Shyam Metallics & Energy Ltd Vs Commissioner of CGST & CX (CESTAT Kolkata)
Summary: The Kolkata Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) allowed the appeal filed by Shyam Metallics & Energy Ltd against Order-in-Appeal No. 96/CE/RKL-GST/2018 dated 26.09.2018 passed by the Commissioner (Appeals) of CGST & Central Excise, Bhubaneshwar. The Tribunal pronounced Final Order No. 76067/2026 on 11.08.2026.
The appellant is engaged in the manufacture of sponge iron, ingot, billet and TMT bars falling under Chapter 72 of the Central Excise Tariff Act, 1985. It has a captive thermal power plant installed within its factory for production of electricity, which is used in the manufacture of its dutiable final products on which appropriate excise duty was discharged.
Fly Ash is generated during the production of electricity. The appellant disposes of the Fly Ash in accordance with the Environment (Protection) Act, 1986. For this purpose, it obtains transportation services for moving Fly Ash generated in the captive thermal plant to an ash pond located inside the plant and avails CENVAT credit of the service tax paid on such services. The appellant also clears Fly Ash from its factory on payment of appropriate excise duty and reflects such clearances in its ER-1 returns.
The Department issued Show Cause Notices alleging irregular availment of CENVAT credit on the transportation service used for Fly Ash on the ground that the service had no direct or indirect nexus with, or relation to, manufacture and clearance of the final products up to the place of removal.
The appellant filed detailed replies contending that the services had a direct nexus with manufacture of the final products and that removal of Fly Ash was mandatory for environmental protection. It also submitted that excise duty had been duly discharged on clearance of Fly Ash from the factory.
The adjudicating authority dropped the demand. It held that Fly Ash was generated during production of electricity, which was further used in the manufacture of the final products, and therefore the input service was used in or in relation to manufacture of the final products. It further held that Fly Ash generated in the captive power plant was an excisable commodity and had been cleared on payment of Central Excise duty, thereby qualifying as a final product of the appellant. Accordingly, the credit of the input service was held admissible.
Before CESTAT, the appellant submitted that the same issue concerning the same appellant for the period 2013-14 to 2014-15 had already been decided in its favour by the same Bench vide Final Order No. 75009-75010/2023 dated 18.01.2023. It was submitted that the present Show Cause Notice related to the subsequent period 2015-16 and involved identical facts.
The Tribunal examined the factual details and Show Cause Notice and held that the issue was squarely covered by its earlier Final Order No. 75009-75010/2023 dated 18.01.2023, wherein it had held that the appellant was eligible for CENVAT credit of service tax paid on account of Fly Ash movement.
The Tribunal also considered the decision of the Bangalore Bench in ACC Ltd Vs Commissioner of Central Tax, Bangalore, Final Order No. 20925/2026 dated 31.07.2026. That decision, in turn, referred to Birla Corporation Ltd. Vs. CCE, Lucknow, 2014 (34) STR 589 (Tri.-Del.), concerning CENVAT credit relating to services connected with a fly ash extraction plant.
In the cited Birla Corporation Ltd. decision, the Tribunal had held that services relating to erection, installation and commissioning, repair and maintenance and insurance of the fly ash extraction plant were services in or in relation to manufacture of cement and were eligible for CENVAT credit. The Tribunal in the present matter found the ratio of the cited decisions applicable to the facts before it.
Following the ratio of the cited case laws, CESTAT set aside the impugned order and allowed the appeal with consequential relief, if any, as per law.
Cases Discussed
- Shyam Metallics & Energy Ltd. Vs. Commissioner of CGST & CX, Bhubaneshwar, Final Order No. 75009-75010/2023 dated 18.01.2023 — the Tribunal relied upon its earlier decision concerning the same appellant and identical issue for the period 2013-14 to 2014-15.
- ACC Ltd. Vs. Commissioner of Central Tax, Bangalore, Final Order No. 20925/2026 dated 31.07.2026 — the Tribunal followed the Bangalore Bench decision on the identical issue concerning CENVAT credit and Fly Ash-related services.
- Birla Corporation Ltd. Vs. CCE, Lucknow, 2014 (34) STR 589 (Tri.-Del.) — referred to in the ACC Ltd. decision for the proposition concerning eligibility of CENVAT credit on services connected with a Fly Ash extraction plant.
