TaxTMI 
TaxTMI 
2025 (11) TMI 593
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.... 02.09.2013 August 2012 - March 2013 9,12,15,251 70388/2019 28.04.2014 April 2013 - December 2013 8,12,77,726 70386/2019 04.02.2015 Jan 2014 - Sept 2014 9,77,46,955 70387/2019 21.09.2015 October 2014 - March 2015 5,35,35,236 70389/2019 14.03.2016 April 2015 - January 2016 5,58,17,627 Total 57,37,30,603/- 2.1 Respondents are engaged in the manufacture and sale of Aluminium and products thereof and were availing Cenvat credit facility on input, capital goods and input services as per the provisions of Cenvat Credit Rules, 2004. 2.2 The Respondent was procuring raw material bauxite-ore from various mines which were named by the Respondent as Lohardaga Mine and Bagru Mine situated in State of Jharkhand and Samri Mine situated in State of Chattisgarh. 2.3 Various input services were received at the said mines, such as GTA services and Business Auxiliary services. The service providers raise invoices on the above-mentioned Mines which avails credit on such input services, and thereafter, the credit on such input services is distributed to the manufacturing units of....
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....ng No. 76 of the first Schedule to Central Excise Tariff Act. 1985 and were also availing the facility of Credit on Input service under Rule 3 of the Cenvat Credit Rules, 2004. The party availed CENVAT credit of Service Tax paid on the Service which was in relation to two different bauxite mines of the party located at Lohardagad and Samri which are located in different states which supply Bauxite ores to the party's Renukoot Plant, and had utilized the full amount for payment of duty on clearances of their final products The department sought to recover the amount of credit of service tax availed as (1) the two mines which received the Input services are neither registered with the Department as captive mines of the party nor are those offices of the Noticess Unit, (ii) bauxite is non-excisable, the Cenvat Credit of Service Tax of Input Services in its production is inadmissible to the party. 6. On the other had the party contested the demand on the ground that the Mines are captive mines of the Noticees' unit and are integral part of the Unit; that under the Cenvat Credit Rules, 2004, input service can be availed as Cenvat credit by a manufacturer or out....
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...., qualify as imput service under the Cenvat Credit Rules, 2004. Before, deciding the above issue the relevant statutory provisions are reproduced: I observe that Rule 2(l) of the Cenvat Credit Rules, 2004 reads as under- "(l) "input service' means any service (i) used by a service provider for providing and out service, or (ii) use by the manufacturer, whether directly or indirectly in or in relation to the manufacture of final products and clearance of final products from the place of removal, and includes services used in relation to setting up, modernisation renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement of sales promotion, market research, storage up-to the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation up-to place of removal." From the above definition it is evident that the f....
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....t a complete transformation for the whole components so as to produce a commercially different article or a commodity. But, that process itself may consist of several processes which may or may not bring about any change at every intermediate stage. But the activities or the operations may be so integrally connected that the final result is the production of a commercially different article. Therefore, any activity or operation which is the essential requirement and is so related to the further operations for the end-result would also be a process in or in relation to manufacture to attract the relevant clause in the exemption notification. In our view, the word `process‟ in the context in which it appears in the aforesaid notification includes an operation or activity in relation to manufacture. 17. The transfer of raw material to the reacting vessel is a preliminary operation but it is part of a continuous process but for which the manufacture would be impossible. The handling of the raw materials for the purpose of such transfer is then integrally connected with the process of manufacture. The handling for the purpose of transfer may be manual or mechanical but if....
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....steel wires or the treatment of the papers is a process for the manufacture of goods in question. 22. We are, therefore, of the view that if any operation in the course of manufacture is so integrally connected with the further operations which result in the emergence of manufactured goods and such operation is carried on with the aid of power, the process in or in relation to the manufacture must be deemed to be one carried on with the aid of power. In this view of the matter, we are unable to accept the contention that since the pumping of the brine into the salt pans or the lifting of coke and lime stone with the aid of power does not bring about any change in the raw material, the case is not taken out of the notification. The exemption under the Notification is not available in these cases. Accordingly, we allow these appeals. In the facts and circumstances of the case, we make no order as to costs. The above case was followed and referred to in Union of India Vs Ahmedabad Electricity Co. Ltd. 2003 (158) E.L.T. 3 (S.C.). Further, The Hon'ble larger bench of the CESTAT in the case of Union Carbide India Ltd. vs. CCE, 1996 (86) ELT 613 held that th....
