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2015 (2) TMI 265 - AT - Central ExciseDisallowance of CENVAT Credit - Manpower Recruitment Services - Inputs used in the manufacture of exempted goods or exempted services - Held that - In view of the ruling of the Hon ble Madras High Court in the case of Eid Parry (I) Ltd. (2013 (3) TMI 366 - MADRAS HIGH COURT), I hold that there is no infirmity in the order of Commissioner (Appeals) and he has rightly held that manpower also consumed for the purpose of handling waste and compost etc. is an essential part of manufacture of the product being excisable goods, etc. and accordingly, the same is fully allowable. - Decided against Revenue.
Issues:
- Disallowance of CENVAT credit on certain inputs and input services used for handling waste products - Interpretation of Rule 6(1) and Explanation-III of Cenvat Credit Rules - Admissibility of CENVAT credit on input services used for handling waste products - Applicability of ruling in the case of Indian Farmers Fertilizers Co-Op Ltd. - Appeal against Order-in-Original disallowing CENVAT credit on boiler ash and compost - Commissioner (Appeals) decision allowing CENVAT credit on manpower recruitment services - Revenue's appeal challenging Commissioner (Appeals) decision - Application of Rule 3 of Cenvat Credit Rules Analysis: The appeal by Revenue challenges the disallowance of CENVAT credit on certain inputs and input services used for handling waste products by the respondent assessee, a manufacturer of sugar, molasses, rectified spirit, and denatured spirit. The Revenue contended that as per Rule 6 of Cenvat Credit Rules, credit is available only on the final product, and since compost and boiler ash are not final products of the assessee, CENVAT credit on input services used for these services should not be allowed. The Revenue also argued that Explanation-III to Rule 6(3) prohibits credit on input services used exclusively for manufacturing exempted goods or services. The respondent argued that the waste handling services were essential for manufacturing excisable goods and were fully attributable to the manufacturing process. They highlighted the directions of the Pollution Control Board, which mandated proper disposal of waste to avoid environmental harm. The respondent emphasized that the waste handling services were integral to maintaining manufacturing processes and environmental compliance. They relied on a ruling regarding Pollution Control Board directions being part of manufacturing activity. The Order-in-Original disallowed CENVAT credit on boiler ash and compost but allowed credit on input services used for removing press-mud. The Commissioner (Appeals) reversed this decision, allowing CENVAT credit on manpower recruitment services used in relation to the manufacturing process. The Revenue's appeal contended that the Commissioner (Appeals) erred in interpreting Rule 3 of Cenvat Credit Rules and failed to consider the applicability of Explanation-III to Rule 6(3). The Tribunal referenced a ruling by the Hon'ble Madras High Court in a similar case involving sugar manufacturing. The Tribunal concluded that the waste handling services were an essential part of the manufacturing process of excisable goods. The Tribunal held that the waste handling services were fully allowable for CENVAT credit based on the manufacturing requirements and environmental regulations. As a result, the Revenue's appeal was dismissed, upholding the Commissioner (Appeals) decision to allow CENVAT credit on the manpower recruitment services used in handling waste products during the manufacturing process.
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