TaxTMI 
TaxTMI 
2026 (7) TMI 920
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecurities on its own account and hence the activity was an investment and was not a service at all) (ii) In the facts of this case, whether there were sufficient grounds to invoke extended period of limitation and to impose penalties? 2. M/s. IFCI Ltd. [appellant] filed this appeal to assail the Order dated 15.02.2018 [impugned order] passed by the Commissioner (Appeals) in which upheld the order of the Additional Commissioner and rejected the appellant's appeal. The appellant is a Government of India undertaking which provides loans and banking and financial services to its customers and it is registered with the service tax department and pays service tax. It also avails CENVAT credit of the service tax paid on input services and excise duty paid on inputs used in providing the services. 3. A show cause notice dated 21.4.2014 [SCN] was issued to the appellant covering the period April 2008 to March 2011 proposing to recover CENVAT credit of Rs. 89,84,539/- under Rule 14 of the CENVAT Credit Rules, 2004 [CCR] read with section 73 of the Finance Act, 1994 [Act]. It was also proposed to impose an equal amount as penalty under Rule 15(3) of CCR read with section 78 of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-rule (2) or sub-rule (3), as the case may be : ****** (2) A manufacturer who exclusively manufactures exempted goods for their clearance upto the place of removal or a service provider who exclusively provides exempted services shall pay the whole amount of credit of input and input services and shall, in effect, not be eligible for credit of any inputs and input services. ***** (3) (a) A manufacturer who manufactures two classes of goods, namely :- (i) non-exempted goods removed; (ii) exempted goods removed; or (b) a provider of output service who provides two classes of services, namely:- (i) non-exempted services; (ii) exempted services, shall follow any one of the following options applicable to him, namely :- (i) pay an amount equal to six per cent. of value of the exempted goods and seven per cent. of value of the exempted services subject to a maximum of the sum total of opening balance of the credit of input and input services available at the beginning of the period to which the payment relates and the credit of input and input services taken during that period; or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2 dated 01.11.2022] (e) Siegwerk India Pvt. Ltd. versus Commissioner, Central Goods & Service Tax, Commissionerate [Final Order No. 58747/2024 dated 01.10.2024] (f) Career Point Limited versus Commissioner of Central Goods & Service Tax, Excise and Customs, Udaipur [Final Order No. 50601/2025 dated 06.05.2025] (g) Seigwerk India Pvt. Ltd. versus Commissioner of CGST [Final Order No. 50426-50427/2025 dated 21.03.2025] (h) GMR Hyderabad Air Cargo and Logistics Pvt. Ltd. versus Commissioner of Central Tax Rangareddy GST Service Tax [Final Order No. A/30142-30144/2025 dated 29.04.2025] (i) Flipkart Internet Pvt. Ltd. versus Commissioner of Central Tax [Final Order No. 21728/2024 dated 24.10.2024] (j) Finolex Cables Ltd. versus Commissioner of Central Excise and Service Tax, Pune - I [Final Order No. A/87423/2024 dated 25.11.2024] (k) East West Pipelines Pvt. Ltd. versus Commissioner of CGST & CE Balapur [Final Order No. 86044/2025 dated 03.07.2025] 9. Learned counsel further submits that the activity of purchase and sale of shares is neither a service nor is it goods. Hence, the demand which was proposed in the SCN, conf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lls for no interference. He placed reliance on the decision of this Tribunal in M/s. Lally Automobiles Pvt. Ltd. versus Commissioner of Service Tax, Delhi [2018 (10) G.S.T.L. 310 (Tri. - Del.)] upheld by the Delhi High Court [2018 (17) G.S.T.L. 422 (Del.)] and further by the Supreme Court [2019 (24) G.S.T.L. J115 (S.C.)] 17. We have considered the submissions advanced by both sides. 18. The undisputed fact is that the appellant had bought and sold securities in its own account thereby investing its funds and had not rendered any service to any other entity. Such investment of own funds cannot be called a service at all- either taxable or exempted as held in Ponni Sugars and other decisions by this Tribunal. 19. The submission of the learned counsel is that since the demand is under Rule 6(3) read with Rule 14 of CCR which deals with only exempted services and the aforesaid investment of its own funds does not amount rendering any service at all, let alone an exempted service, it was not required to reverse proportionate amount of CENVAT credit. 20. The submission of the learned authorised representative is that any activity which is not a service at all does not fall un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or services and take Cenvat credit only on that quantity of input or input service which is intended for use in the manufacture of dutiable goods or in providing output service on which service tax is payable." 16. Therefore, the issue is whether the assessee could claim the credit on input which were not services. Input credits can be used for payment of service on output service provided such services are used to provide output services. Undoubtedly, there cannot be an exact correlation between one kind of input and corresponding. That is the reason the Rules cover situations where assessees provide both exempted and taxable services. Wherever someone undertakes activities that cannot be called a service or which is not "manufacture", that activity goes out of the purview of both Central Excise Act as well as Finance Act, 1994. In such cases, an assessee would be ineligible for claiming input-service tax credit on an output which is neither a service nor excisable goods. There is no provision to cover situations where an assessee is providing a taxable service and is undertaking another activity which is neither a service nor manufacture. In such a situation, the only co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate 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 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e reversed. Relying on several decisions, learned counsel for the appellant has successfully argued that the activity was investment and it was not a service at all. We agree that the activity of buying and selling securities by the appellant, being on its own account and not for someone else, was only investment and not trading or any other form of service. 25. It is also not in dispute that the appellant had not taken any CENVAT credit on the input services used exclusively for this activity. 26. The question is whether CENVAT credit of the full service tax paid on common input services used partly for rendering taxable services and partly for this activity of investment was admissible. Lally Automobiles answered the question in negative and held that no CENVAT credit will be available to the extent the common input services were used for activity which is not a service and CENVAT credit must be reversed proportionately. 27. In the decisions relied on by the learned counsel for the appellant, the decision of the Delhi High Court explicitly upheld by the Supreme Court in Lally Automobiles was not brought to the attention of the bench. 28. In Ponni Sugars, the finding o....