TaxTMI 
TaxTMI 
2026 (3) TMI 1588
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....ertook assembly and manufacturing activities for a job work consideration. The vehicles so manufactured were cleared on payment of Central Excise duty in terms of Rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, adopting the transaction value based on the sale price at which the vehicles were sold to Regional Sales Offices. 1.2 Based on audit scrutiny of the appellant's records and annual reports for the financial years 2011-12 to 2013-14, the Department formed a view that apart from manufacturing dutiable goods, the appellant was also engaged in trading of DOST vehicles through Regional Sales Offices outside Tamil Nadu, which was treated as "exempted service" under Rule 2(e) of the CENVAT Credit Rules, 2004. It was alleged that the appellant had not maintained separate accounts for common input services used for manufacturing and trading activities as required under Rule 6 of the CCR, 2004. Accordingly, a Show Cause Notice dated 14.10.2014 was issued proposing recovery of Rs.12,22,57,000/- for the period 2011-12 to 2013-14 under Rule 6(3) of the CCR, 2004 along with interest under Section 11AA and penalty under Section 11AC of th....
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....tivity for the purpose of invoking Rule 6 of the CENVAT Credit Rules, 2004. 4.3 The appellant also submitted that no common input services were used for the alleged trading activity and therefore the provisions of Rule 6 of the CENVAT Credit Rules would not be attracted. It was argued that the show cause notices did not identify any specific input service used in relation to the alleged trading activity and therefore the demand is legally unsustainable. The appellant further contended that the trading margin had already suffered Central Excise duty since the assessable value adopted under Rule 10A included the final sale price of the vehicles. 4.4 The appellant also submitted that the extended period of limitation was wrongly invoked since the entire activity was reflected in statutory returns and financial statements. 5. Per contra, the Ld. Authorized Representative for the Revenue supported the impugned orders and made the following submissions: - 5.1 The appellant was clearly engaged in both manufacturing and trading of vehicles and that the appellant first purchased the vehicles from Ashok Leyland Nissan Vehicles Ltd. (ALNVL) and subsequently sold them through their....
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....LNVL supplied inputs and components required for manufacture of DOST vehicles and the appellant undertook the manufacturing and assembly operations at their Hosur plant. We further note that the vehicles so manufactured were cleared on payment of Central Excise duty in terms of Rule 10A of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, which specifically governs valuation in cases involving manufacture of goods on job work basis. 8.3 We find that the department has relied upon the meaning of the term "trading" in common commercial parlance to argue that the appellant was engaged in buying and selling of goods. However, we observe that the expression "trading" is not specifically defined in the Central Excise Act. In common commercial understanding, trading refers to purchase and sale of goods without undertaking any manufacturing activity. In the present case, it is an undisputed fact that the vehicles were manufactured at the appellant's factory and cleared on payment of Central Excise duty. Therefore, the mere fact that the vehicles were subsequently sold through Regional Sales Offices cannot, by itself, convert the manufacturing activity....
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....nt has alleged that the appellant was engaged in both manufacture of dutiable goods and provision of exempted services, thereby attracting the provisions of Rule 6. 9.2 We observe that for invoking Rule 6 it is necessary for the Department to establish two essential elements: firstly, that the assessee was engaged in both dutiable and exempted activities, and secondly that common inputs or input services were used for such activities. In the absence of these foundational elements, the provisions of Rule 6 cannot be invoked. 9.3 In the present case we find that the Department has not brought on record any material to demonstrate that the input services on which CENVAT credit was availed were actually used in relation to the alleged trading activity. The show cause notices merely proceeded on the assumption that the sale of vehicles through Regional Sales Offices amounts to trading. We observe that such presumption is insufficient to invoke the provisions of Rule 6 and the Department is required to establish a clear nexus between the input services on which credit was taken and the exempted activity alleged to have been undertaken. We further note that the show cause notices do....
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.... the CENVAT Credit Rules. The Hon'ble High Court held that where the same final product is manufactured and cleared partly on payment of duty and partly under exemption, the Revenue cannot treat such clearances as different final products for the purpose of invoking credit reversal provisions. The said judgment has been affirmed by the Hon'ble Supreme Court and the principle laid down therein clearly indicates that artificial bifurcation of the same manufacturing activity so as to invoke credit reversal provisions is impermissible. 9.6 The appellant has also relied upon the judgment of the Hon'ble Supreme Court in Union of India vs Hindustan Zinc Ltd - 2014 (303) E.L.T. 321 (S.C.), wherein the Court interpreted the scope of credit reversal provisions under Rule 57CC. The Hon'ble Supreme Court held that credit reversal provisions cannot be invoked by artificially treating incidental outputs as independent exempted products. The ratio laid down in the said decision supports the proposition that credit reversal provisions cannot be applied in a manner that results in artificial bifurcation of manufacturing activity. 9.7 Applying the above principles to the facts of the present c....
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....mmissioner of Central Excise - 2002 (146) E.L.T. 173 (Tri. -Mumbai) to contend that when the relevant facts are disclosed in statutory records and the dispute arises out of interpretation of legal provisions, the extended period of limitation cannot be invoked. We note that the Tribunal in the said decision held that the proviso to Section 11A of the Central Excise Act can be invoked only when there is clear evidence of suppression, fraud or wilful misstatement with intent to evade payment of duty. We further note that the said decision of the Tribunal has been affirmed by the Hon'ble Supreme Court, thereby reiterating the principle that extended limitation cannot be invoked in cases where the facts were available in the records of the assessee. 10.4 The appellant has also relied upon the judgment of the Hon'ble Supreme Court in Pahwa Chemicals Pvt. Ltd. vs Commissioner of Central Excise - 2005 (189) E.L.T. 257 (S.C.), wherein the Court held that where the relevant facts are already within the knowledge of the Department and the dispute arises merely on account of a different interpretation of law, the extended period of limitation cannot be invoked. The Hon'ble Supreme Court ob....