TaxTMI 
TaxTMI 
2026 (5) TMI 1668
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....Service Tax, Bangalore. 2. The Appellant M/s. Pratham Motors are dealers of Maruti cars engaged in providing authorised services for Maruti cars. They also do the trading activity of selling Maruti cars which is exempted from payment of service tax. Since they had taken cenvat credit for both taxable and non-taxable services, show-cause notice was issued demanding reversal of cenvat credit on the exempted services. The Commissioner in the impugned order confirmed the demand of Rs. 1,65,59,881/- along with interest and imposed penalties under Section 77 and 78 of the Finance Act, 1994. Aggrieved by this order, the appellant is in appeal before us. 3. The Learned Counsel submitted that the Cenvat Credit Rules, 2004 were amended by Notif....
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....ligible to avail cenvat credit on the exempted services; hence, the same is rightly being demanded. The 'Explanation' being only a clarification, it cannot be said to be prospective and also submits that cenvat credit is available only to the taxable services since admittedly trading activity is non-taxable service, the question of taking credit does not arise. 5. Heard both sides and perused the records. We are in agreement with the appellant that the second show-cause notice dated 20.04.2012 cannot be sustained for the extended period since the Revenue was aware of the irregular availment of credit when the first show-cause notice dated 02.08.2010 was issued. 5.1 On merit, we find that the law permits credit only on the taxable serv....
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.... correct legal position appears to be that it is for the assessee to segregate the quantum of input service attributable 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. 17. In the present case, the assessee's argument that there is no mechanism to reverse ....
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....med the department about taking the wrong credit. This would have been undetected if the facts were not noticed during audit. M/s. Lally Automobiles Private Ltd. have failed 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 li....