Custom, Excise & Service Tax Tribunal
M/S.Indian Steel & Power Pvt.Ltd vs Cce, Raipur on 26 October, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
SINGLE MEMBER BENCH
Court No.III
Appeal No. E/50164/2015-SM
(Arising out of OIA No.217/RPR-I/2014 dt.1.09.14 passed by CCE(A), Raipur)
Date of Hearing: 14.10.2015
Date of Order:26.10.2015
For approval & Signature:
Honble Smt.Sulekha Beevi C.S., Member (Judicial)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether their Lordships wish to see the fair copy of the order?
seen
4.
Whether order is to be circulated to the Department Authorities?
Yes
M/s.Indian Steel & Power Pvt.Ltd. Appellant
Vs.
CCE, Raipur Respondent
Appearance:
Present for the Appellant: Shri Manish Saharan, Advocate Present for the Respondent: Shri R.K.Mishra, AR Coram: Honble Smt.Sulekha Beevi C.S., Member (Judicial) Final Order No.53237/2015 Per: Sulekha Beevi C.S. The appellants are engaged in the manufacture of sponge iron and are also availing credit on inputs, capital goods and input service. The appellants send the raw material (Iron Ore) to job worker to crush and make the iron ore into desired size usable in the manufacture of sponge iron. During the period from 2008-09 to 2012-13 (upto January, 2013), the appellants had availed input credit of service tax paid on the crushing charges of 20978.92 MT of iron ore. After crushing the appellant had received back only 14915.69 MT of iron ore for use in the manufacturing of their finished goods as some quantity after crushing results in waste which is not usable in the manufacture. The department observed that there is shortage of 6063.23 MT of iron ore from the job worker and this quantity has not been used in the factory of the appellants for manufacture of final products. Therefore that the service tax credit with regard to the quantity on short receipt of iron ore is not admissible. A show cause notice raising the above allegation was issued to the appellant which finalized in the order in original which confirmed the demand, interest and penalty. In appeal, the Commissioner (Appeals) upheld the same. Aggrieved, the appellant is before the Tribunal.
2. Learned Counsel for the appellants submitted that in the process manufacture of sponge from the iron ore, the raw material is to be crushed into lumps of desired size. The raw material cannot be directly used in the production stream. In order to make raw materials into iron ore lump suitable for manufacture, the appellant sends the raw material to job worker. The job worker crushes the entire raw material and sends back the iron ore lumps suitable for manufacture to the factory of the appellant. The job worker receives charges for service of crushing the iron ore and service tax is also paid by the appellant. The appellant then availed credit of service tax paid on the input services. During the process of crushing some portion turns out to waste which cannot be used for manufacture of sponge iron. The credit is denied by department by referring to sub-rule (5) of Rule 2 of Cenvat Credit Rules, 2004. Learned counsel urged that this Rule speaks about capital goods. He placed reliance on the judgement in A.R.Casting Pvt.Ltd. vs.CCE, Chandigarh-2010 (256) ELT 420 (Tri.-Del.) and Bansal Alloys & Metals Ltd. vs. CCE, Chandigarh-2010 (250) ELT 529 (Tri.-Del.).
3. Per contra, learned DR reiterated the findings in the impugned order. He submitted that the entire quantity of raw materials sent for job work is not received back in the factory of the appellant for manufacture of final products. Therefore, the input service tax credit which pertained to short receipt of quantity of 6063.23 MT of iron ore is not admissible to the appellants in terms of Rule 3(5) of Cenvat Credit Rules, 2004. He relied upon the decision in Mukund Limited vs. CCE, Mumbai-III-202 (150) ELT 168 (Tri.Mum.).
4. Heard both sides and perused the records.
5. The appellant has availed input service tax credit in respect of crushing of raw materials/iron ore which was supplied to the service provider/job worker for the process of crushing. After crushing some portion becomes waste/unfit for use in manufacture of final products. The remaining portion is received back in the factory and used in manufacture of final products. According to Revenue, cenvat credit is not admissible on that quantity which is not received back in the factory being unfit for use in manufacture. This view of the Revenue does not appear to be convincing. It is not in dispute that in the process of crushing of iron ore, some quantity of iron ore changes to waste unfit for use in manufacture. It is impossible for the appellant to segregate and ascertain how much quantity would turn out to be waste or unfit for use in manufacture in the process of crushing. The segregation of the quantity unfit for manufacture happens only after the process of crushing. The appellant has to send the entire quantity of raw materials and pay charges for the services alongwith service tax. It is the discretion of the manufacture either to purchase iron and get it crushed to get the lumps or to directly purchase iron ore lumps suitable for manufacture depending on the type of the plant and machinery installed. Undeniably, iron ore lumps are costlier than iron ore as such. It is the choice of the manufacturer to obtain iron ore and get into crushed lumps. Therefore, disallowance of credit on the ground that short quantity is not used in or in relation to the manufacture of final products, is not sustainable. Further, Rule 3(5) of Cenvat Credit Rules ,2004 speaks about inputs and capital goods and does not mention input service. In A.R. Casting (P) Ltd. (Supra), the Tribunal has observed that as under:-
From the plain reading of this sub-rule, it is clear that what is required at the time of removal of any inputs, as such, in respect of which Cenvat credit has been taken, is that an amount equal to the credit availed in respect of such inputs is to be paid. The credit availed in respect of inputs would be only the credit of duties of excise, as there is no mention in this rule that in addition to the credit of the duty of excise, the credit of service tax in respect of services availed in bringing those goods to the factory is also required to be paid. The word inputs covers only the input goods, not the input services. I find that same view has been taken by the Tribunal in the case of Chitrakoot Steel & Power Ltd. v. CCE, Chennai (supra). In view of this, the impugned order is not sustainable. The same is set aside. The appeal is allowed.
6. In Mukund Ltd. case (supra) which is placed before me by the departmental representative the issue is with regard to credit on inputs and facts being different is not applicable or relevant to the case in hand. In view of the above discussion, and following the proposition laid in the above judgement laid in A.R.Castings (P) Ltd. case, I am of the view that denial of credit is unsustainable. In the result, the impugned order, is set aside and the appeal is allowed.
(pronounced in the open court on 26.10.2015) (Sulekha Beevi C.S.) Member (Judicial) mk 5