1. This appeal is directed against Order-in-Original Nos. CAL-EXCUS-000-COM-044-15-16DT, CAL-EXCUS-000-COM-045-15-16DT, CAL-EXCUS-000-COM-046-15-16DT dated 30.11.2015.
2. Heard both sides and perused records.
3. The issue that falls for consideration is whether the appellant is required to reverse the Cenvat credit availed on three common input services which are utilized for discharging duty liability on the finished goods as well as for trading activities. It is undisputed that during the period October, 2016 to March, 2011, the appellant had activity of manufacturing as well as trading of the goods. Appellant has been availing Cenvat credit of service tax paid on inp
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uts and input services which are utilized for manufacturing activity as well as for trading activity. The adjudicating authority while confirming the demands raised in show cause notice issue, held that the trading activity being exempted service by adopting a method of calculation i.e. sales turnover on trading activity to the total sales turnover of the unit, confirmed the amount of proportionate credit that requires to be reversed, which as per the Order-in-Original is Rs. 13,62,622 and Rs. 2,472 and has also imposed penalty besides seeking interest from the appellant on the confirmed amount.
4. Learned Counsel takes me through the entire case records and submits that they are in this appeal questioning the calculation of the demand confirmed and are also disputing the demand on the ground of limitation. He would submit that the proportionate credit that requires to be reversed, if computed as per explanation to Rule 6(3D)(C) of Cenvat Credit 2004 would be approximately Rs. 5,04,625 which has been reversed by them though they have to reverse only an amount of Rs. 3,78,882 as per the CA certificate. On limitation, it is his argument that the fact of trading activity being in the knowledge of the department, they should have sought the explanation from the appellant at the time when returns were filed and indicated the details. He has relied upon the decision of the Tribunal in the case of Sumitomo Corporation India Pvt. Ltd : 2017 (50) S.T.R. 299 (Tri. Del.) for the proposition that the formula which is inserted in statute from 01.04.2011 will also apply to period prior in respect of reversal of proportionate Cenvat credit on trading activity and also would rely upon the decision on the Tribunal in case of M/s. TFL Quinn India Pvt. Ltd., vs. CC & CE, Hyderabad : 2016-TIOL-856-CESTAT-HYD.
5. Learned DR submits that the issue is no more res integra as the Hon'ble High Court of Madras in the case of M/s. FL Smidth Pvt. Ltd. vs. CCE, Tiruchirapalli and CESTAT, Chennai; 2014-TIOL-2186-HC-MAD-CS, has held that trading activity even prior to 01.04.2011 would be considered as exempted services.
6. Heard both sides and perused the records.
7. The facts are not much in dispute. It is admitted that during the period in question, appellant had engaged in trading activity as well as manufacturing activity and has availed Cenvat credit of common input services and reversed proportionate Cenvat credit attributable to the trading activity as per the impugned order in original. The only dispute that has raised before the Tribunal is the method of calculation and also on limitation.
8. Learned DR was correct in relying upon the judgment of Hon'ble High Court of Madras in the case of M/s. Smidth Pvt. Ltd., as I find that the Hon'ble High Court in the question of law referred to them, has formulated the following questions which needs to be answered:
* Whether in the facts and circumstances of the case, the Tribunal was right in holding that the activity of trading to be considered as exempted service for the period prior to 01.04.2011 even though the same has been identified as an exempted activity only from 01.04.2017?
* Whether in the facts and circumstances of the case, the Tribunal was right in giving effect to the amendment introduced to the definition of exempted service for the period prior to 01.04.2017?
* Whether in the facts and circumstances of the case the Tribunal was right in holding that only the input services used directly or indirectly or in or in relation to the manufacture of taxable goods alone is eligible for credit in terms of Rule 2(1) of the Cenvat Credit Rules, 2004?
* Whether in the facts and circumstances of the case, the Tribunal was right in quantifying the demand in a method which is not prescribed either in the Act or in the Rules?
9. After analyzing all the provisions of law applicable on the issue, their Lordships in Para 10 and 11 laid down the ratio which I reproduce.
* On an understanding of the above provision, namely, Rule 2(1) of the Cenvat Credit Rules, there is no manner of doubt that input service means goods which is used by the manufacturer directly or indirectly in relation to the manufacturing of final product and clearance of final product from the place of removal. In the present case, the Department has allowed cenvat credit in respect of the value of goods amounting to Rs. 5.41 crores and denied for the balance. We find no error in such determination, which is in consonance with Rule 2(1) of the Cenvat Credit Rules.
* On the plea of limitation, it has been considered by the Adjudicating Authority, Commissioner (Appeals) and the Tribunal and there is a clear finding that the appellant had not disclosed the availment of input service credit on commission in respect of trading activities and it came to the knowledge of the Department only on verification of the documents, such as, contract agreements, commission agreements etc. and therefore the plea of limitation was rightly rejected by the Authorities below.
10. It can been seen from the above reproduced ratio of the judgment, even prior to 01.04.2011 trading activity has to be considered as exempted services is the law settled as on date; and even extended period can be invoked in such a situation wherein demands are raised. In view of this on the question of merits as also on limitation, the appeal fails.
11. As regards computation of the demand on duty which has been confirmed by the adjudicating authority as 13,62,622 which has been partly paid, in my view, the adjudicating authority should reconsider the computation based upon the explanation Rule 6(3D)(C) of the Cenvat Credit Rules, 2004, in its correct perspective and arrive at the exact amount that needs to be reversed by the appellant, to that extent for limited purpose of quantifying the correct amount that needs to be reversed by the appellant, the matter is remitted to the adjudicating authority. Adjudicating authority will also consider the interest liability and the quantum of penalty to be imposed on the appellant after arriving at the re-computed demand as indicated herein above.
12. The appeal stands disposed of as indicated