CESTAT Bangalore Allows ACC CENVAT Credit On Fly Ash Transport And Pond Maintenance Services

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bangalore has ruled in favour of ACC Ltd., holding that the cement manufacturer cannot be denied CENVAT credit on services used to maintain a fly ash pond and transport fly ash to its factory merely because those services were rendered outside the factory premises.

It noted that the services were used to bring an essential raw material to the factory for manufacturing and threfore outside taxability. "We find that admittedly there is no dispute that the fly ash in question is the raw material / input for manufacturing of finished goods," the tribunal observed.

A bench of Judicial Member R. Muralidhar and Technical Member R. Bhagya Devi set aside the orders denying CENVAT credit to ACC and allowed its appeal with consequential relief.

ACC manufactures cement using fly ash purchased from NTPC's thermal power plant. Under its arrangement with NTPC, the fly ash is dumped in a fly ash pond in accordance with Pollution Control Board requirements.

ACC is not only responsible for maintaining the pond, It also bears the cost of loading, unloading, and transporting the fly ash to its factory, where it claimed CENVAT credit on the related input services.

The department denied the credit, arguing that the services were rendered outside the factory premises. It confirmed a demand of ₹10.79 lakh, which was later upheld by the Commissioner (Appeals). ACC then approached the tribunal.

Before the tribunal, ACC argued that the issue had already been settled by earlier decisions. It contended that CENVAT credit cannot be denied merely because services are received outside the factory, so long as they are used in or in relation to manufacturing.

The revenue argued that the fly ash pond was situated outside the factory premises. It maintained that ACC was therefore not entitled to the credit.

The tribunal agreed with ACC. It observed that fly ash was an undisputed raw material used in manufacturing cement. The services for maintaining the fly ash pond and transporting the material to the factory were used in relation to manufacturing.

The tribunal also noted that Rule 2(l) of the CENVAT Credit Rules does not restrict input services to those received within factory premises. Relying on earlier decisions, it set aside the impugned order and allowed the appeal with consequential relief.

For Appellant: Advocate M.P. Devnath,

For Revenue: M.A. Jithendra, Authorized Representative