2017 (2) TMI 536 - AT - Central Excise

Cenvat credit - Input service - pre-mining activities - Department took a view that as these were not approved mines and the said activities availed by the appellants were not directly or indirectly related to the manufacturing activity of the appellant. - Held that - The services availed by the appellants are very much towards compliance of the conditionalities therein. The invoices do in fact mention under the particulars column preparation of mining plan and environmental clearances . ; for preparation of mining plan for hydro study, rain water harvesting plant etc. I find that these services are very much essential for the eventual manufacturing activities utilising limestone mined from the demarcated areas. Though the letters evidencing grant of mining lease to the appellant have not been filed, it is seen that the letters conveying environmental clearance do indicate the fact - Appeal allowed - decided in favor of the assessee.

Summary

Issues:
1. Eligibility of input service credits related to pre-mining activities for manufacturing of cement and clinkers.

Analysis:
The case involved a dispute regarding the eligibility of input service credits taken by the appellants for pre-mining activities related to the manufacturing of cement and clinkers. The department contended that the appellants wrongly utilized the input service credit based on invoices for activities at certain villages which were not approved mines and not directly related to their manufacturing activity. The original authority confirmed the demand for Cenvat credit, interest, and penalty. The Commissioner (Appeals) upheld the decision, leading the appellants to appeal before the forum.

Upon hearing the arguments, the Ld. Advocate for the appellant submitted letters of intent for mining lease and relied on relevant judgments to support their case. The advocate argued that the services availed were essential for compliance with the conditionalities attached to the letters of intent for mining lease. On the other hand, the Ld. AR for the Revenue opposed the submissions, emphasizing that only preliminary work had been done in demarcated areas without a proper lease agreement or clarity on the use of mined limestone in manufacturing.

The tribunal considered the facts and submissions from both sides. It noted that although full-fledged mining leases were not initially granted, the appellants availed services after receiving letters of intent with specific conditions to be fulfilled before obtaining the leases. The tribunal found that the services were essential for compliance with the conditionalities, as indicated in the invoices for preparation of mining plans and environmental clearances. Additionally, the tribunal observed that subsequent full mining leases were issued, along with environmental clearances, further supporting the eligibility of the input services for manufacturing activities. Citing relevant precedents, the tribunal concluded that the services availed were eligible input services, allowing the appeal with consequential benefits as per law.