CENVAT - Cement used for the purpose of building construction, cannot be said to be an input - foundation made of cement does not fall 'under the category of "capital goods".

53 taxmann.com 209 (Rajasthan)-Union of India vs. Hindustan Zinc Ltd. [2015]

 

FACTS:

Assessee, a manufacturer took credit of inputs namely, cement, explosive, lubricant oil and grease used in mining area treating them as inputs. Department argued that cement was used by assessee for purpose of filling gaps in form of cut and fill for excavation of ores; and obviously, cement had been used as a construction material so as to provide safety to roof of mining area and was, therefore, ineligible for credit that service tax be levied on the entire consideration received by the assessee under "Commission Agent" (Business Auxiliary Services). IT - Commissioner (Appeals) held that service tax would be levied only on commission. In department's appeal before the Tribunal, it was held that assessee is also liable to pay service tax on merchandise expenses, fixed office expenses and certain part of the other expenses excluding expenses of registration and transportation. Department further preferred appeal before the High Court contending that amount received under the head Primary claim/Retailer scheme is also liable to service tax

HELD:

The High Court observed that the matter is squarely covered in favour of the revenue in the case of Union of India VS. Hindustan Zinc Ltd. 2008 (225) EL T 183 (Raj) where it was held that cement, being a building material used for the purpose of building construction, cannot be said to be an input used for manufacturing of final product and hence, no CENVAT Credit is available so far the cement is concerned. Further, that the foundation made of cement does not fall under the category of "capital goods" in terms of Rule 2(b) of the Rules of 2002; and therefore cement cannot be said to be 'inputs' in terms of Explanation-II to Rule 2(g) of the Rules of 2002. Relying upon the same, department's appeal was allowed.

 

Note: Readers may also read decision in the case of Lloyds Metal & Engineering Ltd. vs. CCE 2008(226) ELT 599 (Mum- Tri) in which the above judgment of Hindustan Zinc 2008 225 EL T 183 is distinguished interalia on the ground that the issue of eligibility to CENVAT Credit on steel and cement themselves as capital goods being component accessories spare parts of specified capital goods was not under the consideration of the High Court. Also Refer CCE vs. APP Mills Ltd. 2013 (291) ELT 585 (Tri- Bang.) distinguishing Vandana Global Ltd vs. Commissioner 2010 (253) ELT 440 (Tri-LB).