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CX - Trading activity was incorporated in definition of exempted services only from 1/4/2011, therefore, prior to that date rule 6 of CCR, 2004 is inapplicable: CESTAT

By TIOL News Service

MUMBAI, FEB 07, 2017: THE appellant is engaged in the manufacture of S.S. Sinks & Parts thereof. They are also engaged in the trading activity of other goods like Taps, Bio Food Disposer etc. which are accessories to sinks.

A SCN was issued contending that appellant is availing CENVAT credit on the common input services such as Advertising Agency or Travel Agent, Business Support Service, Business Auxiliary service, Business Exhibition Service, Cargo Handling Service, Chartered Accountant, Clearing & Forwarding, Courier Insurance, Telephone, Manpower Recruitment and Supply, Travel Agent, CHA, Online Data, GTA, Rent-a-Cab, etc. and, therefore,credit attributable to the trading activity is required to be reversed.

The lower authorities confirmed the demand.

Before the CESTAT, the appellant submitted that trading activity was defined as exempted service only w.e.f. 01.04.2011, therefore, prior to this amendment there is no provision to deny the credit;the demand is time barred as facts were known to the department inasmuch as extensive audit was undertaken. In support, reliance is placed on the following judgments -

Kundan Cars Pvt. Ltd - 2016-TIOL-1088-CESTAT-MUM

Tricity Auto - 2015-TIOL-1198-CESTAT-DEL

Krishna Auto Sales - 2015-TIOL-2994-CESTAT-DEL

Sanjay Automobile Engineering Pvt. Ltd. - 2016-TIOL-1314-CESTAT-MUM

The AR reiterated the findings of the impugned order.

The Bench observed -

"I observe that as regard the trading activity specific amendment was made in the Cenvat Credit Rules, w.e.f. 1-4-2011 as per Notification No. 3/2011-CE (N.T.) dated 1-3-2011 wherein the trading activity was incorporated in the definition of exempted services accordingly Rule 6 became applicable but it is only from 1/4/2011, prior to that there was no provisions for either denial of credit or for reversal of the same as provided under Rule 6 of CCR. This issue has been considered by this Tribunal in various judgements…"

Extracting liberally from the Tribunal decision in Kundan Cars Pvt. Ltd - 2016-TIOL-1088-CESTAT-MUM, the Bench concluded that recovery of Cenvat credit attributed to the trading activity is not sustainable.

The appeal was allowed by setting aside the impugned order.

(See 2017-TIOL-353-CESTAT-MUM)


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