2024 (11) TMI 1174 - AT - Central Excise

CENVAT Credit of input services relating to captive mines - Input Service Distributor (ISD) - distribution of credit by the captive mines to the manufacturing units of the SAIL through ISD invoices - HELD THAT - The issue is no longer res integra as this Tribunal has already decided the same issue in their own case for the period June 2016 to June 2017, in M/S STEEL AUTHORITY OF INDIA LIMITED VERSUS COMMISSIONER OF CGST CENTRAL EXCISE, BOLPUR 2023 (12) TMI 1062 - CESTAT KOLKATA , wherein, on similar facts, it has been held by this Tribunal that the Appellant is entitled to avail CENVAT Credit of input services relating to captive mines. The present appeal covers the period 2006-07 to 2011-12 (up to June 2012), for the same unit. The mines and the Appellant s manufacturing unit belongs to one legal entity, which is engaged in manufacture of dutiable goods. Therefore, the observation given by the Ld. Commissioner that distribution of credit by the mines is in contravention of Rule 7(b) of the CENVAT Credit Rules is legally not tenable. Thus, the distribution of credit by captive mines as ISD is in accordance with the provisions of law. The demands of service tax along with interest and penalty confirmed in the impugned order set aside - appeal allowed.

Summary

Issues:
1. Whether the Appellant is entitled to avail CENVAT Credit of input services relating to captive mines.
2. Whether the distribution of credit by the captive mines as Input Service Distributor (ISD) is in accordance with the law.

Analysis:

Issue 1:
The appeal was filed against an Order-in-Original confirming the demand of service tax, interest, and penalty by the Commissioner of Central Excise and Service Tax. The Appellant, a manufacturing unit of Steel Authority of India Ltd. (SAIL), procured raw materials from captive mines under SAIL's control. The Appellant availed CENVAT Credit based on ISD invoices issued by the mines. The Commissioner alleged that since the mines were exempt from duty payment and not under the Appellant's office but SAIL's administrative control, they were not eligible to distribute credit. The Appellant argued that captive mines are integral to manufacturing units and inputs used in captive mines for production of dutiable goods are eligible for credit. The Tribunal, referring to previous decisions, held that the Appellant is entitled to avail CENVAT Credit of input services from captive mines.

Issue 2:
The Tribunal found that the Appellant and the mines belong to one legal entity engaged in manufacturing dutiable goods. The Tribunal held that the distribution of credit by the mines as ISD is in accordance with the law. It was concluded that the Commissioner's observation that the distribution of credit by the mines contravened Rule 7(b) of the CENVAT Credit Rules was legally untenable. Consequently, the Tribunal set aside the demands of service tax, interest, and penalty confirmed in the impugned order and allowed the appeal filed by the Appellant.

The Tribunal's decision was based on the integral link between the captive mines and the manufacturing unit, allowing the Appellant to avail CENVAT Credit of input services from the mines and confirming the legality of the credit distribution by the mines as ISD.