TaxTMI 
TaxTMI 
2019 (11) TMI 1349
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....2004. The Respondent-Company had also availed 'Input Service Tax Credit' under services of "Transport of Goods by Road' for bringing 'Iron Ore' used commonly for manufacturing the dutiable item as well as exempted good i.e. 'Sponge Iron' and 'Iron Ore Fines'. The Respondent- Company had availed Credit on other input services, such as, Cargo Handling Service, Manpower Recruitment Services, Security Services etc. from 10.09.2004. Besides these, they had also availed 'Input Service Tax Credit' on services of "Transport of Goods by Road" in respect of the transportation of coal; which was used for the manufacturing of 'Sponge Iron' as well as for generation of Electricity. In fact, Electricity is wholly exempted from duty, if it used completely for manufacturing the final product, but the Respondent-Company sold a part of the Electricity manufactured to the Chhattisgarh State Electricity Board (CSEB) for valuable consideration, without payment of any duty. 3. The Central Excise Officers of the Audit Wing of the Raipur Commissionerate, while auditing the 'Books and Accounts' of the Respondent-Company for the period from Septem....
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....the Respondent-Company had reversed the Service Tax Credit with interest availed on 'Goods Transport Agency' (GTA) services attributable to the transportation of coal used in their power plant, the question of payment of any amount equal to 10% of the value of the Electricity would not arise. 5. The adjudicating Authority / Commissioner noted in Annexure-A/3, in paragraph 6, that during the course of personal hearing held on 31.07.2008, the Respondent Company had agreed to reverse the Credit of Service Tax availed on transportation of 'Iron Ore' which was directly related to generation of 'Iron Ore Fines'. They had also assured to furnish evidence of reversal by 25.08.2008 and informed that they had already paid back the Service Tax Credit with interest availed on GTA services attributable to transportation of coal used in their power plant for a sum of Rs. 14,15,922/- (including interest of Rs. 2,11,996/-). The Respondent-Company, as per subsequent letter dated 04.09.2008, had reported the reversal of CENVAT Credit of Rs. 2,77,419/- which Credit was reportedly taken on the GTA service availed for transportation of 'Iron Ore' that was used in genera....
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.... maintain separate Accounts). 7. With regard to the question of sale of Electricity, after referring to the relevant provisions of law and some of the precedents, it was held in paragraph 11 as follows : "11. The Noticee have claimed that they have reversed Cenvat credit availed on GTA services used in relation to manufacture of the exempted goods, hence, demand is not sustainable. But, from the report of the Superintendent, Range- Raigarh dated 05.09.2008 and 18.09.2008, I find that the GTA service is not the only input service but the Noticee have also availed credit of service tax paid on several other input services viz. cargo handling service, consulting engineer service, security service, maintenance & repair service, telephone service, manpower recruitment service, erection & commissioning service, site formation service, courier service, mining service, chartered accountant service, insurance & auxiliary service, commercial or industrial construction service, cost accountant service, design & engineering service and business auxiliary service. The Noticee's contention that such other input services do not have any nexus or link with the processes involving generation of ....
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....with interest and imposing penalty for an equal amount in accordance with the relevant provisions of law. 8. On challenging the above order before the CESTAT, after taking note of the rival submissions and the relevant precedents sought to be relied on by both the sides, the CESTAT simply held that, by virtue of the law declared by the Apex Court in Union of India (UOI) and Ors. Vs. Hindustan Zinc Ltd. (2015) 15 SCC 312 and also a similar view taken by the CESTAT in Commissioner of C. EX. & S.T., Raipur Vs. Aarti Sponge and Power Ltd. [2016 (333) ELT 415 (Tri-Del.)], the issue was no more res integra. It was held the first issue that the 'Iron Ore Fines' was only a by-product and selling of the same without payment of any excise duty, without maintaining separate Accounts in terms of Rule 6 of the CENVAT Credit Rules, 2004 would not attract any liability. The relevant portion as contained in paragraph 5 is as follows : "5. ......We have gone through the cited case laws. In the decision of Apex Court in the case of Union of India Vs. Hindustan Zinc Ltd. (supra), the Hon'ble Supreme Court has held that a distinction has to be made between final product as well as by-produc....
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....taken on GTA, appellant has availed credit to the extent of over Rs. 2 crores on various other services as well. Accordingly, he has submitted that the entire demand cannot be waived on the basis of reversal of GTA services. We find from the impugned order that the appellant has availed Cenvat credit not only on GTA service but also on various other services such as cargo handling service, consulting engineering service, security service, telephone service etc. It is easily seen that credit availed on service tax on transportation of coal is the only service on which credit can be said to have been taken where it is used for generation of electricity and the same has been reversed." From the above, it is clear that the CESTAT noted that as per the order under challenge, the Respondent-Company / appellant before the CESTAT had availed the CENVAT Credit not only on GTA services, but also on various other services; such as Cargo Handling Service, Consulting Engineering Service, Security Service, Telephone Service etc. But, on the very next breath, it was easily said that 'Credit' availed on service tax on transportation of coal was the only service on which Credit could be....
