2026-VIL-1599-CESTAT-ALH-ST
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SERVICE TAX CESTAT Cases

Service Tax - Proportionate reversal of CENVAT Credit - Common CENVAT Credit versus Total CENVAT Credit - Rule 6(3A) of CENVAT Credit Rules - The Appellant being service provider availed CENVAT credit and opted for reversal of proportionate CENVAT credit under Rule 6(3A) by taking into consideration only common CENVAT credit instead of total CENVAT credit which included credit on inputs exclusively used for taxable output services - Department alleged that Appellant was engaged in trading activity treated as exempted service and proposed demand of Rs. 10,99,10,976 for short reversal of CENVAT credit - Whether for computing proportionate CENVAT credit for reversal under Rule 6(3A) only common CENVAT credit is to be taken into consideration or total CENVAT credit availed - HELD - It is settled jurisprudence that for computing proportionate CENVAT credit for reversal “total CENVAT Credit” for the purpose of formula under Rule 6(3A) is only total CENVAT Credit on common input service and will not include the CENVAT Credit on input or input service exclusively used for the manufacture of duty of goods. If the interpretation of the revenue is accepted, then the CENVAT Credit of part of input service even though used in the manufacture of dutiable goods, shall stands disallowed, which is not provided under any of the rule of CENVAT Credit Rules, 2004 - The Rule 6(3A) amendment is clarificatory in nature and is to be applied retrospectively. Trading is a transfer of ownership of goods by sale which is excluded from definition of service. Trading is not an exempted service under Rule 2(e) of CENVAT Credit Rules. Services excluded from definition of service under Section 65B(44) are exempt for purposes of Rule 6 not services under Section 66D – Extended period cannot be invoked merely because Revenue missed opportunity of scrutinizing returns filed by Appellant. Where items are disclosed in ST-3 returns veracity of calculation could be verified by calling information. Mere failure to disclose matter not disclosed or called for is not suppression with intent to evade. Mere non-disclosure in periodical returns does not constitute suppression warranting extended period in absence of positive act with intention to evade duty - The impugned order is set aside and the appeal is allowed
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