2025-VIL-691-CESTAT-HYD-ST
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SERVICE TAX CESTAT Cases

Service Tax - Cenvat credit, Manufacture of exempted and dutiable goods, Trading, R&D units - Show cause notice alleging non-compliance with Rule 6 of the Cenvat Credit Rules in relation to credit availed for exempted goods, credit availed for R&D units, credit availed for trading activities, and irregular availment of credit on certain input services - Whether the appellant is eligible to take Cenvat credit on input services used in the manufacture of exempted goods for the period prior to 01.04.2008 - HELD - The appellant was not eligible to take Cenvat credit on input services used in the manufacture of exempted goods for the period prior to 01.04.2008 as per the mandatory provisions of Rule 6(1) of the CCR, 2004. The Rule 6(1) is mandatory and the only option available for the appellant was to pay an amount equal to 10% of the value of the exempted goods cleared. The Tribunal rejected the appellant's argument that merely reversing the credit later would amount to compliance, as there was no provision for such reversal during that period. The benefit of the retrospective amendment made in 2010 cannot be granted to the appellant as they did not comply with the conditions specified in the amendment - The demand equivalent to 10% of value of exempted goods cleared during the period 10.09.2004 to 31.03.2008 is upheld along with payment of interest and equal penalty - The demand of equivalent to 10% of the value of exempted goods, the demand on account of Cenvat credit availed on input services used in R&D units and the imposition of interest and penalty are upheld. The demand on account of trading activity is set aside. The demands related to irregular availment of Cenvat credit on certain input services are partly remanded back to the Adjudicating Authority for re-examination - The appeal is allowed partly - Whether the trading activity is an exempted service for the period prior to 01.04.2011 - HELD - The Tribunal held that the trading activity is not an exempted service for the period prior to 01.04.2011 based on the Tribunal's own past decisions in Orion Appliances Ltd, Franke Faber India Ltd and Marudhan Motors. Accordingly, the demand on account of reversal of credit attributable to trading activity is set aside - Whether the Cenvat credit availed on input services used in the standalone R&D units is eligible - HELD - The Cenvat credit availed on input services used in the standalone R&D units is not eligible as per Rule 6(1) of the CCR, as the R&D units were neither manufacturing any dutiable goods nor providing any taxable output service. The Tribunal rejected the appellant's argument that the R&D activities have a remote connection with the business - Whether the extended period of limitation can be invoked by the department - HELD - The extended period of limitation can be invoked by the department in the present case, as the appellant was aware of the provisions of Rule 6 and had taken Cenvat credit even when they were not eligible for the same, as evident from the appellant's own act of reversing the credit in certain cases. The Tribunal observed that the appellant's plea of bonafide belief based on certain judgments is not tenable, as the judgments relied upon were not relevant to the present case.
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