2011 (5) TMI 802 - AT - Service Tax

Appellant wins CENVAT credit case for waste transportation service tax denial

The judge ruled in favor of the appellant, holding that the denial of CENVAT credit on service tax paid for waste transportation during manufacturing was ... CENVAT credit entitlement - service tax on transportation and clearance of waste - during the course of business of manufacturing - cost of production - precedent: CCE Nagpur v. Ultratech Cement Ltd. CENVAT credit entitlement - service tax on transportation and clearance of waste - during the course of business of manufacturing - cost of production - precedent: CCE Nagpur v. Ultratech Cement Ltd. - Whether CENVAT credit of service tax paid on transportation and clearance of waste generated during manufacture is admissible to the appellants - HELD THAT: - The Tribunal held that transportation and clearance of waste generated in the factory while manufacturing the finished product constituted services availed during the course of the appellants' manufacturing business. Applying the principle, as enunciated by the Bombay High Court in CCE Nagpur v. Ultratech Cement Ltd. , that where a service is availed in the course of manufacturing and its cost forms part of the cost of production the assessee is entitled to CENVAT credit, the Tribunal found the appellants entitled to the credit. The contrary contention that clearance and transportation are post-manufacturing activities was rejected on the facts, since the waste removal was integral to the manufacturing process.The appellants are entitled to avail CENVAT credit of service tax paid on transportation and clearance of waste generated during manufacture; the impugned order is set aside and the appeal is allowed with consequential relief.Final Conclusion: The appeal succeeds: CENVAT credit on service tax paid for transportation and clearance of manufacturing waste is allowed, the impugned order is set aside and consequential relief granted. Issues:Denial of CENVAT credit on service tax paid for transportation and clearance of waste generated during manufacturing.Analysis:The appellant, engaged in bulk drug manufacturing, appealed against the denial of CENVAT credit on service tax paid for waste transportation. The waste chemicals generated during manufacturing were transported to a treatment plant, with the appellant availing transportation services and paying service tax. Both lower authorities denied the CENVAT credit, leading to the appeal. The advocate for the appellant argued that since waste transportation was part of their manufacturing business, they were entitled to the credit, citing a Bombay High Court decision. The respondent contended that waste clearance was a post-manufacturing activity, thus not eligible for CENVAT credit.Upon hearing both sides, the judge analyzed whether the appellant was entitled to CENVAT credit for service tax paid on waste transportation and clearance during manufacturing. Referring to the Bombay High Court decision, it was established that if a service is part of the manufacturing business and its cost contributes to production costs, CENVAT credit is permissible. In this case, waste transportation and clearance were integral to the manufacturing process, making the appellant eligible for the credit. Consequently, the judge set aside the impugned order and allowed the appeal with any consequential relief.