2016 (7) TMI 154 - AT - Service Tax

Tribunal rules in favor of M/s MSPL Ltd. on 'manufacture' & CENVAT credit eligibility

M/s MSPL Limited Versus Commissioner of Central Excise (Vice-Versa)

The Tribunal held in favor of M/s MSPL Ltd., determining that their activities constitute 'manufacture' under the Foreign Trade Policy (FTP) 2004-09. It ... Refund of accumulated input service tax Cenvat credit. - Department denied Cenvat credit mainly stating that the activity of extraction, crushing, grinding, sorting and washing of iron ore undertaken by the assessee does not amount to manufacture under Section 2(f) of the Central Excise Act and therefore, no duty is payable under Section 3 of the Central Excise Act and the goods, therefore, cannot be termed as excisable. Held that:- In this regard, there are number of decisions of the higher Judicial Fora, wherein it has been made clear that wherever exempted products are exported outside India, provisions of Rule 6(6) (v) of the Cenvat Credit Rules, 2004, will be applicable which states that provisions of Rule 6 (1) to (4) will not be applicable for the excisable goods removed without payment of duty after they are cleared for export under bond in terms of the provisions of Rule 2 of the Central Excise Rules. Eligibility of credit on input services upto the place of removal - Held that:- here exports are on FOB basis, place of removal is port and not factory gate. Therefore, in the present case, M/s MSPL Ltd. are entitled to the Cenvat credit for all the input services for bringing the goods upto the port of shipment. Revenue's appeal dismissed - Assessee's appeals accepted - Decided in favor of assessee. Issues Involved:1. Disallowance of CENVAT credit by the Commissioner.2. Eligibility of M/s MSPL Ltd. for a refund of accumulated input service tax CENVAT credit.3. Definition and scope of 'manufacture' under Section 2(f) of the Central Excise Act, 1944.4. Applicability of Rule 6 of the CENVAT Credit Rules, 2004.5. Determination of 'place of removal' for the purpose of claiming CENVAT credit on input services.Issue-Wise Detailed Analysis:1. Disallowance of CENVAT Credit:M/s MSPL Ltd. filed appeals (Nos. ST/483 to 485/2009) against Orders-in-Original Nos. 5/2009, 06/2009 & 07/2009 dated 20.3.2009, where the Commissioner disallowed CENVAT credit on various grounds, including that the activities of extraction, crushing, grinding, screening, sorting, washing, grading, etc., of iron ore do not amount to 'manufacture' under Section 2(f) of the Central Excise Act, 1944. The Commissioner also invoked Rule 6 of the CENVAT Credit Rules, 2004, stating that iron ore attracts a Nil rate of duty under Notification No. 4/2006 CE dated 1.3.2006.2. Eligibility for Refund of Accumulated Input Service Tax CENVAT Credit:The Revenue filed appeals (Nos. ST/224/2008 and ST/411/2008) against the Orders-in-Appeal Nos. 7/2008-C.E. dated 4.3.2008 and 8/2008-C.E. dated 5.3.2008, where the Commissioner (Appeals) allowed the refund of accumulated input service tax CENVAT credit to M/s MSPL Ltd. The Revenue contended that the services do not appear to be covered by the definition of 'input service' and requested a remand for re-examination.3. Definition and Scope of 'Manufacture':M/s MSPL Ltd. argued that the definition of 'manufacture' under the Foreign Trade Policy (FTP) 2004-09 includes processes such as refrigeration, re-packing, polishing, labelling, re-conditioning, repair, remaking, refurbishing, testing, calibration, re-engineering, and mining. They relied on the decisions in Tirumala Impex Vs. CCE and Hewlett Packard India Sales (P) Ltd Vs. CCE to support their claim that their activities amount to 'manufacture.'4. Applicability of Rule 6 of the CENVAT Credit Rules, 2004:M/s MSPL Ltd. contended that Rule 6 (1) to (4) of the CENVAT Credit Rules, 2004, is not applicable to iron ore manufactured and exported by a 100% EOU. They argued that the goods produced in EOU are not exempted goods and relied on several judicial decisions, including Repro India Ltd Vs. Union of India and CCE, Delhi Vs. Punjab Stainless Steel, to support their claim.5. Determination of 'Place of Removal':M/s MSPL Ltd. argued that the 'place of removal' is the port where the transaction of sale takes place, not the factory gate. They relied on CBEC Circular No. 97/8/2007 ST dated 23.8.2007 and judicial decisions, including CCE Vs. Accurate Meters Ltd. and CCE Vs. Dynamic Industries Ltd., to support their claim that the port is the place of removal for the purpose of claiming CENVAT credit on input services.Judgment:The Tribunal found that the activities undertaken by M/s MSPL Ltd. amount to 'manufacture' as per the definition under the Foreign Trade Policy (FTP) 2004-09. It also held that Rule 6 (1) to (4) of the CENVAT Credit Rules, 2004, is not applicable to iron ore exported by a 100% EOU. The Tribunal determined that the 'place of removal' is the port of shipment, not the factory gate, and M/s MSPL Ltd. is entitled to CENVAT credit for all input services used up to the port of shipment. Consequently, the appeals filed by the Revenue (Nos. ST/224/2008 & ST/411/2008) were rejected, and the appeals filed by M/s MSPL Ltd. (Nos. ST/483 to 485/2009) were allowed with consequential relief.