2017 (5) TMI 514 - AT - Central Excise

Reversal of CENVAT credit - inputs and capital goods such as explosives, lubricants, detonators, components etc. provided to contractors for mine development work/ore productions - whether the explosives, lubricants, detonators, pipes and rods on which Cenvat Credit was availed and supplied to various outsource companies who undertake the mining activities is correct or the respondent is required to discharge the Cenvat Credit on such goods? Held that - the adjudicating authority after recording the entire issue of how the contracts have been signed by the respondent with their clients for mining activity and also provision of rule 3(5) of the Cenvat Credit Rules recorded that the SCN itself admits that the goods have been used for undertaking mining activities on behalf of the assessee. 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 - In the absence of any evidence to show that these goods were never used in the mining area of the respondent, the findings recorded by the adjudicating authority are correct and there is no need for interference in such reasoned order - credit remains allowed. Reliance placed in the case of C.C.E., Raipur Versus Bhilai Steel Plant 2017 (1) TMI 293 - CESTAT NEW DELHI , where it was held that no amount is required to be paid under Rule (4) on capital goods as there has been no removal. Appeal dismissed - decided against Revenue.

Summary

Issues:
Demand of reversal of Cenvat Credit availed on inputs and capital goods provided to contractors for mine development work / ore productions.

Analysis:
The appeal challenged the demand for reversal of Cenvat Credit availed on inputs and capital goods provided to contractors for mining activities. The Revenue issued show cause notices alleging improper Cenvat Credit availment on goods sold. The adjudicating authority concluded that the proceedings were incorrect, as the goods were used exclusively for the respondent's work, no physical removal occurred, and the goods were essential for mining activities. The authority rejected the Revenue's reliance on a High Court judgment and found no evidence that the goods' cost was recovered from contractors. The Revenue appealed this decision.

The grounds of appeal focused on the provision of goods to contractors and the applicability of Cenvat Credit Rules. The Revenue argued that the contractors were independent legal entities, not involved in manufacturing, and the goods were essential for the contracted services. The respondent's counsel supported the authority's decision, emphasizing the absence of physical removal of goods and citing relevant case law to support their position.

Upon review, the Tribunal identified the central issue as whether the Cenvat Credit availed on goods supplied to mining contractors was correct or if the respondent should discharge the credit. The Tribunal examined the findings of the adjudicating authority, which highlighted that the goods were used for mining activities within the respondent's premises, and no evidence suggested non-usage. The Tribunal found no dispute regarding the goods' consumption within the mining area, supporting the authority's decision.

The Tribunal referenced prior judgments to support its decision. In the case of Bhilai Steel Plant, it was held that no payment was required if there was no physical removal of goods. Similarly, in the case of Steel Authority of India Ltd., the Tribunal ruled in favor of the appellants, emphasizing that the goods were fully utilized within the factory premises. Based on these precedents and the factual findings, the Tribunal upheld the authority's decision, rejecting the Revenue's appeal. The judgment was pronounced on 09.05.2017 by the Tribunal members, Shri. M. V. Ravindran and Shri V. Padmanabhan.