2024 (7) TMI 184 - AT - Central Excise

Reversal of CENVAT Credit - credit availed on the inputs and capital goods such as explosives, detonators, lubricants, components, etc. provided to the contractors for mine development work/ore production in terms of Rule 3(5) of the Cenvat Credit Rules, 2004 - extended period of limitation - interest - penalty. CENVAT Credit - HELD THAT - The appellant is right in submitting that the issue in the present case is squarely covered by the earlier decision in their own case C.C.E. S.T. UDAIPUR VERSUS M/S. HINDUSTAN ZINC LTD. 2017 (5) TMI 514 - CESTAT NEW DELHI , covering the subsequent period, where it was held that ' As such there is no removal of inputs or capital goods and there is no question of any reversal under rule 3(5) of the Cenvat Credit Rules 2004. Therefore, credit cannot be denied in this case'. On merits, following the earlier decisions of the Tribunal in Hindustan Zinc, there is no sale and no removal of inputs and capital goods when the assessee supplied the same to the contractor, which was used for mine development activity and, therefore, the provisions of Rule 3(5) are not applicable. In the circumstances, the appellant was not required to reverse the credit availed in respect of the impugned items. Merely providing the inputs and capital goods to the contractor for use within the captive mines for mine development works of the appellant does not amount to removal and thereby, do not attract the provisions of Rule 3(5) of CCR. Extended period of limitation - interest - penalty - HELD THAT - Since the issue has been decided on merits in favour of the appellant, the question of extended period of limitation, levy of interest and penalty does not survive. The impugned order deserves to be set aside - Appeal allowed.

Summary

Issues:
1. Whether the appellant is required to reverse cenvat credit availed on inputs and capital goods provided to contractors for mine development work/ore production.

Analysis:
1. The appeal arose from de novo adjudication remanded by the Tribunal to consider if providing inputs to job contractors constitutes transfer to a third party requiring reversal of cenvat credit. The Tribunal found the adjudicating authority failed to consider the contract terms, remanding the matter for fresh adjudication.

2. The issue involved whether the appellant must reverse cenvat credit on inputs and capital goods provided to contractors for mine development work. The Tribunal referred to a previous case involving similar facts and submissions, where the appellant supplied goods to contractors for mining activities. The show cause notice alleged the appellant should reverse the credit availed on these goods, leading to recovery orders.

3. The Tribunal noted that the issue was previously addressed in the appellant's case for a subsequent period. The learned counsel argued the issue was covered by the earlier decision, which the Department's representative accepted. The previous decision had ruled in favor of the appellant, stating no removal or sale occurred when supplying goods to contractors for mine development activities.

4. The Tribunal emphasized the importance of following its previous decisions, stating that the dismissal of appeals by higher forums did not affect the binding nature of its orders. It held that providing goods to contractors for mine development did not constitute removal under Rule 3(5) of the Cenvat Credit Rules, absolving the appellant from reversing the credit availed.

5. Ultimately, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant. It concluded that since no removal or sale occurred when providing goods to contractors for mine development, the provisions of Rule 3(5) did not apply. Therefore, the appellant was not required to reverse the credit availed on the supplied items, and the question of extended limitation, interest, and penalty did not apply.

This comprehensive analysis of the judgment covers the issues involved, the key arguments presented, and the Tribunal's decision based on legal principles and previous precedents.