C.C.E. & S.T.-Bhavnagar Vs Hariyana Ship Demolition P Ltd (CESTAT Ahmedabad)
CESTAT Ahmedabad held that the fuel oil lying in the engine room is part and parcel of the ship which is imported for breaking and hence CENVAT Credit is duly admissible on the same.
Facts- The issue involved in the present case is that whether the respondent (ship breaking company) is eligible to avail cenvat credit of CVD on fuel oil, High Speed Oil and lubrication oil inside the engine room bunker available on the ship imported for breaking, in as much as, the said goods form part of ship and input service under Rule 2 (a) of CCR, 2004 used in process of manufacture of final excisable product in breaking of ship.
Conclusion- The tribunal in the case of Navyug Ship Breaking Co. has held that Fuel and Oils are by- product that are inevitably required to be removed from the ship in the course of commencing the activity of breaking the ship and if that be so, there is no reason for denial of cenvat credit of CVD paid on any part of the Ship including its stores viz. fuel and oil on the ground that they do not form part and parcel of the ship or that they are removed at a stage before commencing the activity of breaking ship or that their classification is under different heading. It is settled law that in the course of manufacturing activity any by-product emerges; cenvat credit on that part which pertains to by-product cannot be denied on the ground that such by-products are non-excisable goods or that they are not used in or in relation to manufacturing activity of manufacturer of excisable goods.
