It i s a s e t t l e d p o s i t i o n o f l a w a c c e p t e d a c r o s s t h e l e n g t h a n d b r e a d t h o f t h e commercial world in the country as well as the Department that nonservice is not tobe considered for the purpose

of computing the eligible cenvat credit on the commoninput services. The said settled position was unsettled by the decision of the Tribunali n t h e c a s e o f M/s Orion Appliances Ltd. Vs CST, Ahmedabad [2010-TIOL-752-CESTAT-AHM] The fact of the case is that the appellant is engaged in providing maintenance andrepair services and commissioning and installation service and also carrying outcertain trading activity. In the financial year 2004-05 they have taken and utilizedt h e e n t i r e c e n v a t c r e d i t o n t h e c o m m o n i n p u t s e r v i c e s w h i c h a r e u s e d b o t h f o r providing taxable service as also for the trading activity.Tribunal held that trading activity is not an exempted service and hence Rule 6 of theCenvat Credit Rules, 2004 (CCR) does not apply. There is no provision in the CCR tocover such situations. Accordingly the only obvious solution which is legally correct ist o e n s u r e t h a t o n c e i n a q u a r t e r o r o n c e i n a s i x m o n t h s , t h e q u a n t u m o f i n p u t service tax credit attributed to trading activities according to standard accountingprinciples is reversed.L e t u s examine whether the above decision of the Hon'ble Tribunal u n s e t t l e t h e settled position of law or not.As per Cenvat Credit Rules, 2004 (CCR), the method of taking credit on the commoni n p u t s e r v i c e s u s e d f o r p r o v i d i n g t a x a b l e o u t p u t s e r v i c e s a n d e x e m p t e d o u t p u t services are specified in Rule 6 of the CCR. As per Rule 6(1) of the CCR, the CENVATc r e d i t s h a l l n o t b e a l l o w e d o n s u c h q u a n t i t y o f i n p u t s e r v i c e w h i c h i s u s e d f o r provision of exempted services, except in the circumstances mentioned in subrule(2).Rule 6(2) speaks about maintenance of separate accounts for input service meant foruse in providing output service and to take CENVAT credit only on that quantity of input service which is intended for use in providing output service on which servicetax is payable.As per Rule 6(3) of the CCR the service provider has the option not to follow thea b o v e p r o c e d u r e a n d f o l l o w t h e p r o c e d u r e t o p a y a n a m o u n t e q u i v a l e n t t o t h e CENVAT credit attributable to input services used for provision of exempted servicessubject to the conditions and procedure specified in sub-rule (3A). It is also clarifiedthat the above procedure applies to common input services and credit shall not beallowed on input services used exclusively for the provision of exempted service.In view of the above it is very clear that only in the case where the common inputs e r v i c e s a r e used for providing taxable output services and exempted o u t p u t services, the proportionate credit attributable to exempted output service is to bereversed. Exempted output service has been defined in Rule 2(e) of the CCR to meanexempt service and non-taxable service. It does not cover those business activitieswhich are non-service. It is very clear that the trading activity is a nonservice and isnot covered under the definition of exempted service. Hence the procedureprescribed under Rule 6 of CCR does not cover Cenvat credit attributable to non-service, i.e., trading activity where the input service is commonly used for providingtaxable service as well as trading activity. Accordingly credit attributable to non-service cannot be denied by taking recourse to Rule 6 of the CCR.The eligibility to Cenvat credit is governed by Rule 3 of the CCR. As per Rule 3(1) of the CCR, the provider of output services is allowed to take credit on the service taxpaid on any input service received by them.