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....factory of the manufacture of the final products as provisions of the Rules, as regards input service are qua the manufacturer and not qua the factory. Hence the services received in respect of their captive mines will qualify as imput service I also notice that as per the provisions of Rule 4(1) of the Rules, Cenvat credit can be avaded when the inputs are received in the factory. Similar restrictions do not exist as regards Cenvat credit on input services. Further Cenvat credit is available even where the input services are received in the Head Office or any Regional Offices or any other place of business of the manufacturer. This is evident from the rule 3(1) of the Rules which reads as follows: "(1) A manufacturer or producer of final products or a provider of taxable service shall be allowed to take credit (hereinafter referred to as the Cenvat Credit) of (i) to (viii)------------ (ix) the service toy leviable under Section 66 of the Finance Act, and (X) - paid on (i) any input or capital goods received in the factory of manufacture of final products or premises of the provider of output service on or afte....
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....thority confirming therein the demand and recovery of credit along with interest. Feeling aggrieved the party filed appeal before the Commissioner Appeal. The Commissioner (Appeal) vide OIA No. 50/CE/ALLD/2017 dt. 28.08.2017 passed by the Commissioner (Appeals), Central Excise & CGST, Allahabad, held as under: 5.5 Thus, I am of the considered view that the impugned mines are integral part of the manufacturer, Le., M/s HINDALCO Restukoot and captive mines. Thus, the credit taken by the appellant on inputs and capital goods received and used in these mines, are justified. From the above discussion I find that the two mines of the party are their Captive mines. This fact is evident from the terms of the mining lease executed for these mines between the Noticees company and the State Government which has granted them mining lease for mining of bauxite from these mines. A perusal of the mining lease makes it clear that these mines are the captive mines of the Noticees' company. Therefore, allegation of Department to the contrary in the present Show Cause Notices is incorrect and against the facts on record. It is evident that there are independent financial transac....
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....e concerned Bureau of Mines wherein it is declared that entire quantity of Bauxite produced is sent to Noticee manufacturing unit at Renukoot. Therefore, the Noticee having used the entire quantity of bauxite ore excavated from their captive mines in manufacturing of their final products at the Noticee present unit, the Cenvat credit of the service tax paid on the input services used in the mines is admissible to the Noticeus, In this regard I also place reliance on the judgment of Hon'ble Supreme Court in the case of Vikram Cement reported in 2006 (194) ELT 3 (SC) while dealing with the issue regarding eligibility of an assessee to avail Cenvat credit of inputs and Capital goods used in the mines, held that an assessee is eligible to avail Cenvat Credit of the inputs and Capital Goods used in their captive mines. The same analogy is also applicable to determine the eligibility of the Noticees aluminum plant to avail Cenvat Credit of the Service tax paid on input services received at their Captive mines. I also finds that the Hon'ble Supreme Court in the case of Vikram Cement (supra) while reconsidering its earlier judgment in the case of J.K. Udaipur Udyo....
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....not claim the captive mines as integral unit for availing Cenvat Credit. In this regard I observe that t in the present case the final products manufactured by the Noticees is not bauxite but is aluminium products. Bauxite is mined at different captive mines of the Noticees only for the purpose of manufacturing dutiable final products, aluminium. That without consuming bauxite it is not possible to manufacture dutiable final products aluminium. Therefore, the allegation that bauxite is the final product holds no good. Further. I find that that, the captive mines of the Noticees are integral part of the Noticees unit at Renukoot as it caters entirely to the noticee's factory at Renukoot and forms part of the same manufacturer. Therefore, the allegation that the Noticees Company have a dozen different units spread all over India and Cenvat credit of Input Services availed by one such unit is not available for utilisation by any one else except that unit which avails the credit is not correct. I observe that the Noticees being 'Input Service Distributor under Rule 2(m) of the Cenvat Credit Rules, whereby the service tax paid on the services received in any office of t....
