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Trading cannot be considered as an exempted service prior to April 2011
Facts
The appellant,
a service provider,
was also engaged in trading activities. CENVAT credit
on common input services was disallowed under rule 14 of the CENVAT Credit
rules, 2004 on the ground that trading activity should be considered as
exempted service in terms of rule 2(e) of the said rules. Since separate
accounts were not maintained, reversal was demanded in accordance with rule 6(3a)
of the said
rules and the
demand was confirmed.
Held
The tribunal noted that the term exempted service
is defined in Rule 2(e) of the said rules during the relevant period as
taxable services which
are exempt from the whole of the service tax leviable
thereon. The said definition was amended vide notification 3/2011-CE(NT) dated
01/03/2011 and an explanation was added clarifying that exempted service
includes trading. On perusal of both un-amended and amended provisions of
exempted service, it reveals that the activity of trading was not included
within the ambit of the definition prior to 01/04/2011. Since the period in the
present case is prior to April 2011, the amended definition would not be
applicable and thus rule 6(3) of the CENVAT Credit rules 2004 does not have any
application and therefore credit is allowable.
{Note: readers may note a similar decision in the case of Kundan
Cars Pvt. ltd. [2016 (43) STR 630
(tri.-mumbai)] wherein the tribunal relying on the decision of Shariff motors
[2010] 18 Str 64(tr.-Bang) upheld by the
andhra Pradesh high Court [2015 (38) St j53(a.P)] and Badrika motors [2014 (34)
STR349] Held that reversal of CENVAT credit attributable to trading activity is
not required.}
