Custom, Excise & Service Tax Tribunal
Udaipur vs Hindustan Zinc Limited on 19 June, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi - 110 066.
Principal Bench, New Delhi
COURT NO. III
DATE OF HEARING : 19/06/2018.
DATE OF DECISION: 19/06/2018.
Excise Appeal No. 51149 of 2018 (SM)
[Arising out of the Order-in-Appeal No. 86-87 (CRM)
CE/JDR/2017-18 dated 12/02/2018 passed by The
Commissioner, Central Excise and CGST Commissionerate,
Udaipur.]
CCE, Udaipur Appellant
Versus
M/s Hindustan Zinc Limited Respondent
Appearance
Shri H.C. Saini, Authorized Representative (DR) - for the
appellant.
Shri Dhruv Tiwari, Advocate - for the Respondent.
CORAM: Hon'ble Shri Ajay Sharma, Member (Judicial)
Final Order No. 52328/2018 Dated : 19/06/2018
Per. Ajay Sharma :-
The above mentioned appeal has been filed from the
impugned order dated 12/02/2018 passed by the Commissioner,
CGST, Jodhpur.
2. The respondent is engaged in the manufacture of Lead and
Zinc Concentrates, Zinc Cathode & Sulphuric Acid falling under
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Chapter 26, 79 and 28 of the First Schedule of Central Excise
Tariff Act, 1985. During the period from March, 2012 to
November, 2012, the respondent had availed Cenvat credit of
service tax amounting to Rs.33,75,904/- (Rs.32,77,576/- ST +
Rs.65552/- Ed.Cess + Rs.32776/- H.Ed.Cess), paid by them for
the services received by them for raising the height of tailing
Dam for disposal of Industrial Waste in compliance with the
requirement of Environmental laws. According to the department,
since the aforesaid services received by the respondent could not
be termed as input service therefore the respondent had wrongly
availed Cenvat credit in contravention of the provisions of Rules
2(l) and 3 of Cenvat Credit Rules, 2004. Accordingly a show
cause notice dated 07/08/2014 readwith corrigendum dated
12/12/2014 was issued to the Respondent.
3. The Adjudicating Authority vide Order-in-Original dated
09/01/2015 held that the respondent have wrongly availed
Cenvat credit amounting to Rs.33,75,904/- in contravention of
provisions of Rule 2(1) and 3 of Cenvat Credit Rules, 2004 and
passed the following order:-
(i) ―I disallow input service credit amounting to Rs.
33,75,904/- (Rupees Thirty Three Lacs Seventy Five
Thousand Nine Hundred Four only) and order recovery
of the same under Rule 14 of Cenvat Credit Rules,
2004 readwith Section 11A (10) of Central Excise Act,
1944 from M/s Hindustan Zinc Ltd., Sindesar Khurd
Mines, P.O. Dariba, Distt. Rajsamand.
(ii) I order recovery of interest on the amount f above
disallowed input service credit from M/s Hindustan Zinc
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Ltd., Sindesar Khurd Mines, P.O. Dariba, Distt.
Rajsamand under Rule 14 of Cenvat Credit Rules, 2004
readwith Section 11AB (prior to 08/04/2011) and 11AA
(w.e.f. from 08/04/2011) of Central Excise Act, 1944.
(iii) I impose penalty of Rs. 33,75,904/- (Rupees Thirty
Three Lacs Seventy Five Thousand Nine Hundred Four
only) upon M/s Hindustan Zinc Ltd., Sindesar Khurd
Mines, P.O. Dariba, Distt. Rajsamand under Rule 15 (2)
of Cenvat Credit Rules, 2004 readwith Section 11AC of
Central Excise Act, 1944. However, if the amount of
Cenvat credit as determined under Section 11A (2) and
the interest payable thereon under Section 11AB and
11AA (w.e.f. 08/04/2011 substituted by Section 11AA)
is paid within thirty days from the date of
communication of this order, the amount of penalty
liable to be paid shall be twenty five percent of duty
ordered to be recovered above. However, this benefit
of reduced penalty shall be available only if the amount
of such reduced penalty has also been paid within the
period of thirty days referred above‖.
4. On appeal, the learned Commissioner vide impugned order
dated 12/02/2018 allowed the appeal filed by the respondent and
set aside the Order-in-Original dated 09/01/2015.
5. I have heard learned AR for the department and learned
Counsel for the respondent and perused the record of the case.
The issue involved in this matter is whether the services received
for raising of height of tailing dam can be treated as ‗input
service' in terms of Rule 2(l) of the Cenvat Credit Rules, 2004.
Before proceeding further in the matter it is pertinent to have a
look at Rules 2(l) and 3 of Cenvat Credit Rules, 2004 which are
extracted as under:-
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Rule 2 (l) of the Cenvat Credit Rules, 2004 as under :-
[(l) ―input service‖ means any service, -
(i) used by a provider of [output service] for providing an
output service; or
(ii) used by a manufacturer, whether directly or indirectly, in
or in relation to the manufacture of final products and clearance
of final products upto the place of removal,
and includes services used in relation to modernisation,
renovation or repairs of a factory, premises of provider of output
service or an office relating to such factory or premises,
advertisement or sales promotion, market research, storage upto
the place of removal, procurement of inputs, accounting,
auditing, financing, recruitment and quality control, coaching and
training, computer networking, credit rating, share registry,
security, business exhibition, legal services, inward
transportation of inputs or capital goods and outward
transportation upto the place of removal;
[but excludes], - ..........‖
RULE 3. CENVAT credit. -- (1) A manufacturer or producer of
final products or a [provider of output service] shall be allowed
to take credit (hereinafter referred to as the CENVAT credit) of -
.........
