The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) delivered 3 members’ opinions on a single issue of recovery of availed CENVAT credit of service tax on common inputs services which was attributable to the trading activity by invoking the extended period of limitation. The majority of members upheld the demand for the extended period by invoking the extended period of limitation.
Dorma India Pvt. Ltd, the appellant assessee was engaged in the manufacture of “Automatic Door Operators and Door Closures” and parts and are registered with the Central Excise Department and also with the Service Tax Department for the taxable services rendered by them and they had been availing CENVAT credit of duty paid on the inputs and input services procured by them locally as well as imported.
The assessee appealed against the order passed by the Commissioner for confirming the demand for ineligible CENVAT credit on service tax paid on common input services attributable to trading activity along with the penalty and interest.
N. Viswanathan, the counsel for the assessee contended that the department has not considered the application of eligibility for credit in terms of Rule 6(5) of CENVATCredit Rules,2004, and as per this provision, the assessee was eligible to avail credit on certain services though they are used commonly for exempted and taxable services. Further, the demand has been made not based on the proportionate credit regarding trading but based on the entire input credit availed which was against the provisions of the law.
Sridevi Tritula, the counsel for the department contended that the amendment by adding Explanation to Rules 2(e) of the CENVAT Credit Rules was introduced with effect from 1.4.2011 only, trading being neither a service nor manufacturing activity, the assessee cannot avail credit of services used for trading activity. During the disputed period, the assessee had availed credit on common input services used for trading as well as manufacturing activity.
Sulekha Beevi (Judicial) held that there are no grounds to invoke the extended period of limitation. However, part of the demand would fall within the normal period and the same had to be quantified.
Also held that the impugned order was modified to the extent of setting aside the demand for the extended period and remanding the matter to the adjudicating authority for the limited purpose of re quantifying the demand for the normal period. All the penalties imposed are quashed.
Sanjiv Srivastava (Technical) held that an extended period of limitation as held by the Commissioner should be invokable in the present case for demanding reversal of CENVAT credit in respect of trading activities.
D.M Mishra (Judicial) held that credit availed on common inputs services attributable to the trading activity can be recoverable for the period before 01.4.2009 invoking an extended period of limitation.
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