Whether transportation of cement used for repair/renovation within the mines falls under the definition of input service?

PJ/Case Law /2016-17/3401

Case:-COMMISSIONER OF CENTRAL EXCISE, JAIPUR Versus HINDUSTAN ZINC LTD.

Citation:-2014 (34) S.T.R. 609 (Tri. - Del.)

Brief facts:-This is an appeal filed by Revenue against Order-in-Appeal No. 230(KKG)CE/JPR-I/2010, dated 2-6-2010 passed by the Commissioner of Central Excise (Appeals), Jaipur-II.
The brief facts of the case are that M/s. Hindustan Zinc Ltd. (respondents) are manufacturer of lead, zinc and other metal concentrates falling under Chapter 26 of the Central Excise Tariff. They have availed credit of Service Tax paid on freight for procurement of cement under Goods Transport Agency service. It was the view of the department that cement is not eligible input and therefore freight charges paid for inward transportation of cement cannot be treated as input service utilised for manufacture of final product and as such, credit availed by the respondent is not admissible. Accordingly, show cause notice was issued to the respondent proposing recovery of credit amounting to Rs. 2,68,576/- and also proposing penalties on the respondent. Show cause notice was adjudicated by Deputy Commissioner vide order dated 16-10-2008 and Deputy Commissioner had demanded the Cenvat credit along with interest and also imposed equal amount of penalty on the respondent. The respondent filed appeal before the Commissioner of Central Excise (Appeals) who vide impugned order has allowed their appeal. Revenue has challenged the impugned order in the present appeal.

Appellant’s contention:-Ld. D.R. appearing for Revenue submits that credit has been availed by the respondent in respect of Service Tax paid under GTA services for bringing cement inside their premises. He submits that cement is not an eligible input for the respondent in this case and therefore the Service Tax paid on transportation charges is not admissible to the respondent. He submits that Commissioner (Appeals) has not appreciated the Cenvat Credit Rules in proper prospective and has set aside the Order-in-Original. He submits that Order-in-Appeal is bad-in-law and needs to be set aside.

Respondent’s contention:-Ld. Advocate for the respondent submits that cement is used in the mines of the respondent. During the course of mining of the ores huge cavities are created inside the mines. For filling these cavities, cement is used and without filling up the cavities it is difficult to perform further activity inside the factory. He submits that transportation charges were paid for bringing the cement inside the mines for the purpose of repair/renovation of these cavities. He submits that the mines are included in the factory area as a decision of Supreme Court in the case of Vikram Cement v. CCE - 2006 (197)E.L.T.145 (S.C.). He therefore submits that Revenue’s appeal is not maintainable.
Reasoning of judgment:-After hearing both the sides, the Tribunal found that input service has been defined under Rule 2(l) of the Cenvat Credit Rules means as “(i) used by a provider of taxable service for providing an output service or (ii) used 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.” Further definition includes input service used in relation to setting up, modernization, renovation or repairs of the factory. As per the decision of the Supreme Court in the case of Vikram Cement the mines are to be treated as factory area. Therefore transportation of cement used for repair/renovation within the mines is very much under this definition of input services. Accordingly, the Tribunal did not find any infirmity in the finding of the Commissioner (Appeals) for allowing Cenvat credit in respect of GTA services for bringing the cement inside their factory. Accordingly, the Tribunal upheld the order-in-appeal and rejected the Revenue’s appeal.

Decision:-Appeal rejected.

Comment:-The gist of the case is that the assessee manufactured lead, zinc and other metal concentrates falling under Chapter 26 of the Central Excise Tariff. The assessee used cement for filling the cavities created inside mines. They availed input service credit of Goods Transport Agency service taken for bringing cement inside the mines for repair/renovation of cavities. It was held that mines can be treated as factory area in view of the decision of the Apex Court in the case of Vikram Cement [2006 (197)E.L.T.145 (S.C.)] - Rule 2(l) of Cenvat Credit Rules, 2004. Therefore, transportation of cement used for repair/renovation within the mines falls under the definition of input service and hence credit was made admissible.

Prepared by:-Praniti Lalwani

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PJ/Case Law /2016-17/3401

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