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....nvoices conforming to the requirements as laid down in rule 4A of the Service Tax Rules, 1994 can distribute the service tax paid as indicated on such invoices. Rule 7 of the Rules deals with the manner of distribution of credit by Input Service Distributor. In view of the above provisions of the Rules, it is clear that it is not necessary in the case of input service that the service should be received in the factory of the manufacturer as the services received in any office of the manufacturer can be distributed to the manufacturing units in accordance with rule 7 of the Rules. The only condition for availing the Cenvat credit in respect of services is that the service must satisfy the definition of input service'. If it is so, a manufacturer will be entitled to take Cenvat credit of service tax paid on such service even if such service is received outside the factory. In the impugned Show Cause Notices it is alleged that in order to be an 'input service distributor, the following conditions are to be complied with by the input service distributor:- (a) Distributor should be an office of the manufacturer or producer of final product or provider ....
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....t case, the Noticees have fulfilled the same. Thus, the input services received in respect of the captive mines which supply bauxite are in fact indirectly used in relation to the manufacture of the final products. Hence, the input services received by the party in respect of its captive mines will qualify as input service as defined in rule 2(1) of the Rules even though it is not received in the factory of the Noticees. In other words, even though it is assumed that the services are not received by the Noticees in its factory where final products are manufactured, the service tax paid on such services can be availed as Cenvat credit by following the procedure prescribed for 'Input Service Distributor in the Rules. In view of the above, I hold that the captive mines are part of the manufacturing unit and that the services received in the said captive mines will qualify as input service." 4.3 Revenue have challenged the above order stating that:- ⮚ Issue is covered by the decision in case of Maruti Suzuki Ltd. 2009 (240) ELT 641 (SC); ⮚ The decisions relied in the impugned order as follows are distinguishable: o Vikram Cements....
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....ce in favour of the mines and subsequently such mines avails credit of input services. Thereafter, the credit of such service is distributed to the manufacturing units of the SAIL through ISD invoices. 2.1 Proceedings were initiated against the Appellant vide issuance of a Show Cause Notice dated 29.08.2012. It has been alleged that the Appellant has availed CENVAT Credit on the strength of ISD invoices issued by the mines, which produce iron ore/manganese, which are not chargeable to excise 3 Appeal No.: E/71440/2013-DB duty nor do the mines provide any taxable output services. Since the said mines are exempted from duty payment and also not an office of the Appellant but under the administrative control of the SAIL RMD, therefore it is alleged that the mines are not eligible to distribute credit as ISDs in terms of Rule 2(m) of the CENVAT Credit Rules, 2004. Accordingly, the Notice proposed to recover CENVAT Credit amounting to Rs. 17,76,34,847/- from the Appellant, along with interest and equivalent penalty. The said Show Cause Notice was adjudicated and the demands raised in the Notice were confirmed by the Ld. Commissioner of Central Excise, along with interest and pe....
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...... 9. By relying on the decision cited above we hold that the Appellant is eligible to avail CENVAT Credit of input services relating to captive mines, which is distributed to the Appellant vide ISD invoices. Hence, we hold the demand of reversal of Cenvat credit along with interest and penalty confirmed vide the impugned order dated 30.09.2019, is not sustainable." 6. In view of the above discussions, we hold that the mines and the Appellant's manufacturing unit belongs to one legal entity, which is engaged in manufacture of dutiable goods. Therefore, we hold that the observation given by the Ld. Commissioner that distribution of credit by the mines is in contravention of Rule 7(b) of the CENVAT Credit Rules is legally not tenable. Thus, we hold that the distribution of credit by captive mines as ISD is in accordance with the provisions of law. 7. In view of the above discussions, we set aside the demands of service tax along with interest and penalty confirmed in the impugned order and allow the appeal filed by the appellant." 9.1. As the issue has already been settled by this Tribunal in the case of Steel Authority of India Ltd. (supra), we ob....