2013 (7) TMI 499 - AT - Central Excise

Cenvat Credit - On Input Services of GTA Services for the manufacture of lead, zinc and other metal concentrates falling under Chapter 26 of the Central Excise Tariff Credit availed of service tax paid on freight for procurement of cement under Goods Transport Agency service - Cement not eligible input and therefore freight charges paid for inward transportation of cement not be treated as input service utilised for manufacture of final product and as such, credit availed by the respondent is not admissible - Held that - Under Rule 2(l) of the Cenvat Credit Rules means, input service used in relation to setting up, modernization, renovation or repairs of the factory. As per the decision of the Supreme Court in the case of Vikram Cement 2006 (2) TMI 1 - Supreme court the mines are to be treated as factory area. Therefore transportation of cement used for repair/ renovation within the mines is very much under this definition of input services - Cenvat credit in respect of GTA services for bringing the cement inside their factory allowed Decided against the Revenue.

Summary

Issues:
1. Eligibility of credit availed by the respondent for service tax paid on freight for procurement of cement under Goods Transport Agency service.
2. Interpretation of Cenvat Credit Rules in relation to the definition of input service.
3. Whether transportation charges for bringing cement inside the mines for repair/renovation purposes qualify as input services.
4. Applicability of the definition of input services in the context of the mines being considered part of the factory area.

Analysis:
1. The appeal was filed by the Revenue against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals) concerning the eligibility of credit availed by the respondent for service tax paid on freight for cement procurement under Goods Transport Agency service. The department contended that cement is not an eligible input, thus the credit for freight charges is inadmissible, leading to the issuance of a Show Cause Notice for recovery of credit and penalties.

2. The Revenue argued that the Commissioner (Appeals) did not correctly interpret the Cenvat Credit Rules, claiming that the credit availed by the respondent was not in accordance with the rules. The Revenue sought to challenge the impugned order on the basis of the inadmissibility of service tax paid on transportation charges for bringing cement inside the premises.

3. The respondent's advocate countered by explaining that cement was utilized in the mines for filling cavities created during mining activities, which are essential for further operations within the factory area. He argued that the transportation charges were incurred for bringing cement into the mines for repair/renovation purposes, citing a Supreme Court decision that mines are considered part of the factory area.

4. Upon examination, the judge found that the definition of input service under Rule 2(l) of the Cenvat Credit Rules includes services used in relation to setting up, modernization, renovation, or repairs of the factory. Referring to the Supreme Court decision regarding mines being treated as part of the factory area, the judge concluded that transportation of cement for repair/renovation within the mines falls within the definition of input services. Consequently, the judge upheld the Order-in-Appeal, rejecting the Revenue's appeal and affirming the admissibility of Cenvat credit for GTA services related to bringing cement inside the factory.