CESTAT allows Proportionate Credit Reversal, Questions Additional Tax on Trading

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) allowed proportionate credit reversal and questioned additional tax on trading. The case involved a company that had availed CENVAT credit on inputs used in both manufacturing and trading activities. The Revenue demanded additional tax on the trading activities, arguing that the company should reverse the entire credit. However, the tribunal found that the company was entitled to proportionate credit reversal based on the actual use of inputs in manufacturing and trading. The tribunal questioned the additional tax demand, emphasizing that only the proportionate credit should be reversed. This ruling clarifies the conditions for availing CENVAT credit and protects taxpayers from unjust demands for additional tax. The decision provides guidance on the treatment of inputs used in mixed activities and ensures fair treatment for businesses.