No demand of 6/7% of Value of Trading Activity will sustain on Reversal of Cenvat Credit for Common Input Service and Payment of Interest [Read Order]

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) comprising Ramesh Nair, Judicial Member observed that no demand of 6/7% of value of trading activity will sustain on reversal of cenvat credit for common input service and payment of interest.

The issue involved in the present case is that whether the appellant, Hil Limited,  is liable to pay 6/7% of the value of the traded goods considering the same as exempted goods when cenvat credit was availed on the common input service attributed to the dutiable goods as well as exempted service i.e. trading activity, in this case, when the appellant was admittedly reversing the proportionate credit attributed to the trading activity along with interest.

Deepak Kumar Jain, learned Chartered Accountant appearing on behalf of the appellant submits that the demand of 6/7% was raised by the department on the ground that the appellant have not opted for any of the option before any stage therefore, they are liable to pay 6/7% in terms of Rule 6(3).

The Counsel further submitted that the appellant has reversed the cenvat credit in respect of common input service attributed to the exempted service i.e. trading activity and have also paid the interest from the date of taking credit till the date of reversal therefore, as per one of the options provided under Rule 6(3), the appellant cannot be demanded the amount of 6/7% of the value of the exempted service.

The Tribunal noted that merely because the appellant at the relevant time did not opt for any of the option, revenue cannot impose upon the appellant a particular option i.e. payment of 6/7% of the value of the goods/service. On this issue much water has flown as per the various judgments cited by the appellant.

“Therefore, once it is admitted fact that the appellant have reversed the cenvat credit in respect of common input service attributed to the trading activity and also paid the interest thereon at the relevant time, no demand of 6/7% of the value of the trading activity will sustain” the Tribunal concluded.

To Read the full text of the Order CLICK HERE

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