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November 2016

[2016-TIOL-2576-CESTAT-DEL] M/s. Marud- han Motors vs. Commissioner of Central Excise and Service Tax, Jaipur-II

By CA Puloma Dalal
CA Jayesh Gogri
CA Mandar Telang
Chartered Accountants
Reading Time 2 mins
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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.}

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