Providing Capital Goods To Contractor For Use In Captive Mines Doesn't Amount To 'Removal': CESTAT

The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that Hindustan Zinc is not required to reverse credit availed as merely providing capital goods to contractors for use within captive mines does not amount to 'removal'.The bench of Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that there is no sale and no removal of inputs and capital goods when the assessee supplied the same to the contractor, which was used for mine development activity, and, therefore, the provisions of Rule 3(5) of the Cenvat Credit Rules, 2004 are not applicable. As per Rule 3(5) of the Cenvat Credit Rules, 2004, when inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods.The appellant/assessee is in the business of mining ores and concentrating the same, for which the mining activity was outsourced. The appellant supplied input and capital goods such as explosives, detonators, lubricants, components, pipes, rods, etc., on which they availed of the CENVAT credit. A show cause notice was issued alleging that the appellants were liable to reverse the credit availed on inputs and capital goods removed as such under Rule 3(5) of the CCR as these goods were transferred by the appellant to the contractors for execution of both contracts. Therefore, the appellant was required to pay an amount equal to the cenvat credit availed on duty paid on these items under Rule 3(5) of the CCR. The show cause notice was adjudicated by the order-in-original dated November 16, 2009, whereby the recovery of cenvat credit along with interest and penalty was ordered. The appellant/assessee raised the issue of whether the appellant is required to reverse cenvat credit availed on the inputs and capital goods such as explosives, detonators, lubricants, components, etc. provided to the contractors for mine development work or ore production in terms of Rule 3(5) of the Cenvat Credit Rules, 2004.The tribunal, while allowing the appeal, held that the material, equipment, facilities, explosives, and detonators were provided by the assessee free of charge to the contractors for use in the work of their company. It cannot be said that the assessee has sold these items to contractors, as there is evidence of the free supply of these items by the assessee to the contractors.Counsel For Appellant: S.C. VaidyanathanCounsel For Respondent: M.K. ChawdaCase Title: M/s. Hindustan Zinc Limited Versus Commissioner of CGST and Central Excise CommissionerateCase No.: Excise Appeal No.55424 of 2023Click Here To Read The Order

Providing Capital Goods To Contractor For Use In Captive Mines Doesn't Amount To 'Removal': CESTAT

Mariya Paliwala

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INR 1099+GST

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Providing Capital Goods To Contractor For Use In Captive Mines Doesn't Amount To 'Removal': CESTAT

Mariya Paliwala

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

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