(ix) the service tax leviable under section 66 of the Finance Act; [* * *] [(ixa) the service tax leviable under section 66A of the Finance Act;] [(ixb) the service tax leviable under section 66B of the Finance Act;]
(x) the Education Cess on taxable services leviable under section 91 read with section 95 of the Finance (No. 2) Act, 2004 (23 of 2004);
[(xa) the Secondary and Higher Education Cess on taxable services leviable under section 136 read with section 140 of the Finance Act, 2007 (22 of 2007); and] [(xi) the additional duty of excise leviable under [section 85 of Finance Act, 2005 (18 of 2005),]] :
paid on -
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(i) any input or capital goods received in the factory of manufacture of final product or [by] the provider of output service on or after the 10th day of September, 2004; and
(ii) any input service received by the manufacturer of final product or by the provider of output services on or after the 10th day of September, 2004, ............‖
6. According to learned AR, after 01/04/2011 the construction services were excluded from the definition of ‗input service'.
Therefore the services received by the respondent in relation to raising of height of tailing Dam at Sindesar Khurd Mines, Dariba for disposal of industrial waste are not covered under the scope of definition of ‗industrial service' Thus the Cenvat Credit on the said service are not admissible to the respondent. He further submitted that after going through the definition of ‗input service' given under Rule 2(l) of Cenvat Credit Rules, 2004 during the relevant period, it is clear that raising of height of tailing Dam at Sindesar Khurd Mines, Dariba for disposal of industrial waste are not services used directly or indirectly and in or in relation to the manufacture of final product since these were not related to process of manufacture, but these were used for collection of waste by the respondent for a different purpose, that is compliance of requirement of Environmental laws. According to him the definition covers only the ‗activities' which are essentially required directly or indirectly for manufacture of the final product.
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7. The learned Counsel for the respondent reiterated the findings of the learned Commissioner (Appeals) and submitted that the Cenvat Credit of Service tax paid on the services received for raising the height of tailing dam is admissible to the respondents. He further submitted that the issue of admissibility of input service credit relating to raising the height of tailing dam for disposal of Industrial and hazardous waste, is squarely covered by the decision of Division Bench of this Tribunal in Respondent's own case vide Final Order No. A/53619- 53620/2017-EX[DB], dated 29.5.2017 and also the order dated 07/02/2018 of this Tribunal in another case of the respondent vide Final order No. 50572-50573/2018 in which this Tribunal allowed the input service credit in respect of services for fabrication and erection work at tailing dam. He further submitted that the Cenvat credit has been rightly availed by the respondent on services in relation to raising the height of tailing dams used for disposal of hazardous industrial waste as the same is essentially/integrally connected with the manufacturing process, thus qualifying as an eligible input service under Rule 2(l) of the Cenvat Credit Rules, 2004.
8. It is an admitted fact that the services in question availed by the respondent in relation to the raising height of tailing dam are used essentially for the purposes of disposal of hazardous waste, in compliance with the Environmental laws. Without complying with the said environmental laws, the respondent couldn't carry out the manufacturing process and cannot run the 7 EX/51149 of 2018 factory. Therefore the services received for raising the height of tailing dam for disposal of industrial waste are integrally connected with the manufacturing of finished products by the respondent. It is basic requirement of environment laws that no waste can be discharged on open land. Disposal of waste generated is required to be complied with as per the norms of Pollution Control Board. There is no allegation that the services received for raising the height of tailing dam were being used for other purpose than collecting the waste generated during the manufacturing process. The tailing dam is used for collecting residue of plant generated during the beneficiation process and the same is an integral part of process of manufacture. Therefore the service received for rising of height of tailing dam falls under the scope of „input service‟ as defined under Rule 2(l) of the Cenvat Credit Rules, 2004 and as per Rule 3 of the Cenvat Credit Rules, 2004, a manufacturer or producer of final product is allowed to take credit of service tax paid on any „input service‟ received by them.
9. On an identical issue in respondent's own case, this Tribunal in Excise Appeal Nos. 50958 & 50636 of 2014, titled as M/s. Hindustan Zinc Limited vs. CCE, Jaipur-II, vide Final Order No. A/53619-53620/2017-EX[DB], dated 29/05/2017 held that the Cenvat credit in dispute is allowable to the respondent and recorded as under:-
".............
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8. Having considered the rival contentions, we find that the appellant assessee cannot operate their business or manufacturing facility of dutiable/ excisable goods without compliance with the directions given by the State Pollution Control Board to minimise the pollution under the relevant Pollution Control Laws. Compliance with the directions of the State Pollution Control Board if not done by the appellant industry, may result in prosecution of the appellant company and its key personnel under the various Pollution Control Laws for violation. Accordingly, we hold that the Cenvat credit received on the services for raising the height of tailing dam and maintenance service for pipeline work of tailing dam, used for disposal of industrial waste and polluted water in compliance with Environment Laws is in input service within the meaning of Rule 2(l) of Cenvat Credit Rules, 2004 used by the manufacturer indirectly in or in relation to the manufacture of final products and clearance of final products from the place of removal. Similarly, the Cenvat credit on services procured for construction of secured land fill and jerofix storage pond, which are used for disposal of industrial waste and polluted water in compliance with Environmental laws is an input service received by the manufacturer indirectly in relation to the manufacture of final products. Accordingly, we hold that the Cenvat credit in dispute is allowable to the appellant. Accordingly we allow these appeals and set aside the impugned orders. The appellant shall be entitled to consequential relief, if any."
10. In view of the discussions in the preceding paragraphs and also in view of the order of this Tribunal in respondent's own 9 EX/51149 of 2018 case, the appeal filed by the department is devoid of merit and is accordingly dismissed.
(Operative part of the order pronounced in the open court.) (Ajay Sharma) Member (Judicial) PK