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M/s Heidelberg Cement India Limited Versus Commissioner of Central Excise, Bangalore

2016 (9) TMI 677 - CESTAT BANGALORE

Cenvat credit - input services - Clean Development Mechanism Service in relation to Carbon Credit Management Services - Held that:- the service tax paid for providing Consultancy Services in relation to greenhouse gas emission reduction and carbon credit management service as per guidelines under the Koyoto Protocol falls under the definition of input service and the appellants are entitled to Cenvat credit and the impugned order denying the Cenvat credit on the said services on account of lack .....

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ner of Central Excise, Bangalore-II Commissionerate. 2. Briefly, the facts of the present case are that the appellants, M/s Heidelberg Cement India Ltd. (formerly Mysore Cements Ltd.) are engaged in the manufacture of Cement and Cement Clinker falling under Chapter sub-heading No. 2523 2940 and 2523 1000 respectively. The unit is availing Cenvat credit on various inputs, capital goods and service tax under the provisions of Cenvat Credit Rules, 2004. During the course of audit of the records of .....

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it Rules, 2004. Therefore, a Show-Cause Notice dated 21.3.2011 was issued to the appellant proposing demand of ₹ 8,54,471/- attributable to Cenvat credit wrongly availed on Clean Development Mechanism Service in relation to Carbon Credit Management Services. The appellant refuted the allegation in the show-cause notice and the learned Additional Commissioner vide his order dated 23.11.2011 rejected the submissions of the appellant and confirmed the demand as per the show-cause notice along .....

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earned counsel further submitted that clean development mechanism service is used for the reduction of emission of toxic gasses in the atmosphere from the manufacturing unit. He further submitted that both the Central Pollution Control Board (CPCB) and the State Pollution Control Board (SPCB) deal with the environment issues. The State Pollution Control Board (SPCB) regularly inspects the cement plants/limestone quarries to verify compliance with emission norms and the Central Pollution Control .....

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ent, encompassing emissions of air pollutants, consumption of water, generation and discharge of trade effluents, utilization and storage of hazardous waste, noise generation, utilization of forest land and wildlife areas under various acts passed by the Parliament. He further submitted that in order to comply with the statutory requirements of environmental protection norms and India being a signatory to the Kyoto Protocol, the appellants have registered with the State Pollution Control Board a .....

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otocol which includes assessment, validation and monitoring the appellants premises for meeting the requirements of reduced emission norms. 3.1. The learned counsel also submitted that as per the agreement with M/s CARE Sustainability, the following services are to be provided by way of consultancy services : (a) Preparation of project design documents addressing the requirements under the Kyoto Protocol; (b) Assistance in obtaining approvals from Ministry of Environment & Forests; (c) Assis .....

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rther explained the concept of Carbon Credit in the Memorandum of Appeal which as follows : (i) The concept of Carbon Credit has been introduced as an instrument to reduce the emission of gasses that cause the greenhouse effect. It s main aim is to incentivize the unit which pollute less and dis-incentivize the units that pollute more. A Central Authority sets a limit on the amount of a pollutant that can emitted in totality. Based on this each entity is issued emission permits and holds an equi .....

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sults in reduction of emissions achieving the pollution reduction at the lowest possible cost to the society. (ii) These carbon credits are tradable i.e. they can be bought and sol on exchanges set up especially for this purpose. Some of these exchanges are Chicago Climate Exchange. The European Climate Exchange, Nord Pole Power Next etc. In addition to this Carbon Credits may be bought and sold between these organizations / operators. The prices at which these are bought and sold is the prevail .....

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hat are real measurable gives long term benefits to the mitigation of climate change the baseline methodology for increasing the blend in cement production. 3.3. The learned counsel relied upon the following decisions in support of his submissions : (i) Shree Bhawani Paper Mills Ltd. Vs. CCE, Lucknow [2012 (28) S.T.R. 409 (Tri.-Del.)] (ii) CCE, Nagpur Vs. Ultratech Cement Ltd. [2010 (260) E.L.T. 369 (Bom.)] (iii) CCE, Bangalore-III Vs. Stanzen Toyotetsu India Pvt. Ltd. [2011 (23) S.T.R. 444 (Kar .....

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inclusive part of the definition restricts its scope to the services used in relation to the manufacture or business activity of the kind to give effect to the activities of business and does not include welfare and general activities. He also submitted that the impugned service received by the appellant has no nexus with their manufacturing activity and hence, the same cannot be treated as input service in terms of Rule 2(l) of the Cenvat Credit Rules, 2004. He also submitted that the fact of a .....

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le 2(l) of the Cenvat Credit Rules, 2004, which is reproduced herein below : RULE 2. . . .. (l) input service means any service, - (i) used by a provider of taxable service for providing an output service, or (ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products from the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises .....

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ion of the terms input service as defined above has two parts (i) the MEANS part which is the main part of the definition and (ii) the INCLUSIVE part which is illustrative and certainly not exhaustive. The means part of the definition covers any service used directly or indirectly, in or in relation to manufacture of the final products and clearance of the final products from the place of removal. It covers within its ambit all services received by the manufacturer of final products, as long as .....

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n Para 27 as under : 27. The definition of input service as per Rule 2(l) of 2004 Rules (insofar as it relates to the manufacture of final product is concerned), consists of three categories of services. The first category, covers services which are directly or indirectly used in or in relation to the manufacture of final products. The second category, covers the services which are used for clearance of the final products up to the place of removal. The third category, includes services namely; .....

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on of inputs or capital goods and outward transportation upto the place of removal. Thus, the definition of input service not only covers services, which fall in the substantial part, but also covers services, which are covered under the inclusive part of the definition. Similarly, the Hon ble High Court of Karnataka in the case of Commissioner of Central Excise, Bangalore-III Vs. Stanzen Toyotetsu India Pvt. Ltd. [2011 (23) STR 444 (Kar.)] has observed in Para 10 as under : 10. As is clear from .....

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ized directly or indirectly. Such service may be in the nature of transportation of inputs or capital goods, upto the factory premises or if the final product is removed from the factory premises for outward transportation upto the place of removal. It is an inclusive definition. The services mentioned in the Section are only illustrative and it is not exhaustive. Therefore when a particular service not mentioned in the definition clause is utilised by the assessee/manufacturer and service tax p .....

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d the manufacturer is eligible to avail Cenvat credit of the service tax paid on such service. Further the Tribunal s Delhi Bench in the case of Shree Bhawani Paper Mills Ltd. Vs. Commissioner of C. Ex., Lucknow [2012 (28) STR 409 (Tri.-Del.)] has observed as under : 5. After hearing both sides duly represented by Shri Hemant Bajaj, learned Advocate and Ms. Renu Jagdev, SDR it is seen that the services of M/s. Ernst & Young Pvt. Ltd., were availed in relation to the power plant used for manu .....

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ion which vitiates atmosphere. The revenue s contention that such earning of carbon credit from the United Nations company was not liable to Service Tax and inasmuch as the services of E & Y were availed for earning of such credits, the appellant is not entitled to avail the credit. 6. I find no merits in the above contention of the Revenue. The services availed from M/s. Ernst & Young Pvt. Ltd., were admittedly for modernisation of the power plant of the appellant. Such power plant is u .....

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ould be taxable under the Service Tax is nothing but a fallacy. The amount earned as a result of such service availed by the party is the income of the appellant and is not required to be leviable to Service Tax. As long as the services of consultancy engineering by the appellant are in relation to the development of the power plant, which in turn is used for manufacture of paper, such services get covered under the cover of definition of input services. In fact I note that show cause notice its .....

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