Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *   CBIC issues draft rules for Customs valuation *  Top Headlines: Threshold for Benami deals, green bond investors, and more *  Govt aims 1-hour clearance for goods at all ports *  Exporters Allowed To Use RoDTEP, RoSCTL Scrips To Pay Customs Duty, Transfer Them; Rules Amended *  Millions of labourers to be affected by brick producers’ strike over hike in GST, coal rates *  Inauguration of ‘kendriya GST parisar’ *  Transporter can seek Release of Conveyance alone, not Goods under GST Act: Madras HC *  GST: Quoting of DIN Mandatory for Responding to Notice, Govt Modifies Portal *  Firms can soon file claims for GST credits of ?400 cr *  CBIC issues modalities for filing transitional credit under GST. *  Mumbai: Man creates 36 fake GST firms, arrested for input tax credit fraud of Rs 23 cr *  Report to restructure Commerce Ministry under study; idea is to set up trade promotion body: Goyal *  Firms can soon file claims for GST credits of ?400 cr *  Gambling Alert! Govt May Levy Up To 28% GST; UP, Bengal Back Move *  EPFO backs raising retirement age to ease pressure on pension funds *  India Moving Up Power Scale, Set to Become Third Largest Economy By 2030 *  Airfares Get Expensive: What Changes for Flyers From Today? *  IRCTC Latest News: Passengers to Pay More For Cancelling Confirmed Rail Tickets Soon. *  IBC prevails over Customs Act, says Supreme Court. *  As GST enters sixth year, a time for evaluation and reassessment *  There’s GST on daily essentials as Centre needs money to buy MLAs: Arvind Kejriwal *  Now, GST on cancellation of confirmed train tickets, hotel bookings *  GST kitty for top States could rise 20% in FY23, says Crisil *  French customs officials seize another cargo vessel over Russia sanctions *  TradeLens builds on Asia momentum with Pakistan Customs deal *  Hike tax on tobacco, reduce affordability & increase revenue: Civil society organizations to GST council *  Bihar: ?10 crore tax evasion on tobacco products detected in raids *  Centre failed on GST, COVID; would it be anti-national? Rajan on Infosys row *  Service Tax not Chargeable on Income Tax TDS portion paid by recipient: CESTAT grants relief to TVS *  Foreign portfolio investors make net investment of Rs 7575cr in Sep so far
Subject News *  Run-up to Budget: Monetary threshold for GST offences may rise to Rs 25 cr *   GST (Tax) E-invoice Must For Businesses With Over Rs 5 Crore Annual Turnover *   Both Central GST and excise duty can be imposed on tobacco, rules Karnataka high court *   CBIC Issues Clarification On Extended Timelines For GST Compliance *   CBIC Issues Clarification On Extended Timelines For GST Compliance *  Budget 2023- 9.6 crore gas connections *  GST: Tamil Nadu Issues Instructions for Assessment and Adjudication Proceedings *  GST: CBIC Extends Last Date for filing of ITC *  GST collection in September surpasses Rs 1.4 lakh crore for straight seventh time *  Dollar smuggling case: Customs chargesheet names M Sivasankar as key conspirator. *  Hike in GST rates fuels inflation *  Assam: CBI arrests GST commissioner in Guwahati *  GST fraud worth ?824cr by 15 insurance Cos detected *  India proposes 15% customs duties on 22 items imported from UK *  Decriminalising certain offences under GST on cards *  Surge in GST collections more due to higher inflation: India Ratings *  MNRE Notifies BCD and Hike in GST Rates as ‘Change in Law’ Events But With a Condition | Mercom India *   Solar projects awarded before customs duty change allowed cost pass-through *  Rajasthan High Court Dismisses Writ Petitions Challenging Levy Of GST On Royalty *   GST revenue in September likely at Rs 1.45 lakh crore *  Govt working on decriminalising certain offences under GST, lower compounding charge *  Building an institution like GST Council takes time, trashing is easy: Sitharaman *  GST collections in Sept may touch ?1.5 lakh crore *  KTR asks Centre to withdraw GST on handlooms *  After Gameskraft, More Online Gaming Startups To Receive GST Tax Claims *  Madras HC: AAR Application Filed Under VAT Does Not Survive After GST Enactment *  Threshold for criminal offences under GST law may be raised *  Bengaluru: Gaming company faces biggest GST notice of Rs 21,000 crore *  CBIC clarifies Classification of Cranes for GST, Customs Duty *  Customs seize gold hidden in bicycle in Kerala airport  

Comments

Print   |    |  Comment

PJ/CASE LAW/2015-16/2604

Whether Cenvat needs to be reversed proportionately of the GTA services when used in both taxable and exempted goods and services?

Case:- APOLLO TYRES LTD. Versus COMMISSIONER OF C. EX., CUSTOMS & S.T., CALICUT
 
Citation:- 2014 (36) S.T.R. 835 (Tri. - Bang.)

