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To determine the method of apportionment of input credit on common input services attributable to manufacturing and trading activities prior to 01.04.2011, the matter remanded to the Tribunal.
Facts
The Appellant, a manufacturer of motor vehicles also imported motor vehicles and sold them in domestic markets and therefore was a manufacturer as well as a trader. The Revenue contended that credit of service tax paid on common input services attributable to the activity of import and sale of cars viz. trading activity which is an exempted service is not available which is not contested. The question is about the true and correct method of quantifying the credit relatable to the trading activity for reversal. The Tribunal held that the method prescribed for arriving at the value of trading of goods vide clause (c) of Explanation-1 for the purpose of reversal under rule 6(3) of the CENVAT credit Rules, 2004 being the difference between sale price and cost of goods sold or 10% of the cost of goods sold, whichever is more is not retrospective in nature since the same was issued on 01/03/2011 and it came into force on 01/04/2011. Accordingly, it was held that service tax paid on common input services should be apportioned in the ratio of trading turnover to total turnover (trading as well as manufacturing turnover). Aggrieved by the same the present appeal is filed.
Held
The High Court held that the Tribunal has misdirected itself completely when it has concluded that clause (c) of Explanation 1 inserted w.e.f. 01/04/2011 has been adopted to encourage the trading of the goods rather than the manufacturing of the goods (otherwise criterion should have been same viz. Based upon turnover or value addition) and thus the common input services before such date should be apportioned in the same ratio as the turnover of manufactured and traded cars. The court held that firstly the Tribunal should refer to the substantive Rule as operative prior to 01/04/2011 and then arrive at a conclusion in relation to the explanation introduced with sub-clauses with effect from 01/04/2011. Accordingly for determination of the fraction/percentage to be applied to apportion the input credit relatable to the trading activity, the matter was remanded to the Tribunal.
