Transportation Of Mining Rejects To Dumping Yard Qualifies For CENVAT Credit: CESTAT Chennai

The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that transportation of waste and reject materials arising during mining operations qualifies as an 'input service', and accordingly, CENVAT credit is allowed to Chettinad Cement Corporation Ltd.

A Bench comprising Judicial Member P. Dinesha and Technical Member Vasa Seshagiri Rao allowed the appeal, setting aside the impugned order that had denied credit on services relating to loading and transportation of limestone rejects from captive mines to dumping yards.

It held:

“It is thus claimed that the transportation of reject/waste is connected directly or indirectly to the activity of mining and therefore such activity would definitely fall within the ambit of Rule 2(l) (ii) of CCR. We find merit in the above contentions of the Appellant.”

The dispute arose from two show cause notices issued to the appellant for the period June 2009 to March 2015, proposing recovery of CENVAT credit availed on services relating to loading and transportation of limestone rejects from captive mines to dumping yards.

The Department contended that such activities had no nexus with the manufacture of cement and therefore did not fall within the scope of 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004. The adjudicating authority upheld the denial of credit, holding that transportation of rejects was unconnected with manufacturing activity.

Before the Tribunal, the Chettinad Cement argued that removal of overburden and waste is a necessary and integral part of mining operations, without which extraction of limestone, the primary raw material for cement, would not be possible. It was submitted that the activity of loading and transporting such waste to dumping yards is intrinsically linked to mining and therefore qualifies as an input service.

The Bench observed that the Department's reasoning was flawed and that the Commissioner had wrongly relied on unrelated judicial precedents. It noted that similar activities had already been recognised as 'mining services' under service tax law, and such classification cannot be inconsistently interpreted to deny CENVAT credit under central excise provisions.

The Tribunal agreed with Chettinad Cement that removal and transportation of mining rejects is a technical and essential requirement for the extraction of limestone and has a direct nexus with the manufacturing process, thereby squarely falling within the ambit of 'input service'.

It further observed that once the activity is treated as a taxable service under the relevant category, the credit of service tax paid thereon cannot be denied.

Accordingly, the Tribunal set aside the impugned order and allowed the appeals with consequential relief, holding that the denial of CENVAT credit on such services was unsustainable in law.

For Appellant: R. Parthasarathy, Consultant

For Respondent: O.M. Reena, Authorized Representative