2023 (12) TMI 1062 - AT - Central Excise

CENVAT credit allowed on input services for captive mines distributed through ISD invoices under Rule 3

CESTAT Kolkata allowed the appeal, holding that the appellant was entitled to CENVAT credit on input services for captive mines distributed via ISD ... CENVAT Credit - eligibility to avail credit on input services relating to captive mines, which is distributed to the Appellant vide ISD invoices - HELD THAT:- It is found that both the mines as well as the manufacturing unit belongs to one legal entity i.e. SAIL, which is engaged in manufacture of Steel. The subject mines are set up primarily to serve as captive mines to manufacturing units of SAIL and thus bears an integral link to steel plants - it is observed that the input services like security service, mining service, transportation etc used by the captive mines bears a direct nexus with Appellant’s units manufacturing final products i.e. Steel. Hence, such services are very well covered within the scope of the definition of ‘input services’. Rule 3 of CCR does not mandate that for the purpose of availment of credit on input services, such services should be received within the premises where manufacture of final product takes places but only provides that services should be used in or in relation to the manufacture of final products. Thus, the Appellant is entitled to avail credit of service tax paid on input services received at the mines, which serves as an intermediate product for manufacture of final product i.e. steel items. Thus, the Appellant is eligible to avail CENVAT Credit of input services relating to captive mines, which is distributed to the Appellant vide ISD invoices - the demand of reversal of Cenvat credit along with interest and penalty confirmed vide the impugned order dated 30.09.2019, is not sustainable - appeal allowed. Issues Involved:The appeal against the Order-in-Original confirming demand of CENVAT credit on input services from captive mines.Summary:The Appellant, engaged in manufacturing Iron and Steel products, appealed against the demand of Rs. 8,82,11,067/- along with interest and penalty for availing CENVAT credit on input services from captive mines. The Appellant argued that the mines are integral to the manufacturing units, both belonging to the same legal entity, and the services availed at the mines are directly linked to the manufacturing of final products. The Tribunal found that the Appellant is entitled to avail credit of service tax paid on input services received at the mines, as these services are used in or in relation to the manufacture of final products. The Tribunal referred to a similar case where credit was allowed for services received at captive mines, emphasizing the integrated nature of the mines and manufacturing units.The Tribunal observed that the Appellant, being part of the same legal entity as the mines, is eligible to avail CENVAT Credit of input services from captive mines distributed via ISD invoices. The Tribunal highlighted that the denial of credit by the lower authority was unsustainable, citing precedents where credit for services received at captive mines was allowed. Consequently, the Tribunal set aside the impugned order and allowed the appeal filed by the Appellant.