ST - Appellant, Authorized Service Station is also engaged in trading activity of passenger cars - unless vehicles are received and sold, there would not be any servicing of same -no requirement to reverse Cenvat Credit attributable to trading activity: CESTAT
By TIOL News Service
MUMBAI, MAY 06, 2016 : THE appellant is engaged in providing the following services: Authorized Service Station, Business Auxiliary Services and Servicing of Motor Vehicles. They are also engaged in trading activity of passenger cars purchased from the manufacturer supplier. The appellants are availing Cenvat Credit on various common input services.
A SCN was issued proposing denial of Cenvat credit of Rs.8,74,955/- attributable to the trading activity of the cars.
The lower authorities confirmed the demand and, therefore, appellant is before the CESTAT.
The appellant submitted that the explanation under Rule 2(e) of CCR, 2004 enlarging the definition of ‘exempted service'to include trading activity was introduced w.e.f. 1.4.2011 and, therefore, prior to this date there was no provision for reversal of Cenvat Credit attributable to the trading activity. Reliance is placed on the decisions in Badrika Motors (P) Ltd. - 2014-TIOL-24-CESTAT-DEL, Shariff Motors - 2009-TIOL-1571-CESTAT-BANG; 2013-TIOL-1207-HC-AP-CX. Furthermore, the Commissioner (Appeals) while dropping the penalty u/s 78 of FA, 1994 has given a categorical finding that there is no intention to evade payment of service tax and no ingredient such as fraud, collusion, suppression of facts etc. with intent to evade payment of duty is involved in the present case. Inasmuch as based on this finding, the demand dated 5.4.2013 for the period 2008-09 to 2010-11 is not sustainable on limitation.
The AR while reiterating the findings contained in the impugned order submitted that even prior to 1.4.2011 the fact remains that the trading activity is not taxable and, therefore, no input credit can be allowed in respect of the service commonly used for providing taxable service as well as trading activity. Judgements cited - Mercedes Benz India Pvt. Ltd. 2014-TIOL-476-CESTAT-MUM , Synise Technologies Ltd. - 2015-TIOL-1036-CESTAT-MUM.
The Bench after considering the submissions observed thus -
"…I find that the very identical issue has been considered by this Tribunal in the case of Badrika Motors Pvt. Ltd. (supra) and Shariff Motors (supra). In the case of Badrika Motors Pvt. Ltd. (supra) the Cenvat credit was denied on the GTA service on the ground that the GTA service has no nexus with the taxable service such as ‘Authorized Service Station' and ‘Business Auxiliary Service'. This Tribunal has held that no arithmetical correlation is required between the input and output services and accordingly the credit was allowed. In the case of Shariff Motors (supra) similar facts was involved that the assessee had availed the Cenvat credit in respect of GTA service which is used for transportation of motorcycles from factory to show room which were sold as such and credit was utilized for payment of service tax under authorized service station. The Division Bench has allowed the credit on GTA service. This decision has been upheld by the Hon'ble Andhra Pradesh High Court. …In view of the above judgments, since the identical facts are involved the appellant is not required to reverse the Cenvat Credit attributed to the trading activity of passenger cars."
The case laws cited by the AR were distinguished.
On the question of limitation, the CESTAT held -
| “…Commissioner (Appeals) has conclusively held that in the absence of ingredients such as fraud, collusion, suppression of fact etc. with intent to evade payment of duty, the penalty is not imposable under Section 78. The Revenue has not challenged this finding therefore the same attained finality. Considering this finding which is equally applicable in case of invocation of extended period in terms of proviso to Section 73, the demand is not sustainable on the ground of time bar also…” |
Holding that the impugned order is not sustainable on merit as well as on limitation, the same was set aside and the appeal was allowed.
(See 2016-TIOL-1088-CESTAT-MUM)
