2018 (10) TMI 1733 - AT - Central Excise

Distribution of CENVAT Credit - GTA Service - Business Auxiliary Service - denial of credit on the ground that the mines were independent units having their own identity, mines were having separate set up and financial transactions and did not have any bearing of the appellant, though mines had the same PAN Number and the mines were not in the precincts of factory premises. HELD THAT - After amalgamation w.e.f. 01.04.2004 and as per the agreements entered into between the appellant and the respective State Government for enjoying the rights of mining, the mines located at various places which were named by the appellants as Lohardaga mine, Bagru mine and Samri mine were supplying Ores to the appellants - In the absence of any evidence that the said mines supplied ores to any other entity, the said mines were capitive mines of appellant. Hon be Supreme Court in the case of VIKRAM CEMENT VERSUS CCE, INDORE 2006 (2) TMI 1 - SUPREME COURT had ruled that if the mines are the captive mines then the Cenvat credit on capital goods used in such mines will be available to the appellant. We find from the records submitted before us that the above stated mines were captive mines for the appellants also due to reason that revenue has stated on record that the records being maintained at various mines were having the same PAN Number. Therefore, the Cenvat credit of service tax on services availed at mines was admissible to the appellant. Further, we note that the appellant were availing Cenvat credit received through invoices issued by Lohardaga mines which has registration as Input Service Distributor and therefore, we find that said Cenvat credit was admissible to them. Some discrepancies found with the invoices were only procedural infirmities and we did not come across any evidence on record to establish that the services covered by the said invoices were not availed by the appellant. We further note that Input Service Distributor is covered by Rule 7 of Cenvat Credit Rules, 2004 and there were no allegation that the procedure required to be followed as per said Rule 7 was not followed by the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Admissibility of Cenvat credit for input services received at mines
- Alleged independence of mines from the appellant
- Denial of Cenvat credit and imposition of penalties

Admissibility of Cenvat Credit for Input Services Received at Mines:
The case involved the appellants, engaged in manufacturing aluminum products, receiving raw materials from captive mines. The appellants availed Cenvat credit for input services like GTA Service and Business Auxiliary Service received at these mines. The revenue alleged that the Cenvat credit was inadmissible due to various reasons, including the mines being independent units with separate financial transactions and not within the factory premises. Show cause notices were issued covering different periods, raising substantial demands. The Original Authority disallowed Cenvat credit of around ?18 crores and imposed penalties. The appellants argued that the mines were captive and supplied only to them, making them eligible for Cenvat credit. They cited Supreme Court rulings and High Court judgments supporting their position.

Alleged Independence of Mines from the Appellant:
The Commissioner held that the mines were independent entities and not part of the appellant's manufacturing unit, thus disqualifying them from Cenvat credit. The appellants contended that the credit was availed based on invoices issued by the input service distributor, making it admissible. They highlighted the registration of Lohardaga mine as an input service distributor and cited relevant case laws and tribunal orders to support their argument. They also addressed specific allegations regarding repeated consignment numbers and procedural irregularities in registration, emphasizing that these should not lead to denial of substantial benefits.

Denial of Cenvat Credit and Imposition of Penalties:
The Original Authority disallowed Cenvat credit, imposed significant penalties, and directed payment of interest. The appellants argued that the input services used in the mines were essential for manufacturing aluminum, making them eligible for Cenvat credit. They also pointed out that as per Rule 7 of Cenvat Credit Rules, input service distributors can distribute credit to manufacturing units, and the services received at captive mines were integral to the manufacturing process. The revenue supported the impugned order, but the Tribunal found in favor of the appellants, holding that the mines were captive and the Cenvat credit was admissible.

In the final analysis, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellants. The judgment emphasized the captive nature of the mines, the admissibility of Cenvat credit based on the input service distributor's registration, and the absence of evidence to support the revenue's contentions. The ruling highlighted procedural irregularities as not sufficient grounds for denying substantial benefits and upheld the appellants' eligibility for Cenvat credit on the input services received at the mines.