Relief to Thyssenkrup Industries: CESTAT quashes Service Tax Demand on Payment of Cenvat Credit to Trading Activities [Read Order]

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed the service tax demand on payment of Cenvat Credit to trading activities, thereby granting a major relief to M/s. ThyssenKrupp Industries India Pvt Ltd, the appellant.

The appellant is engaged in the manufacture of excisable goods viz. machinery/parts/equipment of sugar plant, cement plant, boilers and bulk material handling systems, falling under Chapter 84 of the First Schedule to the Central Excise Tariff Act 1985.

The appellant undertakes design, engineering, manufacture, supply, transport and erection & commissioning activities of various projects. They supply/sale duty-paid / non-duty paid materials, components, which are either cleared from their manufacturing units or from the premises of job workers/ subcontractors.

A show cause notice was issued on the ground that the appellant did not maintain separate accounts input services used in trading activities, as required under Rule 9 (5) & (6) of the Cenvat Credit Rules, 2004 and it was alleged that the appellant should have not taken the credit of the input services or that portion of the input services which have been used in relation to the trading.

Shailesh P Seth, Advocate appeared for the appellant and Amrendra Kumar Jha, DeputyCommissioner, Authorized Representative appeared for the revenue.

After amendment in the CENVAT Credit Rules, 2004 w.e.f 01-04-2011, trading activities have been treated as exempted service. No service tax was leviable prior to or is leviable after the said amendment in the Rule, under Section 66 of the Finance Act, 1994 read with any given exemption. The services or portion of the input services, availed for providing output services, but utilized in relation to trading activities, appeared to be not qualifying as input service, and therefore the credit availed to that extent is not admissible.

The Tribunal of Sanjiv Srivastava, Member (Technical) and Dr.Suvendu Kumar Pati, Member (Judicial) observed that “Undisputedly and admittedly appellant has reversed/ paid the amount of the CENVAT Credit attributable to trading activities as per the prescribed formula in Rule 6(3A) of Cenvat Credit Rules, 2004 as interpreted in the above referred orders. We do not find any merits in the impugned order on the merits of demand. As the demand is set aside there can be no question for interest or penalty.”

To Read the full text of the Order CLICK HERE

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