ACC Ltd Vs Commissioner of Central Tax, Bangalore (CESTAT Bangalore)
Summary: The Customs, Excise & Service Tax Appellate Tribunal, Bangalore Regional Bench, considered Central Excise Appeal No. 20025 of 2020 filed by ACC Ltd against Order-in-Appeal No. 157/2019-CT dated 30.09.2019 passed by the Commissioner of Central Tax (Appeal-II), Bangalore. The Final Order No. 20925/2026 was pronounced on 31.07.2026.
The appellant was a manufacturer of cement and used Fly Ash as raw material in the course of manufacturing. The Fly Ash was purchased from NTPC’s electricity generation plant. NTPC dumped the Fly Ash in a pond, from where the appellant was required to collect it at its own cost by arranging loading into trucks, transportation to its factory and unloading. The appellant was also required to maintain the Fly Ash Pond in accordance with the conditions specified by the Pollution Control Board.
The appellant availed CENVAT credit on services rendered at the Fly Ash Pond and on services used for loading, unloading, freight and movement of Fly Ash to its factory. It also took credit on inputs, input services and capital goods used for maintenance of the Fly Ash Pond.
The Department issued a Show Cause Notice for the period January 2016 to June 2017 on the ground that the services were rendered outside the appellant’s factory premises and, therefore, CENVAT credit was not eligible. After adjudication, a demand of Rs. 56,69,721/- was confirmed, which was subsequently affirmed by the Commissioner (Appeals).
Before the Tribunal, the appellant submitted that the issue was no longer res integra and relied upon several decisions, including CC, Nagpur Vs. Ultratech Cement Ltd, 2012 (278) ELT 523; Birla Corporation Ltd. Vs. CCE, Lucknow, 2014 (34) STR 589 (Tri.-Del.); General Motors India Pvt. Ltd Vs. Commissioner of Central Excise and Service Tax, Vadodara-II, (2024) 15 Centax 124 (Tri.-Ahmd); Linde India Ltd Vs. Commissioner of CGST & CX, Rourkela, (2024) 23 Centax 101 (Tri.-Cal); and Mangalam Cement Ltd Vs. Commissioner, Central Goods, Excise & Service Tax, Udaipur, (2024) 24 Centax 38 (Tri.-Del.).
The Revenue opposed the appeal on the ground that the Fly Ash Pond was situated outside the factory premises. It also submitted that the inputs and input services had been procured after 01.04.2011 and justified the confirmed demand.
The Tribunal noted that there was no dispute that the Fly Ash in question was the raw material/input for manufacture of finished goods. The appellant purchased the Fly Ash from NTPC, and pursuant to Pollution Control Board directions, the Fly Ash was dumped by NTPC in the Fly Ash Pond, which was required to be maintained in accordance with prescribed standards.
The Tribunal considered the definition of “input service” under Rule 2(l) of the CENVAT Credit Rules, 2004. The definition covered services used by a manufacturer, directly or indirectly, in or in relation to manufacture of final products and clearance of final products up to the place of removal, and also included inward transportation of inputs or capital goods.
The Tribunal held that the Rule permitted the appellant to take credit for input services used in the manufacture of dutiable goods.
On the specific objection that the services were used outside the factory premises, the Tribunal relied upon the decision in CC, Nagpur Vs. Ultratech Cement Ltd, 2012 (278) ELT 523 (Tri.-Bom.). In that case, the Tribunal had held that Rule 2(l) nowhere provided that input service credit was unavailable for services utilised outside the factory premises and that denial of CENVAT credit merely because services were not received within the factory premises was unsustainable.
The Tribunal also considered Birla Corporation Ltd. Vs. CCE, Lucknow, 2014 (34) STR 589 (Tri.-Del.), where services relating to erection, installation and commissioning, repair and maintenance and insurance of a Fly Ash extraction plant at a thermal power plant had been held eligible for CENVAT credit. The Tribunal in that decision had also considered the fact that Fly Ash was generated by the thermal power plant and that extraction of Fly Ash by the appellant did not amount to manufacture of Fly Ash by the appellant.
The Tribunal further reproduced the reasoning from Linde India Ltd Vs. Commissioner of CGST & CX, Rourkela, (2024) 23 Centax 101 (Tri.-Cal), which had considered Mangalam Cement Ltd and decisions including Hindalco Industries Ltd., Commissioner of Central Excise, Kolkata-III v. M/s Texmaco UGL Rail (P) Ltd., Kellogs India Pvt. Ltd., PepsiCo India Holdings (Pvt.) Ltd. and Hindustan Zinc Limited. Those decisions concerned the scope of the definition of input service after the amendment effective from 01.04.2011 and the nexus between services and manufacturing activity.
