2016 (12) TMI 720 - AT - Central Excise

CENVAT credit - Manufacture of cement - The appellant is availing credit of the taxes paid on the coal as also on various services utilized by them for bringing the coal in their factory - Held that - I find that admittedly the service tax stand paid by the washery on the full valued coal received by them. The appellant has taken the credit of the service tax paid by the washery. It is well settled law that the amounts cannot be challenged at the service recipient end and whatever tax has been paid by the service provider, would be available as credit to the service recipient - Otherwise also I find that an identical issue was considered by the Tribunal in the case of M/s Real Ispat & Power Ltd. vs. CCE, Raipur 2016 (4) TMI 327 - CESTAT NEW DELHI , the entire credit was held as admissible, irrespective of the wastage having occurred at the end of the coal washery. Further Tribunal in the case of Seven Star Steels Ltd. vs. CCE, CUS & ST, BBSR - II 2013 (5) TMI 119 - CESTAT KOLKATA has held that the fact of loss of Iron Ore during the process of screening, when screening process is a part of the manufacturing process, cannot result in denial of part amount of Cenvat credit. The appellants have also contended that the washing process can be undertaken by them in their own factory, in which case the entire credit would be available to them. As such, I find no justifiable reasons to deny a part of the credit, as has been done by the Adjudicating Authority. Appeal allowed - decided in favor of appellant-assessee.

Summary

Issues Involved:
- Denial of proportionate credit of service tax paid on services provided by washeries
- Discrepancy in quantity of raw coal sent and received after washing
- Admissibility of Cenvat credit on the entire value of washed coal
- Applicability of service tax credit to the service recipient

Analysis:
1. The appellant, engaged in cement manufacturing, availed credit of taxes paid on coal and services used to bring coal to the factory. The coal required washing to remove impurities, done by job workers (washer) outside the factory, amounting to Business Auxiliary Services taxable under service tax.

2. Processing of raw coal in washeries led to a loss of quantity due to impurity removal, resulting in the appellant receiving less washed coal than raw coal sent. Invoices raised by washeries included service tax on the entire value, leading to a show cause notice proposing denial of proportionate credit due to quantity discrepancy.

3. The Commissioner confirmed a demand along with interest and penalty, citing that rejects retained by washeries affected the beneficiation rate, disallowing Cenvat credit related to the quantity discrepancy. The appeal contested this decision.

4. The tribunal found that the service tax was paid on the full value of coal received by the washeries, making the credit available to the appellant. Precedents were cited where credit was allowed despite wastage during processing, emphasizing that the appellant could have undertaken washing in their own factory to claim full credit.

5. Relying on legal principles and past judgments, the tribunal set aside the impugned order, allowing the appeal and granting consequential relief to the appellant. The decision emphasized that the service provider's tax payment entitles the service recipient to credit, rejecting the denial of credit based on processing losses.

6. The judgment, delivered on 06/10/2016, resolved the issues of credit denial and quantity discrepancy in favor of the appellant, highlighting the applicability of service tax credit to the recipient and the availability of full credit despite processing losses.