2019 (9) TMI 789 - AT - Central Excise

CENVAT Credit - input - iron ore - input service - royalty charges - appellant being bona fide purchaser of such iron ore has paid the royalty charges and service tax thereon as charged by the Monitoring Committee, Department of Mines Geology in their tax invoices - HELD THAT - The appellant has purchased the iron order from the Monitoring Committee, Department of Mines and Geology and has paid the royalty charges and service tax thereon separately as shown in the tax invoice issued by the Monitoring Committee and it is also not disputed that such input was used for manufacture of Sponge Iron by the appellant - further, once the appellant paid the service tax on the royalty charges, then he is entitled to take the CENVAT credit on the same and the CENVAT credit cannot be denied at the appellant s end. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against rejection of CENVAT credit - Denial of credit on iron ore purchase - Payment of royalty charges and service tax - Dispute over eligibility of credit - Appellant's contention on bona fide purchase - Legal interpretation of CENVAT credit rules.

Analysis:
The case involved an appeal against the rejection of CENVAT credit by the Commissioner(Appeals) concerning the purchase of iron ore by the appellants. The appellants, engaged in Sponge Iron manufacturing, were availing CENVAT credit on duty paid inputs, capital goods, and service tax paid on input services. The dispute arose when during an audit, it was observed that the appellants had availed ineligible CENVAT credit of &8377; 8,25,175. A show-cause notice was issued, demanding the recovery of the credit along with interest and penalty. The Deputy Commissioner confirmed the demand, leading to the appeal before the Commissioner(Appeals), who upheld the decision, prompting the present appeal.

The main contention of the appellant was that they purchased iron ore from the Monitoring Committee, paying royalty charges and service tax on the same, which were considered as Business Support Services. The appellant argued that since they had paid the service tax on the royalty charges as per the tax invoices issued by the Monitoring Committee, they were entitled to avail CENVAT credit on the same. The appellant emphasized their bona fide purchase of iron ore and the service tax paid, asserting their right to claim the credit. The appellant relied on various legal precedents to support their argument, highlighting that once the service tax was paid, the appellant's entitlement to CENVAT credit could not be questioned.

After hearing both sides and examining the records, the Judicial Member found merit in the appellant's arguments. It was established that the appellant had indeed paid the service tax on the royalty charges for the iron ore purchased, which was utilized in the manufacturing process of Sponge Iron. Citing relevant legal precedents, the Judicial Member concluded that the appellant's entitlement to CENVAT credit could not be denied, especially when the duty had been paid correctly by the supplier of inputs. The Judicial Member emphasized that the authorities at the receiver's end could not question the classification or payment of duty made by the supplier, thereby allowing the appeal and setting aside the impugned order.

In light of the settled legal principles and the appellant's compliance with the tax obligations on the purchased iron ore, the Judicial Member ruled in favor of the appellant, overturning the decision of the Commissioner(Appeals). The judgment highlighted the importance of recognizing the appellant's right to claim CENVAT credit in accordance with the law and established precedents, ultimately providing the appellant with the necessary relief in this matter.