Pratham Motors Pvt. Ltd. Vs Commissioner of Service Tax (CESTAT Bangalore)
The appeal was filed against Order-in-Original No. 42/2014 dated 05.09.2014 passed by the Commissioner of Service Tax, Bangalore. The appellant, a dealer of Maruti cars, was engaged in providing authorised servicing of Maruti vehicles and also carried on the trading activity of selling Maruti cars. While the servicing activity was taxable, the sale of cars was exempt from service tax. Since the appellant had availed Cenvat credit on services used for both taxable and non-taxable activities, a show-cause notice was issued demanding reversal of Cenvat credit attributable to exempted services. The Commissioner confirmed a demand of ₹1,65,59,881 along with interest and imposed penalties under Sections 77 and 78 of the Finance Act, 1994.
The appellant argued that the Cenvat Credit Rules, 2004 were amended by Notification No. 03/2011-CE (NT) dated 01.03.2011 by inserting an explanation that exempted services include trading. According to the appellant, trading was not a service prior to the amendment and therefore Cenvat credit could not be reversed by treating trading as an exempted service. It was also contended that the amendment was prospective and could not be applied retrospectively. The appellant relied on various judicial decisions in support of this contention.
