2017 (10) TMI 1414 - AT - Central Excise

CENVAT Credit - input services - Diamond Core Drilling Services availed by them in their captive mines - Held that - Service Tax has been paid on the Diamond Core Drilling Services in the captive mines area of the assessee-Appellants. The said drilling operations are necessary for survey and exploration of their mining area to find the prospective potential for mining zinc ore - this is essential for the core operation of manufacture of Zinc Ore by the assessee-Appellants and the same is carried out in their own mines only - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Eligibility of assessee-Appellants for Cenvat Credit on "Diamond Core Drilling Services" in captive mines.

Analysis:
The appeal was filed against the Order-in-Original denying Cenvat Credit on "Diamond Core Drilling Services" availed by the assessee-Appellants in their captive mines. The impugned order disallowed the credit and imposed a penalty. The dispute centered around whether these services qualified as input services for the assessee-Appellants.

The counsel for the assessee-Appellants argued that the drilling was essential for identifying and extracting ore, integral to their mining activity. He cited a previous Tribunal decision in their favor based on similar facts. On the other hand, the Revenue's representative supported the original authority's decision, contending that the drilling did not directly contribute to ore extraction for further manufacture.

After considering both sides and reviewing the record, the Tribunal observed that the drilling services were paid for and carried out in the assessee-Appellants' captive mines area. These operations were crucial for surveying and exploring the mining area to determine the potential for mining zinc ore, a fundamental aspect of their manufacturing process. Consequently, the Tribunal found no justification to deny the credit for "Diamond Core Drilling Services" as they were deemed essential for the core operation of manufacturing zinc ore by the assessee-Appellants. Therefore, the impugned order was set aside, and the appeal was allowed.

In conclusion, the Tribunal ruled in favor of the assessee-Appellants, allowing the appeal and overturning the decision that denied Cenvat Credit on "Diamond Core Drilling Services" in their captive mines.