Cenvat Credit Taken on Capital Goods is Valid as it has been Availed for Providing Output Service: CESTAT [Read Order]

In a recent ruling, the Kolkata bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that Cenvat Credit taken on capital goods is valid as it has been availed for providing output service.

M/s. Emta Coal Limited, the appellant was engaged in the business of raising coal from coal mines of, inter alia, Bengal Emta Coal Mines Limited in Jamuria and adjacent areas in the state of West Bengal and/or Karnataka Emta Coal Mines Limited in the state of Maharashtra. The appellant was registered in terms of section 69 of the Finance Act, 1994 read with rule 4 of the Service Tax Rules, 1994.

The appellant initially started providing mining services at Tara (East and West) OCP of Bengal Emta Coal Mines Limited. Thereafter, the appellant extended providing mining services to Baranj Mines of Karnataka Emta Coal Mines Limited in the state of Maharashtra under the same registration number. The appellant, therefore, had two different premises where it was providing output services, but had one registered office at Tara (East and West) OCP.

The appellant imported capital goods, on payment of customs duties and cleared and directly sent to EMTA’s Baranj OCP in the state of Maharashtra wherein EMTA excavated coal from coal mines and incidental work connected therewith.

The appellant at Churulia, Burdwan, West Bengal was registered under Rule 4(2) of Service Tax Rules, 1994 during the material period and took cenvat credit of duty paid on the said capital goods which were utilized for providing taxable mining service on which appropriate service tax was paid by EMTA as an output service provider, through their registered office in Jamuria Range and were filing their ST-3 returns periodically. 

A show cause notice was issued to the appellant alleging that they have availed inadmissible credit on capital goods suppressing the facts from the department that the said capital goods were not brought into the premises of the output service provider and utilized towards payment of service tax on input services.

Registration of a ‘person liable to pay the service tax’ is mandated by Section 69 of the Finance Act, 1994 read with Rule 4 of Service Tax Rules, 1994 prescribing the procedures thereof. It does not, as an essential qualification for availment of credit, prescribe that the recipient be registered.

A two-member bench comprising Shri Ashok Jindal, Member(Judicial) and Shri K Anpazhakan, Member(Technical)  observed that as per Rule 3 of Cenvat Credit Rules, 2004, the cenvat credit is available on input, input services used for providing output service.

The capital goods on which cenvat credit has been availed have been used for providing output service, the CESTAT held that the appellant has rightly taken the cenvat credit on the said capital goods. The Tribunal set aside the impugned order.

To Read the full text of the Order CLICK HERE

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