2018 (8) TMI 460 - AT - Central Excise

CENVAT Credit - input services - Dredging Services - case of department is that since the Dredging Services is availed outside the registered premises and the same is neither used for manufacture nor for removal of goods, it is not qualified that as input service - Held that - The Jetty is a captive active Jetty of the appellant, which is exclusively used by the appellant, only. At time, the appellant have to get the Dredging done at the Jetty for proper function of Jetty to improve the draft. Since Jetty is used primarily for import of coal which is used in the manufacture of final product, Dredging Service is qualified as input service - merely because the service was availed outside the factory of the appellant the credit cannot be denied. It is also a fact that Dredging Service is nothing to do with the customer to whom final product is sold. The service charge of Dredging Service is borne by the appellant only, which stands absorbed in the overall cost of manufacturing of cement. Therefore, it cannot be said that the Dredging Service is used for the removal of final product from place of removal. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Denial of CENVAT credit on Dredging Service used for Jetty outside registered premises.

Analysis:
The appellant, engaged in cement manufacturing, developed a Jetty at Porbandar for coal transportation, availing Dredging service for Jetty efficiency. The department contended that since Dredging was outside registered premises and not used for manufacturing or goods removal, it did not qualify as an input service. The Ld. Commissioner (Appeals) upheld this denial.

Appellant's Argument:
The appellant's counsel argued that the Jetty was solely used for coal import, essential for cement manufacturing, and for final product removal, including transfers and sales. He cited various judgments to support the admissibility of CENVAT credit on Dredging services for the Jetty.

Revenue's Argument:
The Revenue's representative reiterated the impugned order, emphasizing that Dredging outside the factory and for goods removal did not meet the Rule 2(l) definition of input service for CENVAT credit. Supporting judgments were presented.

Judgment:
After considering both sides' submissions and records, the Member (Judicial) found the Jetty to be a captive facility exclusively used by the appellant for coal import crucial to cement production. Dredging for Jetty maintenance to enhance functionality was deemed an input service, not linked to final product removal. The service cost, absorbed in manufacturing, qualified for CENVAT credit per the Bombay High Court's precedent. The location of service availing, whether inside or outside the factory, was deemed irrelevant as long as it related to final product manufacturing. Consequently, the impugned order was set aside, and the appeal was allowed.