Custom, Excise & Service Tax Tribunal
Hindalco Industries Ltd vs Ranchi on 18 July, 2024
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 76002 of 2016
(Arising out of Order-in- No. 23-26/S. Tax/Commr/2016 dated 07.03.2016 passed
by the Commissioner, Central Excise & Service Tax 5-A, Main Road, Ranchi-I-
834001)
M/s. Hindalco Industries Ltd., : Appellant
Mines Division Lohardaga
VERSUS
Commissioner of Central Excise & Service Tax, : Respondent
Ranchi-I
5-A, Main Road, Ranchi-I
AND
Service Tax Appeal No. 75390 of 2020
(Arising out of Order-in- No. 19/Central Excise/Pr. Commr/2019-2020 dated
23.03.2020 passed by the Commissioner, Central Goods & Service Tax & CX Central
Revenue Building 5-A, Main Road, Ranchi-I-834001)
M/s. Hindalco Industries Ltd., : Appellant
Mines Division, Hindalco Complex
Court Road, Lohardaga-835302
VERSUS
Principal Commissioner, CGST & Central Excise, : Respondent
Central Revenue Building,
5-A, Main Road, Ranchi, Jharkhand
APPEARANCE:
Ms. Udita Saraf, Advocate for the Appellant
Shri Deepro Sen, Advocate
Shri S. S. Chatopadhyay, Authorized Representative for the Respondent
CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NOs.76396-76397/2024
DATE OF HEARING / DECISION: 18.07.2024
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& Appeal No. ST/75390/2020
Order: [PER SHRI ASHOK JINDAL]
Both the appeals are having a common issue
and therefore, they are disposed of by a common
order.
2. The facts of the case are that the appellant is a
captive mine for M/s. Hindalco Industries Limited
[hereinafter referred to as 'Hindalco'] and engaged in
mining of Bauxite ore and also registered with the
respondents as Input Service Distributor (ISD). The
Bauxite so mined by the appellant is used by the
manufacturing units of Hindalco in Renukoot and
Muri for manufacturing of Aluminium and products of
Aluminium. In order to undertake mining activities
and provide raw materials (viz. Bauxite) to
manufacturing units, the appellant avails various
services at the mines like business auxiliary service,
GTA Service, mining service, etc., within the mines.
The service providers raised invoices on the
appellant-mines, which avails CENVAT Credit on such
input services and thereafter, the credit on such
input services is distributed to the manufacturing
units of Hindalco through ISD invoices.
3. In view of the above facts and on account of
parallel proceedings undergoing in respect of the
manufacturing units of Hindalco, Renukoot in respect
of availment of CENVAT Credit of inputs on the basis
of ISD invoices, the present proceedings were
initiated against the appellant by issuance of the
Show Cause Notices, alleging that the appellant has
irregularly availed and distributed CENVAT Credit in
violation of Rule 7(b) of the CENVAT Credit Rules,
2004 inasmuch as the appellant is engaged in
production of exempted goods.
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4. The demands proposed in the Show Cause
Notices were confirmed vide the impugned orders,
holding that the appellant-mines and manufacturing
units of Hindalco are independent entities and thus
the services received by the appellant cannot be an
input service for the manufacturing units; since
Bauxite is not yet dutiable goods, therefore,
distribution of credit by the appellant as an ISD, who
is engaged in the manufacture of such exempted
goods, is in contravention of Rule 7(b) of the
CENVAT Credit Rules, 2004. Further, it was alleged
that the appellant is not an office of the
manufacturing units of Hindalco plants at Renukoot
or Muri; that the appellant is not a manufacturer, but
engaged in the mining of Bauxite and registered as
an office of Bauxite mines; since scheme of ISD
envisages distribution of credit by an office of
manufacturer / service provider, the appellant
cannot be considered as an ISD and such distribution
of credit by the appellant is incorrect.
5. Aggrieved from the said orders, the appellant
is before us.
6. The Ld. Counsel appearing on behalf of the
appellant submits that the appellant-mines are
captive mines to the manufacturing units of
Hindalco, making both as one integrated unit. She
argued that the issue is no longer res integra as
decided in the case of Hindalco's manufacturing units
and therefore, the parallel proceedings at the end of
the mines for denial of CENVAT Credit, are not
sustainable.