The Tribunal particularly noted the reasoning that, although “setting up” was removed from the inclusive portion of the definition of input service with effect from 01.04.2011, services could nevertheless qualify under the main part of Rule 2(l)(ii) if they were used directly or indirectly in or in relation to manufacture of final products and were not specifically excluded.
Applying the ratio of the cited decisions, the Tribunal found that the services used by ACC Ltd for Fly Ash Pond operations and for bringing Fly Ash to its factory had the requisite nexus with manufacture. The Fly Ash was admittedly used as raw material/input for manufacturing finished goods.
The Tribunal accordingly held that there was no justification for denying CENVAT credit merely because the Fly Ash Pond was situated outside the factory premises. It found the ratios of the cited decisions squarely applicable to the facts of the case.
Consequently, the Tribunal set aside the impugned order and allowed the appeal. The appellant was held eligible for consequential relief, if any, as per law. The order was pronounced in open court on 31.07.2026.
Cases Discussed
- CC, Nagpur Vs. Ultratech Cement Ltd, 2012 (278) ELT 523 (Tri.-Bom.) — considered on the issue whether CENVAT credit can be denied merely because the input services were utilised outside the factory premises; the Tribunal relied upon the decision to reject that basis for denial.
- Birla Corporation Ltd. Vs. CCE, Lucknow, 2014 (34) STR 589 (Tri.-Del.) — considered on eligibility of CENVAT credit for services relating to erection, installation and commissioning, repair and maintenance and insurance of a Fly Ash extraction plant.
- General Motors India Pvt. Ltd Vs. Commissioner of Central Excise and Service Tax, Vadodara-II, (2024) 15 Centax 124 (Tri.-Ahmd) — cited by the appellant as a decision covering the issue concerning CENVAT credit.
- Linde India Ltd Vs. Commissioner of CGST & CX, Rourkela, (2024) 23 Centax 101 (Tri.-Cal) — considered for its treatment of the issue concerning CENVAT credit after the 01.04.2011 amendment to the definition of input service.
- Mangalam Cement Ltd Vs. Commissioner, Central Goods, Excise & Service Tax, Udaipur, (2024) 24 Centax 38 (Tri.-Del.) — considered in the discussion reproduced from the Linde India decision concerning services used in connection with setting up a unit and their nexus with manufacture.
- Hindalco Industries Ltd. v. Commissioner, Central GST, Central Excise & Customs, Jabalpur, 2019 (5) TMI 1620 – CESTAT New Delhi — referred to in the discussion of the decisions concerning eligibility of input services after the amendment to Rule 2(l).
- Commissioner of Central Excise, Kolkata-III v. M/s Texmaco UGL Rail (P) Ltd., (Now known as Texmaco Hi-Tech Pvt. Ltd., (Vice-Versa), 2019 (7) TMI 1651 – CESTAT Kolkata — referred to among the decisions holding in favour of the assessee on the scope of input service after the amendment.
- Kellogs India Pvt. Ltd., v. Commissioner of Central Tax, Tirupathi GST, 2020 (7) TMI 414 – CESTAT Hyd. — referred to for the proposition concerning services used in or in relation to manufacture after the 01.04.2011 amendment.
- PepsiCo India Holdings (Pvt.) Ltd. v. Commissioner of Central Tax, GST, Tirupati, 2022 (56) G.S.T.L. 22 (Tri.-Hyd.) — referred to among the decisions considered on the scope of input service after the amendment.
- Hindustan Zinc Limited v. Commissioner of CGST, Excise Customs, Udaipur, 2021 (8) TMI 872 – CESTAT New Delhi — considered for its interpretation of the main part of the definition of “input service” after 01.04.2011.
FULL TEXT OF THE CESTAT BANGALORE ORDER
The appellant is a manufacturer of cement. In the course of manufacturing, the appellant used Fly Ash as raw material. The Fly Ash is purchased by them from NTPC’s electricity generation plant. NTPC dumps the Fly Ash in the pond. From there, the appellant is required to collect the same by incurring their own cost for loading in the truck and movement of the truck to their own factory and unloading the same. The appellant is also required to take up proper maintenance of the Fly Ash Pond as per the conditions specified by the Pollution Control Board. The appellants have been taking the Cenvat credit for the services rendered at the Fly Ash pond as well as for the services used for loading and unloading, freight charges etc., incurred for movement of the Fly Ash to the factory site. The appellant has also taken credit in respect of inputs, input services and capital goods used towards maintenance of Fly ash pond. On the ground that the services were rendered outside factory premises of the appellant and hence the Cenvat credit is not eligible, a Show Cause Notice (SCN) was issued for the period January, 2016 to June, 2017. After due process, the Adjudicating Authority confirmed the demand of Rs. 56,69,721/-. The demand was affirmed by the Commissioner (Appeals). Being aggrieved, the appellant filed their appeal before this Tribunal.
