2026-VIL-1672-CESTAT-MUM-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Reversal of CENVAT Credit on common input services used in trading activity under Rule 6 of the CENVAT Credit Rules, 2004 - Whether the CENVAT credit reversed by the appellant, computed in accordance with Explanation I(c) to Rule 6(3A) as the difference between the sale price and the cost of goods sold, is correctly determined - Demand of CENVAT credit on account of common input services used in trading - HELD - Under Explanation I to Rule 6(3) and (3A), the value for trading is to be calculated as the difference between the sale price and the cost of goods sold, or ten per cent of the cost of goods sold, whichever is higher, and the entire sale price cannot be treated as the value for this purpose - The calculations adopted by the appellant for arriving at the value of trading and for reversing the CENVAT credit attributable to common input services used in trading are in accordance with the explanation clause, and the finding of the adjudicating authority to the contrary is contrary to the legal provision - A Co-ordinate Bench, in the appellant's own case on identical facts, has held that once proportionate credit is reversed along with interest for the delayed period, a demand computed at a percentage of the value of exempted goods/services under Rule 6(3) cannot be sustained - Trading activity was included within the definition of 'exempted services' only with effect from 01.04.2011 by the explanation inserted in Rule 2(e) of the CENVAT Credit Rules, 2004, and there is accordingly no requirement for reversal of CENVAT credit on trading activity prior to that date - The appellant has correctly determined and paid the CENVAT amount payable in respect of common input services involved in trading activity for the disputed period, under intimation to the department, and no further demand is sustainable - The impugned order confirming the CENVAT demand is set aside and the appeal is allowed
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