6.1. It is the submission of the Ld. Counsel for the
appellant that both the mines and manufacturing
units belong to one legal entity, which is engaged in
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& Appeal No. ST/75390/2020
the manufacture of Aluminium and products of
Aluminium and therefore, these mines are captive
mines to the manufacturing units of Hindalco, being
an integral link to the manufacturing plant; the
entire quantity of Bauxite extracted from the mines
are consumed by the manufacturing units of
Hindalco for the purpose of manufacture of the final
dutiable product. In this regard, she further submits
that M/s. Hindalco Industries Ltd. is only responsible
for the overall management of the mines and
manufacturing plants and therefore, mere facilitation
by the internal division for better functioning and
administration of mines/ plants would not indicate
that the units are separate, as the appellant is an
integral part of Hindalco's manufacturing plant by
serving as captive mines supplying necessary raw
materials. It is submitted that it is settled law that
captive mines constitute one integrated unit together
with the manufacturing unit and therefore, inputs
used in the captive mines for production of dutiable
goods in the manufacturing unit would be eligible for
CENVAT Credit as held by the Hon'ble Apex Court in
the case of Vikram Cement v. Commissioner [2006
(197) E.L.T. 145 (S.C.)].
6.2. It is further submitted that if mines have direct
nexus with the manufacture of dutiable goods, then
the credit on input services availed in such mines are
eligible for distribution to manufacturing units. For
this, she relied on the following decisions:
Jubilant Life Sciences Ltd. V. CCE, Noida, 2019
(29) G.S.T.L. 319 (Tri.-All), affirmed by the
Hon'ble Supreme Court, 2019 (29) GSTL J74
(Supreme Court)
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& Appeal No. ST/75390/2020
Aurobindo Pharma Limited vs. CCT, Hyderabad
GST-2019-TIOL-3415-CESTAT-HYD
Dr. Reddy's Laboratories Ltd. v. CCE, Hyd,
2020-TIOL-1246-CESTAT-HYD
6.3. She also submitted that on parallel
proceedings initiated against the manufacturing unit
of Hindalco at Renukoot for denial of the very same
CENVAT Credit distributed by the appellant-mines at
Lohardaga, on identical grounds covering the part-
period under dispute in the present case, reported as
Hindalco Industries Ltd. V. Commissioner of Central
Excise and Service Tax, Allahabad, [2018 (10) TMI
1733], the distribution of CENVAT Credit availed by
the mines was held as admissible to the
manufacturing unit of the assessee. Therefore, it is
her contention that the appellant has rightly
distributed the CENVAT Credit.
6.4. It is their further submission that once the
eligibility of availment of CENVAT Credit on the basis
of ISD invoice at a manufacturing unit has been
settled, their does not remain any dispute on the
availment and distribution of such credit against the
appellant-mines, as ISD. She pointed out that the
said issue has been settled by this Tribunal in the
cases of Steel Authority of India Ltd. v.
Commissioner of C.G.S.T. and C.Ex., Bolpur [2023
(12) TMI 1062 - CESTAT, Kolkata] and Steel
Authority of India Ltd.v. Commissioner of Central
Excise and Service Tax, Bolpur [Final Order No.
75468 of 2024 dated 07.03.2024 in Excise Appeal
No. 71440 of 2013]
6.5. The Ld. Counsel also submitted that appellant
is an office of the manufacturing units of Hindalco
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and qualifies as an ISD in terms of Rule 2(m) of the
CENVAT Credit Rules, 2004.
6.6. It is also contended by the appellant that the
extended period of limitation is not invokable in the
facts and circumstances of these cases.
7. On the other hand, the Ld. Authorized
Representative appearing on behalf of the Revenue
supported the impugned orders.
8. Heard the parties and considered their
submissions.
9. We find that the issue involved in the matter
has been considered by this Tribunal in the case of
Steel Authority of India Ltd.v. Commissioner of
Central Excise and Service Tax, Bolpur vide Final
Order No. 75468 of 2024 dated 07.03.2024 wherein
the facts of the case were as under: -
"2. The facts of the case are that the
Appellant is a manufacturing unit of Steel
Authority of India Ltd. (hereinafter referred
to as 'SAIL') engaged in the manufacture of
Iron and Steel products classifiable under
Chapters 72 and 73 of the Central Excise
Tariff Act, 1985. The main raw materials viz.
iron ore, manganese required for the
manufacture of the final products are
procured by the Appellant from Gua and
Manoharpur mines, which are also part of the
legal entity of SAIL. The abovementioned
captive mines of SAIL were under the control
of Raw Material Division for administrative
convenience. However, with effect from
2021, the raw material division was dissolved
and thus, such captive mines are under
administrative control of the manufacturing
unit as per the location of the captive mines
and respective manufacturing units. The
mines cater to the raw material requirement
of the various manufacturing units of SAIL
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including the Appellant's plant. In case of
excess amount of raw material, the same is
also sold to the other steel plants. The mines
avails various services at the mines like
Cargo handling, mining service, security
services, etc. within the mines. These service
providers raise invoice in favour of the mines
and subsequently such mines avails credit of
input services. Thereafter, the credit of such
service is distributed to the manufacturing
units of the SAIL through ISD invoices.
