Manufacture Of Barges, Cenvat Credit Available On Steel Used: CESTAT

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that cenvat credit is allowable on steel materials used in the manufacture of barges.

The bench of Ramesh Nair (Judicial Member) and C.L. Mahar (Technical Member) has observed that any material used for making some equipment or building, and in turn that equipment or barge is used for providing output service, the material that was used shall be treated as input in terms of Rule 2(k) of the Cenvat Credit Rules, 2004.

The issue raised was whether the appellant or assessee was entitled to the Cenvat credit on various steel materials that were used in the manufacture of barges, and such barges were used for providing output services such as port service, cargo handling service, and supply of tangible goods for use.

The department noted that since the material on which the Cenvat credit was claimed was not used directly for providing any taxable service, Cenvat credit on such material is not available to the appellant.

The appellant contended that, as per the definition under Rule 2(k), all goods used for providing output service are eligible for inputs for allowing Cenvat credit. There is no dispute that steel plates, etc., were used in the fabrication of barges, and barges were used for providing output service. Therefore, whether directly or indirectly, inputs were used in relation to providing output service through barges; therefore, credit is admissible.

The tribunal held that any material used for the construction of a building or the fabrication of any equipment that is in turn used for providing output taxable service is correctly admissible.

Case Title: Shreeji Shipping Versus Commissioner of Central Excise & ST, Rajkot

Case No.: Service Tax Appeal No. 13737 of 2014-DB

Date: 05.09.2023

Counsel For Appellant: PD Rachchh

Counsel For Respondent: Tara Prakash

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