2. The Learned Counsel appearing on behalf of the appellant submits that the issue is no more res-integra. He relies on the following case laws;
i. CC, Nagpur Vs. Ultratech Cement Ltd – 2012 (278) ELT 523
ii. Birla Corporation Ltd. Vs. CCE, Lucknow – 2014 (34) STR 589 (Tri.-Del).
iii. General Motors India Pvt. Ltd Vs. Commissioner of Central Excise and Service Tax, Vadodara-II (2024) 15 Centax 124 (Tri.-Ahmd)
iv. Linde India Ltd Vs. Commissioner of CGST & CX, Rourkela (2024) 23 Centax 101 (Tri.-Cal)
v. Mangalam Cement Ltd Vs. Commissioner, Central Goods, Excise & Service Tax, Udaipur (2024) 24 Centax 38 (Tri.-Del)
3. It is submitted that the above case laws covering the identical issue should be applied and accordingly the appeal may be allowed. He submits that in these case laws, it has been held that Cenvat credit can be taken for services was in the Fly Ash pond operations and even for setting up of the unit after 01.04.2011. Therefore he prays that the appeal may be allowed.
4. The Learned Authorized Representative (AR) appearing on behalf of the Revenue submits that the Fly Ash pond is situated outside the factory premises therefore appellant is not eligible to take cenvat credit. The inputs and input services have been procured after 01.04.2011. Therefore, he justifies the confirmed demand.
5. Heard both sides and perused the appeal papers.
6. 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 appellant is purchasing the Fly Ash from NTPC as per conditions set in by NTPC. As per the Pollution Control Board’s direction, the Fly Ash is dumped by NTPC in the Fly Ash pond which is required to be maintained as per the standards specified by PCB. The appellant is undertaking the manufacturing activity and they are using the services of loading and unloading freight charges etc., for bringing the fly ash to their factory premises. The definition of input services as per Rule 2(l) as under;
“[(l) “input service” means any service, –
(i) used by a provider of [output service] for providing an output service; or
(ii) used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal,
and includes services used in relation to modernisation, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal;”
7. This Rule allows the appellant to take credit for the input services used in the manufacture of dutiable goods.
8. We find that on the very same issue, the Tribunals have held as under:
CC, Nagpur Vs. Ultratech Cement Ltd. 2012 (278) ELT 523 (Tri.-Bom.)
5. The CENVAT Credit to the respondent was denied as proposed in the show-cause notice on the basis of that these services were received outside the factory premises. The CENVAT credit on input service is available as per Rule 2(1) of the CENVAT Credit Rules, 2004 which is reproduced here as under :-
(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 of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation up to the place of removal.
6. From the plain reading of the Rule 2(1) of the CENVAT Credit Rules, 2004, it is seen that no where it is mentioned that the input service credit is not available for the services utilized outside the factory premises. The denial of CENVAT credit on the ground that the services were not received by the respondent in the factory premises, is not sustainable. Accordingly, I do not find any merit in the appeal and the same is rejected.
Birla Corporation Ltd. Vs. CCE, Lucknow
2014 (34) STR 589 (Tri.-Del).
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 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 sed 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.
Linde India Ltd Vs. Commissioner of CGST & CX, Rourkela (2024) 23 Centax 101 (Tri.-Cal)
5. It is seen that in the case of Mangalam Cement Limited case cited supra, the issue was identical and the Tribunal has held as under:-.
4. On examination of the monthly ER-1, it was noticed that the appellant had availed the cenvat credit on input services which were actually used by them in the setting up of their new unit MGU which is not admissible after amendment of the definition of input service w.e.f 01.04.2011. On examining the details, it was observed that the appellant had included all the bills and payments made from October 2013 to 03.02.2014 in respect of various services specified though the commercial production started only from 24.02.2014, which means that they were used by them in setting up of the new unit, namely MGU. Accordingly, Show Cause Notice dated 3 26.08.2015 was issued for the period October 2013 to February 2014, as the department was of the view that the appellant had wrongly availed the cenvat credit amounting to Rs 1,36,25,467/- on the services used in setting up of the new plant, namely MGU.
8. The main issue in the present case is whether the appellant rightly availed the cenvat credit on input services used by them in connection with setting up of their new unit which has been deleted from the inclusion part of section 2(l) post amendment of the definition of ‘input service’, w.e.f. 01.04.2011.
