CESTAT remands Reversal of Proportionate Cenvat Credits w.r.t. Trading Activities for Reconsideration

CESTAT remanded a CENVAT credit reversal case, directing reconsideration of proportionate credit denial related to trading activities. The tribunal found the original order mechanically disallowed 30% credit without examining actual input service usage patterns. The case involved a manufacturer-trader claiming ₹2.8 crore credits where only 15% turnover came from exempted trading. CESTAT emphasized Rule 6 of CCR 2004 requires factual analysis of credit attribution, not arbitrary percentages. The ruling mandates proper documentation of credit allocation methods, benefiting businesses with mixed taxable/exempt activities. Tax authorities must now conduct granular examinations of service consumption rather than apply blanket disallowances in such dual-activity scenarios.