2023 (3) TMI 636

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....e Order No. BHV-EXCUS-000-JC-47-2017-18 dated 25.01.2018 passed by Learned Joint Commissioner, Central GST, Bhavnagar and allowed the appeal of Respondent herein namely M/s. Navyug Ship Breaking Company. 02. Briefly the facts of the case are that Respondent during the period 2013-14 to 2014-15 was engaged in breaking of ships imported for breaking purpose at their plot at the ship breaking yard, Alang where goods and material is obtained by way of breaking the ship. Ship imported for breaking purpose contain items viz. Fuel Oil, Marine Gas Oil, Lubricating Oil etc which are used as fuel for the ship or for generation of electricity. As per the prevailing practice at Alang, an importer files a bill of entry in respect of ship imported for....

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.... (k) and Explanation III to sub-rule (3) of Rule 6 of the Cenvat Credit Rules, 2004 as the same were not their "input" used in or in relation to manufacture of their final products. The said Show cause notice was adjudicated by the adjudicating authority who interalia held that Fuel oil, Marine Gas Oil and Lubricating Oil were not used, directly or indirectly in or in relation to the process of obtaining goods and material by breaking up the ship and hence the same cannot be considered as 'input' in terms of the provisions of Cenvat Credit Rules and consequently Cenvat Credit of Additional Duty of Customs (CVD) paid on Fuel Oil, Marine Gas Oil and Lubricating Oil is not admissible to the Respondent. The adjudicating authority confirmed the ....

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.... "input" for manufacturing process of ship breaking for a ship breaking unit. Accordingly, learned Commissioner (appeals) held that CVD paid on removal of items available on ship including fuel and oils at the time of importation of ships is part and parcel of duty element which is available to the ship breaking unit as cenvat credit and can be utilized for discharging central excise duty on the items removed from breaking of ship. He further relied upon Circular No. 1014/2/2016-CX dated 1st February 2016 in which it has been clarified that once the importer has paid CVD on import of ship, cenvat credit of that CVD cannot be denied for payment of central excise duty on breaking of that ship. 03. Shri G. Kirupanandan, learned Assistant Co....

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....sioner (Appeals) has rightly held that entire ship is the "input" for the importer. He further submitted that fuel and oil so obtained and sold by the importer is a by-product of the ship breaking activity which amounts to manufacture and that it is settled position of law that in the course of manufacturing activity any by-product emerges cenvat credit on that part of input cannot be denied. As regards the issue of classification he submits that classification of inputs is immaterial for admissibility of cenvat credit and that this position is also specifically admitted in the appeal memo in para 3.2.4. 05. We have carefully considered the rival submissions and perused the records. It can be seen that obtaining of goods and material by ....

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....e in the ship when brought for breaking purposes are inevitably required to be removed for efficient and safe operation of breaking of ship. This position is also specifically admitted in the appeal memo in para 3.4.4. In this background, it is clear that Fuel and Oils are by-product that are inevitably required to be removed from the ship in the course of commencing the activity of breaking the ship and if that be so, there is no reason for denial of cenvat credit of CVD paid on any part of the Ship including its stores viz. fuel and oil on the ground that they do not form part and parcel of the ship or that they are removed at a stage before commencing the activity of breaking ship or that their classification is under different heading. ....