Revenue was justified in invoking the extended period of limitation in this case. 14. Therefore, to sum up, it is an admitted fact that appellants were engaged in trading activity, which has been considered as an exempted service by the department, whereas, in the case of Lally Automobiles Pvt Ltd (supra), same activity has been considered as neither being a service nor manufacture. Therefore, respectfully following the judgment in the case of Lally Automobiles Pvt Ltd (supra), it will be obvious that the appellants were required to reverse the amount proportionate to their trading turnover and in fact, they have apparently done so along with interest, as per the submissions of the learned Advocate. Therefore, they would be required to reverse proportionate amount for the entire period along with applicable i....
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....at the demand is time barred, is also not acceptable. Section 11A provides for issue of show cause notice demanding duty short-levied non-levy or short paid. In certain situations, the show cause notice can be issued demanding duty for a period of five years from the relevant date as defined in the Central Excise Act, which is as under: "(ii) "relevant date" means,- ............................................. 8. ......... Learned consultant as not been able to show as to how the date of audit when the department came to know of the irregularity becomes relevant date in the light of the above provision defining the relevant date under Section 11A. ........................" 16. Further, he has also relied on the judgment in the case of Suzlon Infrastructure Vs CCE, Pune-III [2012 (283) ELT 49 (Tri-Mumbai)] and Camlin Ltd Vs CCE, Mumbai-IV [2009 (14) STR 520 (Tri-Mumbai)] and thereafter, rejected the grounds for non-invocation of limitation. We also took note of the observations of the jurisdictional High Court in the case of Bharat Heavy Electricals Ltd (supra), wherein, it was also, inter alia, observed that the finding with regard to invocation of ex....