FULL TEXT OF THE ORDER OF CESTAT KOLKATA
The facts of the case in brief are that the Appellant is a manufacturer of sponge iron/ingot/billet/TMT bars falling under Chapter 72 of the Central Excise Tariff Act, 1985. The Appellant has a captive thermal plant installed within the factory for production of electricity. The electricity produced is used for manufacture of dutiable final products on which the Appellant had discharged appropriate excise duty. In the course of production of electricity, Fly Ash is generated. Since the Fly Ash is detrimental to the environment, the Appellant disposes of the same in accordance with the Environment (Protection) Act, 1986. For this purpose, the Appellant obtains services to transport such Fly Ash generated in its captive thermal plant to the Ash-pond locaed inside the plant and avails CENVAT Credit of the Service Tax paid thereon. The Appellant also clears Fly Ash from its factory on payment of appropriate excise duty and reflects the same in its ER-1 Returns. During the period in dispute, the Appellant was issued Show Cause Notices alleging irregular availement of CENVAT Credit on transport service of Fly Ash on the premise that it has no nexus directly or indirectly in or in relation to manufacture and clearance of the final products upto the place of removal.
2. The Appellant filed detailed replies and contended that availment of the services were in direct nexus with manufacture of the final product and that the said activity was mandatory for the purpose of environment protection. It was also submitted that the Appellant had duly discharged excise duty on the clearance of the Fly Ash from its factory. The Adjudicating authority dropped the demand on the ground that since the Fly Ash was generated in the process of production of electricity, which was further used in manufacture of the final product, the input service was used in or in relation to manufacture of final product. It was further held that the Fly Ash generated in the captive power plant of the Appellant was an excisable commodity and cleared on payment of Central Excise duty, thus qualifying as a final product of the Appellant. As such, the credit of the input service was duly admissible. Being aggrieved by the confirmed demand, the appellant is before the Tribunal.
3. The Ld.Counsel appearing on behalf of the Appellant submits that in case of the same appellant, on identical issue for the period of 2013-14 to 2014-15, the matter stands decided in their favour vide Final Order No. 75009-75010/2023 dated 18th January, 2023. He submits that the present Show Cause Notice has been issued for the subsequent period 2015-16 on identical facts.
4. On going through the factual details and SCN issued in the present case, I find that the issue is squarely covered by the Final Order No. 75009-75010/2023 dated 18th January, 2023 of this Bench, wherein it has been held that the appellant would eligible for the Cenvat Credit for the Service Tax paid by them on account of Fly Ash movement.
5. On an identical issue, the Banglore Bench in the case of ACC Ltd Vs Commissioner of Central Tax, Bangalore, vide Final Order No. 20925 /2026 dated: 31.07.2026 has held as under:
In Birla Corporation Ltd. Vs. CCE, Lucknow 2014 (34) STR 589 (Tri.-Del), it has been held as under:
6. I have considered the submissions from both the sides and perused the records. First of all, I find that the issue of eligibility for Cenvat credit of the services of erection, installation & commissioning, repair and maintenance and insurance availed at the fly ash extraction lant at Thermal Power Plant are eligible for Cenvat credit or not, stands decided in favour of the appellant by a Coordinate Bench of the Tribunal in the case of Ultratech Cement (supra). Moreover, I find that the only basis for denial of Cenvat credit in this case, as mentioned in the show cause notice, is Central Excise Appeal No. 20025 of 2020 Page 5 of 7 that the appellant company, who have installed fly ash extraction plant at the NTPC’s Power Plant at Unachahar, have manufactured fly ash which is an exempted product and, therefore, in terms of Rule 6(1), they would not be eligible for Cenvat credit. This plea of the department is difficult to accept, as fly ash is generated continuously by the Thermal Power Plant by burning the coal. It is extracted by the appellant and is, thereafter, loaded in the bulk trucks for transportation to the appellant’s cement plant. Just extraction of the fly ash generated In the Thermal Power Plant cannot be said to be “manufacture of fly ash” by the appellant. Fly ash has been manufactured by the Thermal Power Plant not by the appellant. The Department’s stand is absurd, therefore, Rule 6(1) of the Cenvat Credit Rules, 2004 is not applicable at all. Since the services, in question, have been availed for erection, installation & commissioning, repairing and maintenance and insurance of the fly ash extraction plant installed by the appellant at the Thermal Power Plant, these services have to be treated as the services in or in relation to the manufacture of the cement by the appellant and would be eligible for Cenvat credit. In view of this, the impugned order is not sustainable. The same is set aside. The appeal is allowed
9. We find that to the facts of the present case the ratio laid down in the above case laws are squarely applicable. Accordingly, we set aside the impugned order and allow the appeal.
6. Following the ratio of the cited case laws, I set aside the impugned order and allow the appeal. The appeal is allowed with consequential relief, if any, as per law.
(Operative part was pronounced in open court.)