Input service' is defined in Rule 2(1) of the CCR to mean any service,(i) used by a provider of taxable service for providing an output service; or (ii) used by the manufacturer, whether directly or indirectly, in or in relation to them a n u f a c t u r e o f f i n a l p r o d u c t s a n d c l e a r a n c e o f f i n a l p r o d u c t s , u p t o t h e p l a c e o f removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating tos u c h f a c t o r y o r p r e m i s e s , a d v e r t i s e m e n t o r s a l e s p r o m o t i o n , market research,storage upto the place of removal, procurement of i n p u t s , a c t i v i t i e s r e l a t i n g t o business, such as accounting, auditing, financing, recruitment and quality control,c o a c h i n g a n d t r a i n i n g , c o m p u t e r n e t w o r k i n g , c r e d i t r a t i n g , s h a r e r e g i s t r y , a n d security, inward transportation of inputs or capital goods and outward transportationupto the place of removal; In view of the above definition of the input service, it may be stated that the saidd e f i n i t i o n i s v e r y b r o a d a n d i n c l u d e n o t o n l y t h o s e s e r v i c e s w h i c h a r e u s e d f o r providing output services but also covers such services which are treated as activitiesrelating to business . Hence any services which are used for business would qualifyas input service' whether the said service is used for providing output service or not.In this respect it may be pertinent to mention that the Larger Bench of the Tribunalin the case of ABB Ltd Versus CCE &ST., Bangalore (2009-TIOL-830-CESTAT-BANG-LB) hasheld that the expression business is a term of vide import as held by the ApexC o u r t i n Mazgaon Dock Ltd. v. Commissioner of Income-tax and Excess P r o f i t s Tax (2002-TIOL-613-SC-IT) . Further the definition of Input Services' uses theexpression activities relating to business . The word relating' further widens thescope of the expression activities relating to business. There is no qualification tothe word activities there is no restriction that the activities relating to business should be relating to only the main activities or essential activities and, therefore,all other activity relating to business falls within the definition of input service ..the expression such as is purely illustrative. The expression means for example orof a kind that (Concise Oxford Dictionary). It has been defined in the ChambersDictionary as for example. The usage of the words such as after the expression a c t i v i t i e s r e l a t i n g t o b u s i n e s s i n t h e i n c l u s i v e p a r t o f t h e d e f i n i t i o n , t h e r e f o r e , further supports our view that the definition of the term input service would not berestricted to services specified thereafter the word include is generally used toenlarge the meaning of the preceding words and it is by way of extension, and notr e s t r i c t i o n . S i m i l a r v i e w h a s b e e n t a k e n b y t h e L a r g e r B e n c h o f t h e T r i b u n a l in Commissioner of Central Excise v. GTC Industries Ltd. (2008-TIOL-1634-CESTAT-MUM-LB) , relying on the Apex Court's decision in Reserve Bank of India v. Peerless General

Finance & Investment Co. Ltd. (2002-TIOL-670-SC-MISC) .As regards the contention of the value of the input service forming a part of the valueof output/ output service, the Hon'ble Larger Bench of the Tribunal in the case of ABB(supra) held that the valuation and cenvat credit are independent of each other andhave no relevance to each other. Interpretation of input service cannot fluctuatewith change in definition of value under Section 4 or Section 4A of Central ExciseAct, 1944 or tariff value under Section 3 ibid.Hence it is clear from a conjunctive reading of Rule 3(1) and Rule 2(l) of CCR thatthe cenvat credit on all the input service is allowed whether the same is used forproviding taxable output service or exempted output service or non-service. The onlyr e s t r i c t i o n o n t a k i n g c r e d i t i s s p e c i f i e d i n R u l e 6 o f C C R t o t h e e x t e n t o f c r e d i t attributable to exempt service (which includes non-taxable service). Hence it is cleart h a t t h e r e i s n o restriction either express or implied in the CCR to take c r e d i t attributable to non-service (i.e., trading activity).Hon'ble Tribunal in the Orion Appliances case (supra) has held that trading activity isnot an exempted service and hence Rule 6 of the Cenvat Credit Rules, 2004 (CCR)does not apply. There is no provision in the CCR to cover such situations. Accordinglythe only obvious solution which is legally correct is to ensure that once in a quarteror once in a six months, the quantum of input service tax credit attributed to tradingactivities according to standard accounting principles is reversed.Hence the Hon'ble Tribunal has admitted that Rule 6 of the CCR does not apply andt h e r e i s n o p r o v i s i o n i n C C R t o cover such situation. H o w e v e r , t h e H o n ' b l e Tribunal has not examined the purport of law and has not considered thelegal position that a benefit which has been given to the service provider inCCR cannot be taken away without the authority of law. As explained above,there is no express or implied restriction on the service provider to take attributablecenvat credit on input services used in trading activity. Hence it is not legally correctto state that the quantum of input service tax credit attributed to trading activitiesaccording to standard accounting principles is to be reversed.In this connection it may be pertinent to mention that it is a settled position of lawthat if there is any ambiguity in law or if two views are possible the view which isfavourable to the assessee should be taken. Hence the Orion Appliances case (supra)warrants a review by the higher judicial forum.