By TIOL News Service

MUMBAI, AUG 25, 2018: IN this appeal, the facts are that the respondents (ship breaking company) were availing credit of tax paid on input services and the same was utilised for discharge of CE duty on dutiable goods manufactured.

Revenue alleged that the sale of motors, generator, engine, remnant oil etc. amounted to trading activity and, therefore, the respondent ought to have reversed CENVAT credit in terms of rule 6 of the CCR

The respondents argued that the items viz. 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 their contention and aggrieved Revenue took their case to the CESTAT.

The Bench considered the submissions and 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 Single Member Bench, therefore, held that the notice could not be sustained.

Nonetheless, while concluding the order, the Bench remarked that the "appeal was allowed".

We had while reporting the order - 2017-TIOL-3608-CESTAT-MUM pointed out that this was not what it ought to be.

Thankfully, the error has been rectified by issuance of a corrigendum which reads - in Para 4, the words:

"In view of the above, notice cannot be sustained and the appeal is consequently allowed."

be read as

"In view of the above, notice cannot be sustained and the appeal is consequently dismissed".

In passing:

All good things must come to an end - an old Proverb.

(See 2018-TIOL-2614-CESTAT-MUM)