ITW India Ltd Vs Commissioner of Central Tax Medchal – GST (CESTAT Hyderabad)
Conclusion: Since common input services were used for both taxable output and trading, assessee was required to reverse proportionate credit attributable to trading along with interest. Penalty under Rule 15(3) to be confined to proportionate irregular credit finally determined.
Held: Assessee-company was engaged in manufacture of excisable goods and provision of taxable services and was also involved in trading activities. Department viewed trading as an “exempted service” and alleged irregular availment and utilization of Cenvat credit on common input services, invoking Rule 6(2) and 6(3) of the Cenvat Credit Rules, 2004. Demand, interest, and equal penalty were confirmed. It was held that for the period prior to 01.04.2008, no recovery of credit was sustainable as Rule 6(3)(c) only restricted utilization of credit beyond 20% but did not require its reversal or lapse—only interest was payable on excess utilization. For the period post 01.04.2008, trading activity could not be retrospectively treated as an “exempted service” prior to 01.04.2011. However, since common input services were used for both taxable output and trading, assessee was required to reverse proportionate credit attributable to trading along with interest. Payment of 6%/8% under Rule 6(3) was not warranted where proportionate reversal with interest had been made. Non-filing of intimation under Rule 6(3A) was procedural. Extended period held invocable, as assessee was aware of trading activity and implications on credit availment. Penalty under Rule 15(3) to be confined to proportionate irregular credit finally determined.
