2024 (3) TMI 128 - AT - Service Tax

Tribunal Affirms Eligibility for Cenvat Credit on Input Services, Dismisses Revenue Appeals, Supports Exempted Goods Production.

Commissioner of Central and Customs, Belgaum Versus M/s. Vibhutigudda Mines Pvt. Ltd.

The Tribunal upheld the Commissioner's decision, affirming the respondent's eligibility for cenvat credit on input services, including port services, ... Refund of CENVAT Credit - rejection on the ground that the respondents were not eligible to avail the cenvat credit on the input services in view of the bar contained in Rule 6 of the CENVAT Credit Rules, 2004 - whether the respondent is eligible for the benefit of cenvat credit which is used for Port services which has resulted in refund? - HELD THAT:- There is no whisper on this issue of eligibility of cenvat credit on port services in their grounds filed and placed before me. Therefore, the appeal filed by the Revenue fails on this ground itself. The respondent has placed on record the judgment of this Tribunal in the respondent’s own case COMMISSIONER OF CUSTOMS, CENTRAL EXCISE & SERVICE TAX, BELGAUM VERSUS BELLARY IRON ORE PVT LTD [2023 (9) TMI 1440 - CESTAT BANGALORE], wherein it is held as The services rendered at the port has been consistently held as an input service within the definition of ’input service’ as per Rule 2(l) of Cenvat Credit Rules, 2004, port being the place of removal in case export of goods. In result, the order of the ld. Commissioner (Appeals) is upheld and the appeal filed by the Revenue is dismissed. There are no merit in the appeal filed by the Revenue - Hence, the Revenue’s appeal is dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether input service CENVAT credit (and consequent refund) is barred by Rule 6(1) of the CENVAT Credit Rules, 2004 when the final product is exempted from central excise duty (nil-rated or exempt under notification)? 2. Whether CENVAT credit of service tax paid on port services (loading/handling at port) is an admissible input service credit for purposes of refund, given the asserted lack of direct nexus between such services and production of the goods? ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability of Rule 6(1) when final product is exempted (nil-rated/exempt) and entitlement to CENVAT credit/refund Legal framework: Rule 6 of the CENVAT Credit Rules, 2004 (including Rule 6(1) and Rule 6(6)) governs availment and utilisation of CENVAT credit where final products are exempt or where exports are involved; entitlement to refund arises where credit has been wrongly availed/used on inputs/services attributable to exempted/nil-rated outputs. Precedent treatment: The Tribunal and appellate fora have consistently held that Rule 6 does not bar availment of credit where final goods are exempted or nil-rated by notification; decisions referenced include earlier Tribunal decisions and High Court/Supreme Court authorities upholding similar conclusions (noted by the Court as followed rather than distinguished). Interpretation and reasoning: The Court examined earlier orders of the adjudicating authorities and the Commissioner (Appeals) and concluded that Commissioner (Appeals) rightly held entitlement to credit/refund. The reasoning rests on: (a) statutory reading of Rule 6 with reference to notification exempting goods; (b) consistent judicial ratios that input-stage rebate/credit is available for exported or exempted goods that are nil-rated; and (c) reliance on precedents which treated Rule 6 as inapplicable to exempt exports or nil-rated production, including authorities that held no bond requirement where goods are exempted and that export under bond decisions are distinguishable. Ratio vs. Obiter: The determination that Rule 6 does not bar CENVAT credit on input services where final goods are exempt/nil-rated is treated as ratio - central to the adjudication and applied to allow refund/credit. References to other authorities and factual parallels were applied as binding ratio for the question at hand rather than mere obiter. Conclusion: The Court affirmed entitlement to CENVAT credit/refund for input services in respect of exempted/nil-rated final goods and dismissed Revenue's challenge on this ground, following earlier Tribunal/High Court precedents. Issue 2 - Admissibility of CENVAT credit on port services (loading/handling) and requirement of direct nexus with production Legal framework: Rule 2(l) (definition of 'input service') under the CENVAT Credit Rules, 2004 and the scheme allowing credit on services that are input services for manufacture/removal; refund mechanism for credit attributable to exempted/nil-rated outputs. Precedent treatment: The Commissioner (Appeals) and Tribunal repeatedly relied on Tribunal precedents holding 'port services' to be input services eligible for credit/refund (examples from Tribunal decisions cited in the impugned orders). These authorities have been followed by the Court in the present matter; the Court treated those decisions as directly applicable and controlling. Interpretation and reasoning: The Court considered whether port services (loading/handling into ship) lacked requisite nexus with production. It found that (a) port services have been consistently held to fall within the definition of input service; (b) port is the place of removal in export cases making port services integrally connected; and (c) earlier findings in the same respondent's proceedings and consistent Tribunal decisions support credit eligibility. The Court additionally observed that the Revenue's appeal did not contest eligibility on this specific issue in its grounds, undermining the appeal procedurally. Ratio vs. Obiter: The holding that port services constitute input services eligible for CENVAT credit (and refund) is treated as ratio - it determines the adjudication of the refund claim. The procedural point that the Revenue did not raise the specific eligibility ground in written grounds was an applied procedural ruling (ratio as to the appeal's failure on pleaded grounds) rather than obiter. Conclusion: The Court upheld the Commissioner (Appeals) finding that CENVAT credit on port services was admissible and dismissed the Revenue's appeal against the refund relating to port services, both on the substantive precedential basis and because the Revenue had not specifically pleaded the port-service eligibility issue in its grounds. Cross-references and interrelation of issues The Court treated Issue 1 (Rule 6 applicability for exempt/nil-rated goods) and Issue 2 (port services as input services) as interlinked: entitlement to refund for service tax paid on input services depends on the legal status of the final product (exempt/nil-rated) and the characterization of services as input services. Precedential holdings on Rule 6's inapplicability to exempt/nil-rated outputs and consistent treatment of port services as input services were applied together to allow the refund claims. Disposition and remedial consequence The Court dismissed the Revenue's appeals against allowance of refund/credit in respect of input services and port services, affirming prior findings that the respondent was entitled to CENVAT credit/refund; consequential relief, if any, was ordered in favour of the respondent.