2.1 Proceedings were initiated against the
Appellant vide issuance of a Show Cause
Notice dated 29.08.2012. It has been alleged
that the Appellant has availed CENVAT Credit
on the strength of ISD invoices issued by the
mines, which produce iron ore/manganese,
which are not chargeable to excise 3 Appeal
No.: E/71440/2013-DB duty nor do the
mines provide any taxable output services.
Since the said mines are exempted from duty
payment and also not an office of the
Appellant but under the administrative
control of the SAIL RMD, therefore it is
alleged that the mines are not eligible to
distribute credit as ISDs in terms of Rule
2(m) of the CENVAT Credit Rules, 2004.
Accordingly, the Notice proposed to recover
CENVAT Credit amounting to Rs.
17,76,34,847/- from the Appellant, along
with interest and equivalent penalty. The said
Show Cause Notice was adjudicated and the
demands raised in the Notice were confirmed
by the Ld. Commissioner of Central Excise,
along with interest and penalty, vide the
impugned order dated 18.09.2013 issued on
24.09.2013."
and this Tribunal had held as under: -
"5. We find 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, reported as Steel
Authority of India Ltd. v. Commissioner of
CGST & CE, 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
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& Appeal No. ST/75390/2020
present appeal covers the period 2006-07 to
2011-12 (up to June 2012), for the same unit.
The relevant part of the said decision is
reproduced below:-
"7. We observe that the issue to be decided in
the present appeal is whether the Appellant is
eligible to avail CENVAT Credit of input
services relating to captive mines, which is
distributed to the Appellant vide ISD invoices.
We find that both the mines as well as the
manufacturing unit belongs to one legal entity
i.e. SAIL, which is engaged in manufacture of
Steel. The subject mines are set up primarily
to serve as captive mines to manufacturing
units of SAIL and thus bears an integral link to
steel plants. We observe that the input
services like security service, mining service,
transportation etc used by the captive mines
bears a direct nexus with Appellant's units
manufacturing final products i.e. Steel. Hence,
such services are very well covered within the
scope of the definition of 'input services'. Rule
3 of CCR does not mandate that for the
purpose of availment of credit on input
services, such services should be received
within the premises where manufacture of final
product takes places but only provides that
services should be used in or in relation to the
manufacture of final products. Thus, we find
that the Appellant is entitled to avail credit of
service tax paid on input services received at
the mines, which serves as an intermediate
product for manufacture of final product i.e.
steel items.
8. We observe that the Issue is no longer res
integra as this Tribunal on identical facts and
circumstances has decided the same issue in
favour of the Appellant in the case of Usha
Martin Ltd. v. CCE, Jamshedpur, 2023 (6) TMI
1153 - CESTAT Kolkata. The relevant paras of
the said decision are reproduced below:
...........
9. By relying on the decision cited above we hold that the Appellant is eligible to avail CENVAT Credit of input services relating to captive mines, which is distributed to the Appellant vide ISD invoices. Hence, we hold the demand of reversal of Cenvat credit along Page 9 of 10 Appeal No.: ST/76002/2016-DB & Appeal No. ST/75390/2020 with interest and penalty confirmed vide the impugned order dated 30.09.2019, is not sustainable."
6. In view of the above discussions, we hold that the mines and the Appellant's manufacturing unit belongs to one legal entity, which is engaged in manufacture of dutiable goods. Therefore, we hold that 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, we hold that the distribution of credit by captive mines as ISD is in accordance with the provisions of law.
7. In view of the above discussions, we set aside the demands of service tax along with interest and penalty confirmed in the impugned order and allow the appeal filed by the appellant."
9.1. As the issue has already been settled by this Tribunal in the case of Steel Authority of India Ltd. (supra), we observe that the mines and the manufacturing unit belong to one legal entity, which is engaged in the manufacture of dutiable goods viz. Aluminium products. Therefore, we hold that the distribution of credit by the mines, being ISD, is in terms with the provisions of Rule 7(b) of the CENVAT Credit Rules, 2004. Accordingly, the distribution of credit by the appellant as an ISD is in accordance with the provisions of law and thus the CENVAT Credit has rightly been distributed by the appellant. In view of this, the demands proposed in the Show Cause Notices against the appellant are not sustainable.
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10. In view of this, we set aside the impugned orders and allow the appeals with consequential relief, if any.
(Dictated and pronounced in the open court) (ASHOK JINDAL) MEMBER (JUDICIAL) (K. ANPAZHAKAN) MEMBER (TECHNICAL) rkp