2026-VIL-986-CESTAT-DEL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise – Quantum of Cenvat Credit – Eligibility to CENVAT credit on services used in handling, transporting and crushing ore in captive mines – Dept of the view that CENVAT credit of the service tax paid on the input services in handling, transporting and crushing ore in the mines can be allowed only to the extent the ore was transported to and used in the factory - Whether CENVAT credit for service tax paid on input services in handling, transporting and crushing ore in captive mines can be claimed only to the extent that the ore was physically transported to and used in the factory, or whether credit is available for services rendered on the entire quantity of ore extracted, including the portion that was discarded as waste in the mines – HELD - The manufacturer is entitled to CENVAT credit for the entire service tax paid on handling, transporting and crushing services of ore, including the portion that was ultimately discarded. The definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004 encompasses any service used by a manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products - The term manufacture includes any process incidental or ancillary to the completion of a manufactured product. The scope of input service extends to services used in processes incidental to manufacture through the expressions directly or indirectly and in or in relation to manufacture. Almost all manufacturing processes involve removal of excess or unwanted material, and the crushing and handling of ore in the mines constitute essential processes incidental and ancillary to the ultimate manufacture of final products. The services rendered on the material that is eventually discarded are integral to the overall manufacturing process as they cannot be separated from the process that produces the useful output. The finding that credit should be limited only to the quantum of ore reaching the factory was incorrect in principle as it improperly bifurcates a single service based on the physical yield rather than evaluating whether the service itself was used in the manufacturing process - The impugned order is set aside and the appeal is allowed
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