By TIOL News Service

MUMBAI, JAN 25, 2015: THIS is a Revenue appeal.

The respondent is a manufacturer of sugar and avails CENVAT Credit. During scrutiny of the records, it was noticed by the Revenue that the assessee had availed CENVAT Credit of Service Tax paid on Manpower Recruitment Services used for handling, loading and unloading of press-mud, compost and boiler ash, which attracted Nil rate of duty during the period August, 2007 to January, 2008.

Revenue was of the opinion that in view of Rule 6(1) of CCR, 2004 CENVAT Credit is not allowable on such quantity of input or inputs services, which is used in the manufacture of exempted goods or exempted services.

Accordingly a demand notice of Rs.17.69 lakhs came to be issued.

The original authority held that manufacture of “compost” is a separate process other than manufacture of sugar, molasses etc. and accordingly, CENVAT Credit of Rs.80,640/- was held to be wrongly availed in respect of Boiler Ash and compost. However, the CENVAT Credit of Rs.16.89 lakhs in respect of input services used for removing the press-mud was allowed.

Aggrieved with the confirmation of demand of Rs.80,640/- the assesse preferred an appeal before the Commissioner (Appeals) and where it was held that in place of electricity as input used in relation to manufacture, the man-power recruitment or supply agency services was used in relation to manufacture of the final product of the appellant.

Revenue is aggrieved with this order and has filed an appeal before CESTAT.

The CESTAT observed that the issue is no more res integra and the same is squarely covered by the ruling of the Madras High Court in the case of Commissioner of Central Excise Vs. Eid Parry (I) Ltd. - 2013-TIOL-251-HC-MAD-CX, where in similar facts and circumstances of sugar manufacture, it has been inter alia held that -

"…Bio-compost is the mixture of two waste products viz., press-mud and spent wash and is marketed by the assessee. What is to be seen is as to whether such final product had emerged by using any cenvated inputs either in or in relation to such manufacture of final product. As we have already found that no cenvated inputs or chemicals were used either in or in relation to the manufacture of such exempted final product viz., bio-compost fertiliser, we are of the view that demand made by the Revenue is unsustainable."

Holding that in view of the ruling of the Madras High Court in the case of Eid Parry (I) Ltd. (supra), there is no infirmity in the order of Commissioner (Appeals) who had rightly held that manpower consumed for the purpose of handling waste and compost etc. is an essential part of manufacture of the product being excisable goods, etc. and accordingly, the same is fully allowable, the Revenue appeal was dismissed.

(See 2015-TIOL-186-CESTAT-MUM)