2017 (7) TMI 477 - AT - Central Excise

CENVAT credit - GTA service on iron ore and coal - Revenue is of the view that the respondent should have reversed the input service credit on the ground that the iron ore fines and coal fines were not used in the manufacture of final products - Held that - the issue is no more res integra in view of the decision of the Tribunal in the case of Seven Star Steels Ltd. v. Commissioner of C.Ex., Cus. & S.T., BBSR-II 2013 (5) TMI 119 - CESTAT KOLKATA , where it was held that There is no such provision to reverse credit of service tax availed in relation to such inputs or capital goods when removed from the factory - appeal dismissed - decided against Revenue.

Summary

Issues:
- Availment of Cenvat Credit on iron ore and coal used in the manufacture of sponge iron.
- Reversal of input service credit on iron ore fines and coal fines not used in final product.
- Adjudication order confirming Service Tax demand, interest, and penalty.
- Commissioner(Appeals) setting aside Adjudication order and allowing appeal of respondents.
- Tribunal's decision based on precedents of Seven Star Steels Ltd., Chitrakoot Steel & Power Pvt. Ltd., and M/s. Sponge Udyog Pvt. Ltd.

Analysis:

1. Availment of Cenvat Credit: The respondent, engaged in manufacturing sponge iron, availed Cenvat Credit on iron ore and coal used in the manufacturing process. The Revenue contended that input service credit should have been reversed as iron ore fines and coal fines generated during the process were sold and not used in the final product. The Adjudicating Authority confirmed the demand for Service Tax, interest, and penalty.

2. Reversal of Input Service Credit: The Commissioner(Appeals) set aside the Adjudication order and allowed the appeal of the respondents. The Tribunal, after hearing both sides and perusing the records, referred to the decision in the case of Seven Star Steels Ltd. The Tribunal analyzed that the iron ore fines and coal fines generated but not used in the final product did not require the reversal of Cenvat credit availed on GTA services. The Tribunal emphasized that Rule 3(5) of the Cenvat Credit Rules, 2004, pertains to inputs or capital goods and is not applicable to input services.

3. Precedents and Tribunal's Decision: The Tribunal cited precedents like Chitrakoot Steel & Power Pvt. Ltd. and M/s. Sponge Udyog Pvt. Ltd. to support its decision. These cases highlighted that there is no provision to reverse the credit of service tax availed on inputs or capital goods when removed from the factory. The Tribunal concluded that the consistent view taken in previous cases did not support the reversal of input service credit in the present case. Consequently, the Tribunal dismissed the appeal filed by the Revenue, upholding the decision of the Commissioner(Appeals) in favor of the respondents.

This detailed analysis of the judgment showcases the application of legal principles, precedents, and interpretations of relevant rules in determining the outcome of the appeal before the Tribunal.