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....ebited in the credit account before the removal of the exempted final products." We are of the view that, before recording the conclusion as above, it was quite necessary for the CESTAT to have recorded the reasons to support the finding; to see whether the circumstances mentioned by the Apex Court in Chandrapur Magnet Wires (P) Ltd. (supra) were actually satisfied to have the benefit therein to be extended. 13. Mr. Anumeh Shrivastava, the learned counsel appearing for the Respondent-Company sought to place reliance on the decision rendered by a Division Bench of this Court in Tax Case No. 48 of 2016 (decided on 08.05.2917), where almost a similar activity in connection with manufacturing of 'Sponge Iron' was involved. The said decision is stated as not applicable by Mr. Vinay Pandey, the learned counsel appearing for the Appellant-Revenue, points out that, it was on the basis of the conceded factual position from the part of the Department, that the judgment was rendered, as discernible from paragraph 6 therein. The said portion is extracted below : "6. On the aforesaid admitted factual premise, taking into consideration that the electricity is not an item for which an....
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....s Court to sustain Annexure-A/3 order passed by the Commissioner and to hold against Annexure-A/1 verdict passed by the Tribunal. 15. Union of India (UOI) Vs. Ahmedabad Electricity Co. Ltd. and Ors. (2003) 11 SCC 129 is cited by Mr. Anumeh Shrivastava, the learned counsel for the Respondent-Company, in support of the contention that 'Iron Ore Fines' is virtually a waste product, just as 'Cinder'. The question considered by the Apex Court in the said case was regarding excisability of the 'Cinder' to excise duty. The Respondents in the Appeals used coal as a fuel for producing steam to run the machines used in their factories to manufacture the end products. Coal was burnt in the boilers or furnaces for producing steam and normally, in the process of burning coal, it gets reduced to 'ash', but some part of the coal would not get fully burnt because of its low compatible quality and this un-burnt or half-burnt portion of coal left out in boilers is called 'Cinder'. Raising different points / questions including as to whether the item in question satisfied the test of being manufactured in India and marketability, it was held in paragraph 36, t....
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....ce, Department of Revenue (Central Board of Excise and Customs) as to withdrawal of the Circulars/Instructions on excisability of 'bagasse', aluminium/zinc dross by virtue of the declaration of law by the Supreme Court in M/s. Union of India and Ors. Vs. M/s. DSCL Sugar Limited [2015-TIOL-240-SC-CX] dated 15.07.2015. It was held in paragraph 4.2 of the said Circular, that Bagasse, Dross and Skimmings of non-ferrous metals or any such by-product or waste, which are non-excisable goods and are cleared for consideration from the factory need not be treated like exempted goods for the purpose of reversal of credit of input or input services, in terms of Rule 6 of the CENVAT Credit Rules, 2004. But here, one thing to be noted is that Clause 4.2 of the said Circular specifically mentions that concession / declaration would only be in respect of skimmings of non-ferrous metals, which virtually means that the position is different in the case of 'ferrous metals' (Iron). As such, this Court finds it difficult to accept the applicability of the said Circular insofar as the item involved in the present case is 'Iron Ore Fines' (Ferrous). 18. In the attempt to assert t....
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....er, forms part of the sulphuric acid which is cleared out. It was submitted that the extraction of zinc from the ore concentrate will inevitably result in the emergence of sulphur dioxide as a technological necessity. It is not as though the respondents can use lesser quantity of zinc concentrate only to produce the metal and not produce sulphur dioxide. In other words, a given quantity of zinc concentrate will result in emergence of zinc sulphide and sulphur dioxide according to the chemical formula on which the respondents have no control. 28. On these facts this Court is inclined to accept the version of the respondents that the ore concentrate is completely consumed in the extraction of zinc and no part of the metal is forming part of sulphuric acid. 29. Once we proceed keeping in mind the aforesaid factual, technological and commercial position available on the records, it has to be accepted that the respondents have consumed the entire quantity of zinc concentrate in the production of zinc. 30. Let us now examine the position contained in Rule 57-CC on the touchstone of the aforesaid position. No doubt, Rule 57-CC requires an assessee to maintain separate records for in....
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....roduced" and only if the requirements of this test are satisfied, the goods can be "final products" and never "by-products". On this basis, the learned Solicitor General submitted that even an admission made before the Tribunal in the Birla Copper case of the goods being a "by-product", cannot be relied on by the respondent. 34. While pleading that the aforesaid interpretation to these Rules be accepted by this Court, submission of Mr Parasaran was that in such an eventuality the judgment in Swadeshi Polytex Ltd. v. CCE (1990) 2 SCC 358 was not applicable, nor was the judgment in CCE v. GAIL (2007) 15 SCC 91 relied upon by the respondent. Likewise his submission was that judgment of the Bombay High Court in Rallis India Ltd. v. Union of India (2009) 233 ELT 301 (Bom) was erroneous wherein the view taken is contrary to the aforesaid submission. 35. These arguments may seem to be attractive. However, having regard to the processes involved, which is already explained above and the reasons afforded by us, we express our inability to be persuaded by these submissions. We have already noticed above that in the case of Birla Copper (CA No. 2337 of 2011) the Tribunal has decided t....