The Customs, Excise and Service Tax Appellate Tribunal, Allahabad set aside demands on two PVC pipe makers, holding that clearing inputs as such after reversing credit is not an exempted trading service.
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad has held that removing inputs “as such” after reversing the CENVAT credit taken on them, as permitted by Rule 3(5) of the CENVAT Credit Rules, 2004, is not “trading”, and does not attract the payment of 6% of value under Rule 6(3) [Tirupati Tubes v. Commissioner of Central Excise & CGST, Ghaziabad & Ors., 2026-juristway.com-3384-CESTAT(Allahabad)-CE].
K. Anpazhakan, Member (Technical), wrote the order for a Bench with P.K. Choudhary, Member (Judicial), deciding four cross‑appeals of Tirupati Tubes and Tirupati Structurals Ltd., both PVC pipe manufacturers in Ghaziabad. They sometimes cleared resin, their main raw material, without processing, to a sister unit or independent buyers, reversing the credit taken on it.
Rule 6(3) requires a manufacturer who uses common inputs or input services for dutiable and exempted goods or services, without keeping separate accounts, to pay an amount equal to a percentage of the value of the exempted output. The Department treated the removal of resin as trading, which was declared an exempted service from 1 Apr 2011.
By orders dated 31 Mar 2025, the Commissioner confirmed service tax demands of ₹3,69,49,846 and ₹1,43,82,927 for the period after 1 Apr 2011, with interest and equal penalties, but dropped the demands for earlier periods. The companies appealed against the confirmed demands, and the Revenue against the dropped portions, arguing that the 2011 amendment was clarificatory and applied retrospectively.
The Tribunal held that inputs removed as such on reversal of credit cannot be considered a trading activity, so Rule 6(3) did not apply. It followed Exide Industries Ltd. v. Commissioner of CGST & Central Excise, Salem (Final Order No. 40064 of 2025), and noted that the Supreme Court in Chandrapur Magnet Wires P. Ltd. v. Collector of C. Ex. had expressed a similar view.
On the Revenue’s appeals, the Tribunal noted that trading became an exempted service only from 1 Apr 2011, so the question of treating it as exempted for earlier periods did not arise, and in any case removal of inputs as such was not trading.
The confirmed demands, interest and penalties were set aside, the companies’ appeals were allowed, and the Revenue’s appeals were rejected.
2026-juristway.com-3384-CESTAT(Allahabad)-CE