Custom, Excise & Service Tax Tribunal
Hindustan Petroleum Corporation Ltd vs Cce Mumbai Ii on 31 January, 2018
IN THE CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
Appeal No.
E/86196/17
(Arising out Order-in-Appeal No. PK/97/M-II/2017 dated 31.03.2017 passed by the Commissioner of Central Excise (A), Mumbai II)
For approval and signature:
Honble Shri Raju, Member (Technical)
1. Whether Press Reporters may be allowed to see No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the No CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy Seen
of the Order?
4. Whether Order is to be circulated to the Departmental Yes
authorities?
Hindustan Petroleum Corporation Ltd.
Appellant
Vs.
CCE Mumbai II
Respondent
Appearance:
Shri Sachin Chitnis, Advocate for the appellant Shri Sanjay Hasija, Supdt. (AR) for the respondent CORAM:
Honble Shri Raju, Member (Technical) Date of hearing : 17.11.2017 Date of decision : 31.01.2018 O R D E R No: ..
Per: Raju The appellants Hindustan Petroleum Corporation Ltd. are in appeal against denial of cenvat credit on capital goods.
2. Ld. Counsel for the appellants made a summary of the items on which the credit has been denied.:-
Sr. No. Details of Capital goods denied Grounds of denial of credit as per impugned order Submission of the appellants
1.
Mobile Compactor Bin Storage System Storage System cannot be considered as a capital goods per the definition in CCR
(i) installed for effective storage system;
(ii)high rise high density mobile compactor erected using maximum height available at area opposite the small pigeon holes for storing spares.
2. FRP Ladder Trays (Rs.1,00,164/-) Neither Capital Goods nor inputs
(i) Utilised in laying electric cable in the refinery;
(ii) electric cabling is to be done during the project stages and are the part of the plant and machinery;
(iii) Cable tray are used as an alternative to open wiring or electrical conduit systems, and are commonly used for cable management.
3. Elbows (Rs.19,586) Neither capital goods nor inputs
(i) Used to connect two various pipers of different shapes and size;
(ii) used to connect the pipes which runs through the refinery for connecting the plant to tankages.
4. Tunneller Neither capital goods nor inputs
(i) used to connect the tanks to the DCS (Distributed control system) control room to monitor the activity in the tank;
(ii) OPC tunneller provides an easy, reliable and secure way to communicate between networked computers.
5. Structrual Steel Rolled/ Structurals Neither capital goods nor inputs Used for the repairs and maintenance of the storage tanks of the refinery.
6. Impeller Spares Neither capital goods nor inputs Used in Kirloskar Ebara Impeller Pumps for better functioning and smooth operation of the refinery.
7. Switch Board Neither capital goods nor inputs Used for Cr.LPG & OM&S substations for replacement of electrical facilities.
3. Ld. Counsel relied on the following decisions:-
In respect of storage system installed in factory, credit admissible * Lear Automotive India Ltd. 2013 (291) ELT 411 (T) * Banco Products (India) Ltd. 2009 (235) ELT 636 (Tri-LB) * Sonai Engineering Pvt. Ltd. 2010 (253) ELT 806 (T) * Kosi Plast P. Ltd. 2011 (271) ELT 93 (T) In respect of switch board being device for regulating electric supply:-
* Grasim Cement 1997 (96) ELT 354 (T) * Nav Bharat Paper Mills 1996 (86) ELT 501 (T) * Jindal Strips Ltd. 1999 (114) ELT 731 (T)
4. Ld. Counsel further produced certain pictures of mezzanine floor for storage of mobile rack system.
5. Ld. AR relies on the impugned order. He argued that from the invoice of the storage rack it is seen the same fall under chapter 94 of the CET and the said chapter is not covered in the definition of capital goods.
