2025-VIL-1727-CESTAT-MUM-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - High Sea sales, Proportionate reversal of Cenvat credit, Taxability of trading activities, Invocation of extended period - Appellant availed Cenvat credit on various input services and to the extent of high sea sales, which the department treated as an exempted trading activity - Whether trading activities can be considered as an exempted service, requiring proportionate reversal of Cenvat credit under Rule 6(3)(ii) of the Cenvat Credit Rules, 2004 – HELD - Trading, being a pure sale of goods, cannot be considered as a service. The definition of "service" under Section 65B(44) of the Finance Act, 1994 specifically excludes such transfer, delivery or supply of goods which is deemed to be a sale within the meaning of Article 366(29A) of the Constitution. Several judicial precedents, including the Supreme Court's judgment in the Ganon Dunkerley case, have established that sale of goods is distinct from the provision of services, and the two cannot be equated. Therefore, the proportionate reversal of Cenvat credit under Rule 6(3)(ii) would not be applicable to the appellant's trading activities – Further, the appellant had intimated the department about the reversal of credit in 2015, and the department did not dispute the same. The extended period of limitation can only be invoked if there is a finding that the escaped duty was a result of the assessee's deception, which was not the case here - the order of the Commissioner (Appeals) is set aside by holding that the trading activities of the appellant cannot be considered as an exempted service, and the department was not justified in invoking the extended period of limitation to demand the reversal of Cenvat credit – The appeal is allowed
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