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Judgment
CM. No. 13846/2013; Exemption allowed subject to all just exceptions.
The application is disposed of.
CEAC 41/2013 and C.M. No. 13845/2013
Having heard counsel for the parties, we frame the following substantial question of law:- Whether the Customs Excise and Service Tax Appellate Tribunal was right in directing the appellant to deposit the entire Cenvat credit disallowed along with interest, as a pre-condition for hearing of the appeal?
Learned counsel for the respondent waives service of notice and states that the appeal may be disposed of at the admission stage itself.
Impugned order dated 24th June, 2013 passed by the Tribunal records that there was a clarificatory amendment in Rule 2(e) of the Cenvat Credit Rules, 2004 and the Cenvat credit for exempted services cannot be set off from the service tax liability leviable and payable on services u/s 66 of the Finance Act. It has been observed that the appellant was engaged in business of sale of motor vehicles on commission basis and, therefore, Cenvat credit of service tax paid on the rent was not available.
Contention of the appellant, on the other hand, is that the premises/buildings taken on rent were not exclusively used for sale of vehicles, but were also used for vehicle servicing, repairs, etc. which were taxable service. It is stated that one of the tenanted premises in fact was being used exclusively for repairs and servicing of vehicles.
4A. Learned counsel for the appellant urges that the amendment is being wrongly interpreted as clarificatory and, therefore, retrospective. He has drawn our attention to the paragraph 3 of the impugned order wherein two conflicting judgments of the Tribunal have been noticed.
Our attention is drawn to paragraph 4 of the impugned order wherein it is mentioned that the contention relating to extended period of limitation shall be considered at the time of hearing of the appeal and was not taken into consideration and examined when directing deposit of the entire amount of Cenvat credit and interest payable thereon. It is submitted that prima facie case would include and requires examination whether or not the Revenue was entitled to invoke the extended period of limitation.
It has been submitted that the appellant had availed of Cenvat credit of Rs. 56,60,329/- and in view of the impugned order, the appellant will be required to deposit this amount plus interest @ 13% or 18% as applicable.
During the course of hearing, we have noticed the findings recorded by the adjudicating authority in order-in-original wherein in paragraphs 29 and 30 it has been stated:--
The notice has also contended that in the Show Cause Notice dated 17-1-2012 the entire Cenvat credit amounting to Rs. 53,37,318/- has been proposed to be disallowed without any sort of bifurcation between trading and taxable activity. The notice has provided the Chartered Accountant certificate dated 17-7-2012 and Balance Sheet for the year 2010-11 from where it has been observed that they have provided taxable services worth Rs. 20,56,04,413/- and traded the goods costing Rs. 3,01,84,82,861/- with the difference between the sale price and cost of goods amounting to Rs. 9,77,80,408/-.
The value of exempted services has been defined vide Explanation 1(c) below Rule 6(3D) of CCR inserted vide Notification No. 3/2011-Central Excise (N.T.) dated 1-3-2011 as amended vide Notification No. 13/2011-Central Excise (NT.) dated 31-3-2011 provides that in order to arrive at the Cenvat credit attributable to the exempted services, the trading income shall be the difference between the sale price and the cost of goods sold (determined as per the generally accepted accounting principles without including the expenses incurred towards their purchase) or ten per cent of the cost of goods sold whichever is more. Therefore the value of trading for the purpose of calculation of Cenvat credit attributable to such activity works out to Rs. 30,18,48,286/- and taxable activity will be Rs. 20,56,04,413/- and the Cenvat inadmissible works out as under:--
[Cost of sales of Trading turnover Rs. 30,18,48,286/-]/[Total turnover of exempted and dutiable services Rs. 50,74,52,699]x[Total common input credit Rs. 53,37,318] = Rs. 31,74,799/- as inadmissible credit.
Thus the CENVAT credit amounting to Rs. 31,74,799/- for the period under Show Cause Notice dated 17-1-2012 and Rs. 24,85,530/- under Show Cause Notice dated 21-10-2011 is recoverable.
It is apparent that one of the issues which will arise for consideration is whether the said formula is applicable or some other basis can be applied and is more just, fair or equitable.
Keeping in view the aforesaid position, we feel that the impugned order directing deposit of the entire demand of Rs. 56,60,329/- plus interest requires modification. It is directed that the appellant will deposit 50% of the impugned demand without interest. The said amount will be paid within a period of four weeks from today. Question of law is accordingly answered. The appeal and application for stay are disposed of. There will be no order as to costs.