 
Brief facts:- Appellant is a manufacturer of tyres. During the period in dispute, the appellant was clearing tubes and flaps to Original Equipment Manufacturers (OEMs) and dealers. Even though tubes and flapswere cleared under separate invoices, tubes and flaps were inserted into tyres at the time of clearance. In respect of clearance to Motor Vehicles Manufactures, Cenvat credit was taken of the duty already paid on tubes and flaps. As regards the tubes and flaps cleared to the appellant in the replacement market, no Cenvat credit of duties paid by the supplier for tubes and flaps was taken by the appellant. Proceedings were initiated on the ground that the appellant should have maintained separate accounts since the sale of tubes and flaps to the dealers in the replacement market amounts to trading and since the appellant did not maintain separate accounts of input services, namely GTA service utilized for tubes and flaps and tyres partly, the appellant is required to pay 5%/10% of value of tubes and flaps cleared as trading activity. As a result of the proceedings initiated, the impugned order has been passed whereby demand of Rs. 49,00,82,011/- for the period from August, 2006 to March, 2011 in terms of Rule 6(3) of Cenvat credit Rules, 2004 with interest. Penalty equal to the duty demanded has also been imposed.
 
Appellant’s contention:- Learned counsel for the appellant submitted that trading activity cannot be considered as a service at all. For this purpose, he relied upon the decision of the Tribunal in the case of Orion Appliances Ltd. v. Commissioner of Service Tax, Ahmedabad [2010 (19)S.T.R.205 (Tri.-Ahmd.)]. He also submitted that trading can be never considered as an exempted service. For this purpose, he drew our attention to the definition of ‘exempted services’. During the relevant period, the ‘exempted service’ means taxable service which is exempted from whole of the tax leviable thereon and includes service on which no service tax is leviable under Section 66 of the Finance Act, 1994. He submitted that when trading itself is not at all a service, it cannot be considered as an exempted service. He submitted that with effect from 1-4-2011, the definition of ‘exempted service’ was amended and it was specifically clarified that exempted service would include trading. Therefore, during the relevant period, the trading activity of the appellant could not have been considered as a service at all and therefore, the provisions of Rule 6(3) of the Cenvat Credit Rules are not at all applicable to the case of the appellant. Further, he also submitted that Revenue has demanded the Service Tax on the value of traded goods. He submitted that for demanding an amount as contemplated under Rule 6(3) of the Cenvat Credit Rules, 2004, the value of traded goods could not have been taken.
 
Respondent’s contention:- learned A.R. relied on the decision of the Tribunal in the case of Metro Shoes Pvt. Ltd. v. Commissioner of Central Excise, Mumbai-I [2008 (10)S.T.R.382 (Tri.-Mumbai)] and submitted that the appellant is not eligible for proportionate credit in respect of the services utilized for trading activities.
 
Reasoning of judgment:- They find that the decision in the case of Metro Shoes Pvt. Ltd. (supra) also is on the same line as in the case of Orion Appliances Ltd. (supra). They have considered the submissions made by both sides in detail. They find that even though it was the submission of the appellant that the entire demand cannot be sustained, yet, they find that the decisions of the Tribunal in the case of Orion Appliances Ltd. (supra) and Metro Shoes Pvt. Ltd. (supra) took a view that proportionate credit attributable to trading arrived at in accordance with Standard Accounting Principles is required to be reversed. After this was proposed by the Bench, learned Counsel even though submitted that this was not the ground on which show cause notice was issued, yet, agreed that in view of the decisions of the Tribunal, proportionate credit may be directed to be reversed without accepting that his stand is wrong. Further, he submitted that extended period could not have been invoked. This is because of the appellant has written a letter to the department as early as 12-4-2004 giving details of activity and explaining the process. The letter explains that the tubes and flaps can be treated as accessories of tyres and value of tubes and flaps have not been included in the price of tyres. It is also stated in the letter that appellants are not availing Cenvat credit on bought out items meant for replacement in the market. Further, he also submitted that return filed by them indicated that the credit has been taken on GTA service and this would show that there was no attempt to suppress facts or make any mis-declaration. If the GTA service credit entry is reflected in return and the appellant have specifically written about their trading activity, it cannot be said that they have suppressed the facts. As regards mis-declaration, having regard to the size of the appellant and the fact that the appellant never took Cenvat credit of Service Tax attributable to GTA service for inward transportation of tubes and flaps (as stated by learned Counsel in reply to query from the Bench), the fact that tubes and flaps were inserted into tyres and the weight of tubes and flaps compared to the weight of tyres is comparatively less, it cannot be said that there was mis-declaration with intention to evade duty. Therefore, we consider that the submissions made by learned Counsel that the demand should be limited to normal period is valid and has to be accepted. In such a situation, obviously, the question of imposition of penalty does not arise.
In view of the above discussion, the appellant is directed to proportionately reverse the Cenvat credit attributable to service tax paid on GTA service utilized in respect of tubes and flaps inserted into tyres in accordance with standard accounting principles within the normal period of limitation. The appeal is decided in above terms.
 
Decision:- Appeal disposed off.
 
Comment:- The analogy of the case is that appellant is directed to proportionately reverse the Cenvat credit attributable to service tax paid on GTA service utilized in respect of tubes and flaps inserted into tyres in accordance with standard accounting principles within the normal period of limitation. Return filed by them indicated that the credit has been taken on GTA service and this would show that there was no attempt to suppress facts or make any mis-declaration.

Prepared by:- Monika Tak

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com