9. The above issue is no longer res integra as the same has been decided in favour of the assessee by various Benches of the Tribunal in several decisions, Hindalco Industries Ltd., v. Commissioner, Central GST, Central Excise & Customs, Jabalpur -2019 (5) TMI 1620 -CESTAT New Delhi, Commissioner of Central Excise, Kolkata-III v. M/s Texmaco UGL Rail (P) Ltd., (Now known as Texmaco Hi-Tech Pvt. Ltd., (Vice-Versa) -2019 (7) TMI 1651 -CESTAT Kolkata, Kellogs India Pvt. Ltd., v. Commissioner of Central Tax, Tirupathi GST – 2020 (7) TMI 414 -CESTAT Hyd., PepsiCo India Holdings (Pvt.) Ltd. v. Commissioner of Central Tax, GST, Tirupati – 2022 (56) G.S.T.L. 22 (Tri.-Hyd.)(Tri. Hyd.) and Hindustan Zinc Limited v. Commissioner of CGST, Excise Customs, Udaipur – 2021 (8) TMI 872 -CESTATNew Delhi after considering the provisions of section 2 (l) of the Finance Act, 2004 both pre and post amendment.
11. For reference, we would like to take note of the observations made by the Tribunal in the earlier decisions on the eligibility of cenvat credit after the amendment of the definition of ‘input service’, excluding the setting up process of a factory from the inclusive part of the definition, w.e.f. 01.04.2011. In the case of Hindustan Zinc Ltd., (supra) it has been held:
15. The department wants to deny them the benefit of the cenvat credit on the ground that ..services related to setting up of a factory” which were specifically included prior to 1.4.2011 were no longer specifically included post 1.4.2011.
16. We find that the definition of .input service” prior to 1.4.2011 had two parts- a main part of the definition and an inclusive part of the definition. This inclusive part specifically included the services availed for setting up the factory. After 1.4.2011, it has three parts- a main part, an inclusive part and an exclusive part. The services used for setting up the factory are neither in the inclusive part of the definition nor the exclusive part of the definition. Therefore, such services were neither specifically included nor were specifically excluded.
17. It takes us to the main part of the definition which must be examined. If it is wide enough to cover the services in question, cenvat credit will be available, otherwise it will not be available. The main part includes “services used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place of removal. ” The term manufacture is not defined in the Rules.
Xxxxxxxxx
21. For a service to qualify as .input service” under CENVAT credit Rules, 2004 post 2011, the service in question need not be covered even by the very wide definition of manufacture under section 2(f) of the Central Excise Act. Any service which is used not only in manufacture but also „in relation to” manufacture will also qualify as input service. The scope of input service is further enlarged with the expression whether directly or indirectly used in the definition of input service. Thus, there are: (a) Actual manufacture; (b) Processes incidental or ancillary to manufacture which are also manufacture; 8 (c) Activities directly in relation to manufacture (i.e., in relation to „a” and „b” above); (d) Activities indirectly in relation to manufacture (i.e., in relation to „a” and „b” above);
22. All four of the above qualify as input service as per Rule 2(l) (ii) as applicable post 1.4.2011. Although setting up the factory is not manufacture in itself, it is an activity directly in relation to manufacture. Without setting up the factory, there cannot be any manufacture. Services used in setting up the factory are, therefore, unambiguously covered as „input services” under Rule 2 (l) (ii) of the cenvat credit Rules, 2004 as they stood during the relevant period (post 1.4.2011). The mere fact that it is again not mentioned in the inclusive part of the definition makes no difference. Once it is covered in the main part of the definition of input service, unless it is specifically excluded under the exclusion part of the definition, the appellant is entitled to cenvat credit on the input services used. This Bench has already taken this view in Kellogs. Similar views have been taken by the other Benches in the other cases mentioned above.” (emphasis supplied)
12. The findings recorded above are squarely applicable to the facts of the present case and therefore we do not find any justification in denying the benefit of cenvat credit to the appellant. Here MGU was a part of the existing unit itself. The services so utilized for setting up of the factory which were availed prior to the commencement of production shall fall within the „means clause” of the definition of „input service”, which has been held to be wide enough to allow cenvat credit of services used in or in relation to manufacture whether directly or indirectly. It is pertinent to appreciate that grinding unit was set up so 9 as to utilize the excess production of clinker in the main fatory and applying the principle laid down in the case of Kellogs (supra), there is a direct nexus between the manufacture of the final product & the services used for setting up the grinding unit, MGU.
17. We respectfully agree with the aforesaid decisions and therefore the demand made by the revenue to deny cenvat credit by the appellant and order its recovery is rejected. Consequently, the question of interest and penalty no longer survives.
6. Since the issue is fully covered by the above decisions, I allow the present Appeal with consequential relief, if any.
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. The appellant would be eligible for consequential relief, if any, as per law.
(Order pronounced in open court on 31.07.2026.)
