2017 (3) TMI 59 - AT - Central Excise

CENVAT credit - site formation services - respondent outsourced, mining activities from their captive coalmines to various private parties - Held that - prior to mining service being included as a separate service for payment of Service Tax, the activities carried out by the contractors, such as excavation, drilling and removal of the overburdens, coal cutting etc. are covered under the category of site formation and clearance services - Service tax has been paid by the contractors under the category of site formation and clearance services. Since there is no dispute that such services have been used, it is concluded that service tax paid is available as CENVAT credit - appeal dismissed - decided against Revenue.

Summary

Issues: Disallowance of Cenvat credit on input services related to mining activities prior to taxation, Validity of CBEC Circular in relation to quasi-judicial findings

The judgment pertains to an appeal filed by the Revenue against an order passed by the Commissioner of Central Excise regarding the disallowance of Cenvat credit availed by the respondent on input services related to mining activities prior to the taxation of mining services. The dispute arose when the Accountant General (Audit) raised an objection to the credit availed by the respondent, stating that the services were taxable only from 01.06.07. The Revenue issued a show cause notice seeking to disallow the service tax credit for the period before the taxable date. However, the Commissioner concluded that the demand was not sustainable and dropped the proceedings. The appeal was filed on the grounds that the Commissioner disregarded the CBEC Circular advising the immediate issuance of show cause notices in case of audit objections to safeguard revenue.

The main argument presented by the Revenue was that the impugned order should be set aside as it disregarded the CBEC Circular, while the respondent's counsel argued that a circular cannot interfere with quasi-judicial findings. The Commissioner had dropped the demand by categorizing the activities carried out by contractors, such as excavation and coal cutting, under site formation and clearance services, for which service tax had been paid by the contractors. The Commissioner concluded that since the services had been used, the service tax paid was eligible as Cenvat credit.

The Tribunal, comprising Mr. (Dr.) Satish Chandra and Mr. V. Padmanabhan, upheld the impugned order, stating that the CBEC Circular cannot take away the power of quasi-judicial authorities. They agreed with the Commissioner's view that the impugned order cannot be faulted solely on the ground of disregarding the Board's instructions. Therefore, the Tribunal dismissed the Revenue's appeal, affirming the Commissioner's decision to drop the demand for disallowance of Cenvat credit on the input services related to mining activities prior to the taxation date.