By TIOL News Service

MUMBAI, OCT 26, 2018: BOTH, Revenue as well as the assessee are in appeal against the order passed by Commissioner of Service Tax, Mumbai.

The assessee is engaged in providing taxable services under the category of Maintenance or Repair services, Erection, Commissioning or Installation Service and is also engaged in the business of ‘trading' of telecom equipment.

Alleging that the assessee had availed CENVAT credit on common Input services for providing the taxable output services as well as for trading activities but did not maintain separate records and did not pay the amount as provided under rule 6(3) of CCR, 2004, proceedings were initiated for confirmation of CENVAT demand of Rs.1424.09 lakhs in terms of Rule 6(3)(i) ibid.

In adjudication, CENVAT Credit demand of Rs.1,05,33,000/- was confirmed along with interest and penalties.

This order was reviewed u/s 86(2) of the FA, 1994 and an appeal came to be filed by the Revenue before the Tribunal. The contention of the Revenue is that during the relevant period, trading was not considered as an exempted service in the CCR and thus, input services used/utilized for trading activities should not be eligible for the CENVAT benefit, in terms of provisions of Rule 3 r/w Rule 4 of the CCR.

The assessee also challenged the order on the ground of limitation but none appeared for the assesse during the hearing.

After hearing the submissions made by the AR and perusing the records, the Bench observed thus -

+ On perusal of both the pre-amended and post amended definition of exempted service contained in Rule 2(e) [of CCR, 2004], we find that there is not much of difference between the definitions inasmuch as the explanation added to amended definition with effect from 31.03.2011 has only clarified that "exempted services includes trading". [Ruchika Global Interlinks - 2017-TIOL-1235-HC-MAD-ST relied upon.]

++ Thus, the grounds urged by Revenue that the trading was not considered as an exempted service during the disputed period, will not hold good and accordingly, cannot alter the findings recorded in the impugned order.

+ …the assessee had reversed the credit attributable to input services used for the trading activities. Since such reversal is not in conformity with sub-rule (3) of Rule 6 of the Cenvat Credit Rules, 2004, we are of the view that the learned Commissioner has correctly interpreted the statutory provisions and confirmed the adjudged demand, to which the respondent was not legally entitled for CENVAT benefit.

+ The assessee had never informed the department regarding availment of CENVAT Credit in respect of the input services used/utilised for providing both output service and the trading activities undertaken by it.

+ Since, upon acquiring the knowledge regarding availment of irregular CENVAT Credit, the department initiated show cause proceedings against the assessee, we are of the view that such proceedings are not barred by limitation of time.

Both the appeals were dismissed.

(See 2018-TIOL-3243-CESTAT-MUM)