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CX - Exploratory drilling in captive mines is necessary to find prospective potential for mining zinc ore - 'Diamond Core Drilling Services' is input service: CESTAT

By TIOL News Service

NEW DELHI, NOV 07, 2017: THE dispute is eligibility of Cenvat Credit on "Diamond Core Drilling Services" availed by appellant in their captive mines during October 2013 to March 2014.

The impugned order passed by CCE, Udaipur held that these services are not input services for the assessee-Appellants and accordingly denied the credit of Rs. 80,60,969/- and imposed penalty of Rs. 10,00,000/-.

In appeal, the assessee-appellant submits that the impugned order admits that the said drilling is carried out in their captive mines area. And the denial is only on the ground that this "exploratory drilling" is not resulting in any mining work. It is emphasised that the exploration is a part of the mining activity and without that they will not be able to identify the ore and extract it for further manufacture.

The AR supported the order.

The CESTAT observed -

"5. … It appears that the facts are that Service Tax has been paid on the "Diamond Core Drilling Services" in the captive mines area of the assessee-Appellants. The said drilling operations are necessary for survey and exploration of their mining area to find the prospective potential for mining zinc ore. Accordingly, we note that this is essential for the core operation of manufacture of Zinc Ore by the assessee-Appellants and the same is carried out in their own mines only. Accordingly, we find no justification to deny the credit availed by the assessee-Appellants in their "Diamond Core Drilling Services", which is part of their operation…."

The impugned order was set aside and the appeal was allowed.

(See 2017-TIOL-3914-CESTAT-DEL)


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