Tribunal allows CENVAT Credit on input services for Bombay Offshore platforms

The Tribunal ruled in favor of the appellants, allowing the admissibility of CENVAT Credit on input services utilized at Bombay Offshore platforms. Citing a precedent set by the Bombay High Court, the Tribunal held that the credit of Service Tax for services availed on the platforms cannot be disallowed for services related to dutiable exempted goods. The Tribunal granted an unconditional stay for the recoveries of the dues until the disposal of the appeals.

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Issues:
Admissibility of CENVAT Credit on input services utilized at Bombay Offshore platforms.

Detailed Analysis:

Issue: Admissibility of CENVAT Credit on input services utilized at Bombay Offshore platforms

The appellants filed stay applications against various Orders-in-Original passed by the Commissioner of Central Excise & Service Tax, Surat-I, regarding periodical demands issued. The appellants argued that they produce different petroleum products at the Hazira plant by processing raw sour gas and condensate received from Gas Wells of Bassein and Satellite fields. They highlighted that Sour gas is processed at Hazira Plant for removal of H2S and CO2 before becoming salable, emphasizing that no gas containing H2S and CO2 is sold from the processing platforms in Bassein and Satellite gas fields.

The appellants claimed CENVAT Credit on all inputs services availed at the platforms in Bombay High, which are also availed at Hazira plant through ISD documents. The show cause notices were issued alleging that crude oil and natural gas, being exempted excisable goods, do not allow CENVAT Credit for services availed at Mumbai Off-shore, as they lack nexus with the manufacturing activity.

The Orders-in-Original passed by the Commissioner were challenged on various grounds, including lack of jurisdiction, and citing a decision by the Hon'ble Bombay High Court allowing credit of services at offshore drilling platforms related to dutiable final products. The argument was made for complete waiver of duty demands and penalties imposed.

The Additional Commissioner argued that even if no sales of Sour gas occur at Bassein and Satellite platforms, the ISD certificates issued to Hazira Plant for credit contain elements related to services used in the production of exempted final products.

The Tribunal observed that the issue of admissibility of CENVAT Credit on input services at Bombay Offshore platforms was addressed by the Bombay High Court in the case of ONGC. The judgment clarified that CENVAT Credit can be availed for services used in or related to the manufacture of dutiable final products, even if the manufacturer also produces exempted goods. The Tribunal emphasized the broad definition of 'input service' and rejected the Revenue's contention that services used in the manufacture of dutiable goods at Mumbai Offshore should not qualify for credit.

Based on the law laid down by the Bombay High Court, the Tribunal ruled that the credit of Service Tax for services availed on the platforms cannot be disallowed for services related to dutiable exempted goods. The ISD certificate issued by ONGC cannot be questioned at the recipient's end, and any CENVAT Credit taken for services used in the production of exempted goods will need to be reversed.

Considering the observations and facts presented, the Tribunal granted an unconditional stay for the recoveries of the dues until the disposal of the appeals.

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