6. I have gone through the rival submissions.
6.1. I find that the cenvat credit of item no. 1 has been denied for the following reason:
In the instant case, it is admitted fact that the structures installed on 4200mm height from floor on cemented platform. The constructions of heightened floor/platform and installations of structure therein are civil in nature. It is observed from case records, that the above items are nothing but structures and its parts installed on uplifted cemented floor/ foundation which were executed under works contract. As discussed above, it does not fall in the ambit of definition of capital goods as defined under Rule 2(a) of CCR, 2004. Neither does it fall under definition of Input under Rule 2(k) of CCR 2004 and definitely hit the exclusion clause of definition of input. The definition of Capital goods reads as under:-
(a) capital goods means:-
(A) the following goods, namely:-
(i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, (heading No. 6805, grinding wheels and the like, and parts thereof falling under heading 6804) of the First Schedule to the Excise Tariff Act;
(ii) pollution control equipment;
(iii) components, spares and accessories of the goods specified at (i) and (ii);
(iv) moulds and dies, jigs and fixtures;
(v) refractories and refractory materials;
(vi) tubes and pipes and fittings thereof; and
(vii) storage tank, and
(viii) motor vehicles other than those falling under tariff heading 8702, 8704, 8711 and their chassis (but including dumpers and tippers), used-
(1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office; or (1A) outside the factory of the manufacturer of the final products for generation of electricity for captive use within the factory; or (2) for providing output service;
(B) motor vehicle designed for transportation of goods including their chassis registered in the name of service provider, when used for
(i) providing an output service of renting of such motor vehicle; or
(ii) transportation of inputs and capital goods used for providing an output service; or
(iii) providing an output service of courier agency;
(C) motor vehicle designed to carry passengers including their chassis, registered in the name of provider of service, when used for providing output service of
(i) transportation of passengers; or
(ii) renting of such motor vehicle; or
(iii) imparting motor driving skills;
(D) components, spares and accessories of motor vehicles which are capital goods for the assessee; The appellants have cited the reason as it appears in column 3 of the sr. No. 1 of table above. It is seen that the appellants have not countered the legal argument in the impugned order that the said goods did not fall under the definition of capital good/ inputs appearing in the Cenvat Credit Rules. While theoretically it can be considered the storage system Mezzanine floor would be capital goods but for the purpose of Cenvat Credit Rules the definition is very clear and the said goods do not fall under the definition of input/ capital goods. Thus the cenvat credit on the said goods is not admissible.
6.2. The second issue raised relates to mobile compactor bin storage system. The credit of the same too has been denied for the reason cited in para above relating to mezzanine floor. The appellants have claimed that these are capital goods. In normal parlance, the storage bin would be considered as capital goods but for cenvat credit goods have to fall under the definition of capital goods as it appears in the Cenvat Credit Rules 2004. The instant case is classifiable under chapter 94 and is thus clearly not covered under the definition of capital goods. Since the appellants have not countered the regarding the goods not fall under the said definition of the Cenvat Credit Rules the credit of the same cannot be allowed.
7. In so far as FRP ladder trays are concerned, the same are used for laying electric cable in the refinery. Most of the equipment of the refinery would be classifiable under chapter 84 and 85 of CET and thus would be covered under the definition of capital goods. The electric system would definitely be covered as components of such refinery machinery. The credit on the FRP therefore cannot be denied.
8. In respect of Elbows, the appellants have contended that the same are used to connect pipes which runs through the refinery for connecting the plant to tankages. I find that tube pipes are specifically covered under the definition of capital goods. The credit of the elbows therefore cannot be denied.
9. The next item Tunneller is used to connect the tanks to the distributed control system and control room to monitor the activity in the tank. It provides an easy reliable and secure way to networked computers. The said goods would fall under the accessories to the control system. Thus the credit of the same cannot be denied.
10. The next item relates to structurals used for repair and maintenance of tanks of the refinery. I find that the definition of capital goods specifically includes storage tanks. However, the items used for construction of tanks are not covered under the definition of capital goods. Tank and refinery being immovable property the credit of the structural steel for repair for tank also cannot therefore be allowed as inputs.
11. The next item are Impeller spares, switch board, both fall under chapter 84 and 85 of CET and thus are covered in the definition of capital goods. The credit of same cannot be denied.
12. The appellants have claimed that they always had a balance of more than 50 lakhs in their cenvat register every month and therefore they have not utilised this amount of disputed cenvat credit. They have argued that no interest in the circumstance can be levied in the case of Hon'ble High Court of Karnataka in Bill forge Pvt. Ltd. 2011-TIOL-799-HC-KAR-CX. I find that no evidence of non-utilisation of cenvat credit has been produced. Mere existence of balance of `50 lakhs in their cenvat credit in the end of each month is not sufficient to establish non-utilisation of the cenvat credit. What needs to be seen is by how much the amounting the closing balance of the month exceeds the amount debited next month. In the absence of this evidence, the contention of the appellants cannot be accepted.
13. It is seen that the issue under dispute are in the nature of credits on which the appellants could have had bonafide belief. In view of above, penalty under Section 11AC is not justified. The demand of reversal of cenvat credit is modified as per observation above, the demand of interest is to be confirmed after examining the detail pattern of use of cenvat credit. The appeal is partly allowed in respect of reversal of cenvat credit. The issue regarding the recovery of interest is remanded to the original adjudicating authority to determine after examining the facts regarding utilisation of the said disputed credit or otherwise. (Pronounced in Court on ..............................) (Raju) Member (Technical) //SR
- 10 -
E/86196/17