SUPERPACKS Vs. COMMISSIONER OF CENTRAL EXCISE, BANGALORE

JUDGEMENT

(1.) THESE applications seek waiver of pre -deposit and stay of recovery in respect of duty and penalty amounts demanded by the lower authorities. In one of the appeals, the demand of duty is Rs. 3,34,869/ - and, in the other appeal, the demand of duty is Rs. 10,30,025/ -. Both the demands arise out of denial of Cenvat credit on certain services which were found to have been used by the appellant for both manufacturing and trading activities during the material period. Learned counsel for the appellant submits that services like telephone services, management consultancy services, renting of immovable property and professional services were used in relation to both manufacturing of goods and trading of goods. It is submitted that the appellant, during the material period, manufactured excisable goods and also carried on trading in identical goods and that the said services were used in relation to both the activities. It is submitted that apportionment of the common input service between manufacturing and trading activities was not possible and hence there was no question of maintaining separate accounts. It is further submitted that there is no recovery mechanism for recovery of Cenvat credit availed on any common input service used in relation to trading activity and, therefore, the demands under challenge are not enforceable. Learned counsel has, in this connection, claimed support from the decision of this Tribunal in Metro Shoes Pvt. Ltd. v. C.C.E., Mumbai - 2008 (10) S.T.R. 382 (Tri. -Mumbai) wherein it was held that the credit availed on services which were directly attributable to trading activity was not admissible as input service credit. Learned counsel has also referred to an explanation added to Rule 2(e) of the Cenvat Credit Rules, 2004, which is to the effect that, for purposes of the definition of exempted services, trading activity also would be deemed to be exempted service. This submission aims at eligibility of the appellant for availing Cenvat credit on common input services. In respect of one of the appeals, learned counsel has also pleaded time -bar against a part of the demand.

(2.) WE have heard learned DR also, who has opposed the present application on the strength of the findings recorded by the original and first appellate authorities.

(3.) AFTER considering the submissions, we are of the view that the impugned demand is not supported by any legal provision. In each case, the amount of duty is found to have been estimated on the basis of a formula based on turnover of manufacturing activity and trading activity. It has been assumed that 40% of the Cenvat credit on common input services has been utilized for trading activity. The demand is based on this formula. The DR has not shown us any supporting legal provision. Hence, prima facie, there is substance in the submission of the learned counsel that the demand of duty is bad for want of machinery provision for recovery. In this view of the matter, we grant waiver of pre -deposit and stay of recovery in respect of the amounts adjudged against the appellant.