Fly Ash is necessary for Running of Captive Power Plant: CESTAT sets aside denial of Credit of Input Services used for Removal and Disposal of Fly Ash [Read Order]

Fly Ash - Captive Power Plant - CESTAT - denial of Credit - Input Services - Disposal of Fly Ash - taxscan

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench set aside denial of credit of input services used for removal and disposal of Fly Ash and recognised that Fly Ash is necessary for running of captive power plant.

The Appellant, M/s. Shyam Metalics & Energy Limited   has a captive thermal plant installed within the factory for production of electricity. Since the Fly Ash is detrimental to the environment, the Appellant disposes of the same in accordance with the Environment (Protection) Act, 1986. For this purpose, the Appellant obtains services to transport such Fly Ash generated in its captive thermal plant to the Ash-pond locaed inside the plant and avails CENVAT Credit of the Service Tax paid thereon.

The Appellant also clears Fly Ash from its factory on payment of appropriate excise duty and reflects the same in its ER-1 Returns. During the period in dispute, the Appellant was issued Show Cause Notices alleging irregular availement of CENVAT Credit on transport service of Fly Ash on the premise that it has no nexus directly or indirectly in or in relation to manufacture and clearance of the final products upto the place of removal.

The Department filed appeal before the Commissioner (Appeals), on the ground that Fly Ash is not a final product of the Appellant and that the service of shifting the Fly Ash was not used in or in relation to manufacturing activities or clearance of the final product. Commissioner (Appeals) allowed the Appeal filed by the Revenue. Hence the present Appeal before the Tribunal.

The Counsel for the appellant contended that removal of Fly Ash on a regular basis is an integral part of the manufacturing activity of the Appellant. The denial of CENVAT Credit on transportation thereof from the captive power plant to the Ash-pond is not justified.

The Tribunal of PK Choudhary, Judicial Member observed that “I am of the view that removal of coal Fly Ash is one of the necessities for running of the captive power plant. Without such removal of the coal fly ash from the captive power plant, the same cannot operate and run, in which case, the power won’t be generated and the appellant would not be in a position to manufacture their final product.”

“The denial of benefit of credit of input services used for removal and disposal of Fly Ash is not sustainable” the Tribunal noted.

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