By TIOL News Service

MUMBAI, OCT 06, 2017: THE respondent is a Ship Breaking company.

The facts are that the respondents were availing credit of tax paid on input services namely renting of immovable property services, security services, manpower recruitment service and the said credit was utilised for discharge of CE duty on dutiable goods manufactured.

Revenue demanded reversal of CENVAT credit under Rule 6 of CCR, 2004 in respect of items like motors, generator, engine, remnant oil etc., considering the same as exempted/non-excisable goods. In the notice it was also alleged that the sale of motors, generator, engine, remnant oil etc. amounted to trading activity.

The primary argument of the respondents before the lower authorities was that the items motors, generator, engine, remnant oil etc. are not purchased by them but recovered during the breaking up of the ship and, therefore, it cannot be said that they are engaged in trading activity.

The Commissioner(A) accepted the contention of the respondent and dropped the demand.

Revenue is aggrieved by this order and, therefore, before the CESTAT.

The Bench observed -

"3. … It is seen that what the appellants are purchasing is a ship for the purpose of breaking. The appellants are breaking the ship and as a result certain items are recovered. The scrap so generated is sold by appellants on payment of central excise duty. Other items generated are sold by them as it is. The items in respect of which demands for revenue under Rule 6 of Cenvat Credit Rules have been made are not purchased by appellants but are part of the ship when it is imported. In this regard, the activity of the appellants cannot be considered as trading activity."

The Revenue appeal was dismissed.

(See 2017-TIOL-3608-CESTAT-MUM)