Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

Comments

Print   |    |  Comment

PJ/Case Laws/2012-13/1295

Whether Credit Reversal required when the input services used for clearance of dutiable goods and trading of goods?
Case:-M/s MICRO LABS LTD Versus COMMISSIONER OF CENTRAL EXCISE, BANGALORE
 
Citation:-2012-TIOL-1451-CESTAT-BANG
 

Brief Facts:-The Appellant filed appeal for waiver and stay of demands raised by department. Appellant is registered under input service distributor and distributing input services to various manufacturing units and taken Cenvat Credit on the same. Appellant is also buying similar goods from third party and marketing/trading the same. Department said that, Trading activity is as good as exempted service and hence, the assessee should have maintained separate books of accounts related to the input services used for clearance of dutiable goods and those for trading activities. As the appellant is not maintaining separate books of accounts, department issued show cause notices to each manufacturing units for recovery of cenvat credit taken on input services used in relation to the trading activity. Further, extended period of limitation was also invoked under the proviso to section 11A (1) of the Central Excise Act. The Show Cause Notices also proposed penalties on the company (Input Service Distributor) and the manufacturing companies. The appellate authority affirmed all the orders-in-original. Hence the present appeals and the connected stay applications.
 
Appellant’s Contention:- The Appellant submit that trading activity was not a taxable service and hence not liable to be treated as exempted service. Therefore, the entire credit distributed by the company's Bangalore office was utilized by the eight manufacturing units of the company for payment of duty on pharmaceutical formulations and so no part of the credit was liable to be denied to the manufacturing units.
 
Respondent’s Contention:-The Respondent submit that it was not open to the sBangalore office of the company to distribute input services to the various units which inter alia were engaged in trading activity also. In this connection, support is claimed from Orion Appliance Ltd. Vs. Commissioner of Service Tax Ahmedabad and also submit that trading activity has ever been an "exempted service" for purposes of the CENVAT Credit Rules 2004 as clarified by the explanation to Rule 2(e). It is clarificatory and hence retrospective in operation. Therefore, all the eight manufacturing units of the company ought to have maintained separate accounts in respect of the common input services.
 
Reasoning of Judgement:-We have considered submissions and it is found that it is not in dispute that the Bangalore office of the company was a registered input service distributor and it distributed input services under cover of valid invoices to the various manufacturing units, eight in number, which were engaged in the manufacture of pharmaceutical formulations (dutiable final products). Further, this case is not related with the fact that any duty or tax was payable on the trading activity. The entire credit was utilized for payment of duty of excise on the dutiable final products. The input service distributor cannot be found fault with on the basis of any commissions or omissions of the manufacturing units and manufacturing units were lawfully utilizing the entire credit for payment of duty on the dutiable final products. Trading activity was not one of the taxable services under Section 65 of the Finance Act 1994 therefore, there was no question of payment of service tax on that activity by the manufacturing units of the company. The manufacturing units could not have been expected to maintain separate accounts. The show-cause notices appear to disclose self-contradictory stand of the revenue with reference to the fact of this case. Apart from the above, the appellant also seems to have a good case on limitation against the impugned demands. In the result, there will be waiver of pre-deposit and stay of recovery in respect of the adjudged dues.
 
Decision:-Appeal allowed.
 
Comment:It is observed from this case that Rule 6 of the Cenvat Credit Rules, 2004 regarding maintenance of separate records of common inputs used in the manufacture of dutiable and exempted goods cannot be made applicable in respect of mere trading of goods. Therefore, full Cenvat Credit is admissible when common input services are used in clearance of dutiable goods and traded goods.
However, this position has changed from April 2011. Trading activity is treated as exempted service after the same. Even the negative list contains the trading activity. The definition of “exempted service” says that all the items listed in negative list will be treated as exempted service. In view of this position of law the assessee has to reverse the cenvat credit henceforth.
 
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