Custom, Excise & Service Tax Tribunal
M/S.Ultra Tech Cement Ltd. Unit Vikram ... vs Cce, Indore on 16 September, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI
Date of Hearing: 8.8.2016
Decision:16.09.2016
Excise Appeal No.1829/2009-EX(DB)
[Arising out of Order-in-Appeal No.IND-I/57/2009 dated 18.03.2009 passed by the Commissioner (Appeals), Central Excise, Indore ]
M/s.Ultra Tech Cement Ltd. Unit Vikram Cement Works Appellants
Vs.
CCE, Indore Respondent
Appearance:
Shri B.L. Narsimhan, Advocate for the appellant.
Shri Yogesh Agarwal, DR for the respondent Coram:
Honble Mr. Justice (Dr.) Satish Chandra, President Honble Mr. Ashok K. Arya, Member (Technical) Final Order No.53625/2016 /Dated:16/09/2016 Per Ashok K. Arya:
Heard both the sides.
2. The matter concerns with the denial and recovery of cenvat credit amounting to Rs.17,19,091/- availed on 836.99 MT of steels used for fabrication of misc. structures under Rules 12 and 13 of erstwhile Cenvat Credit Rules, 2001/2002 read with Section 11 A of the Central Excise Act, 1944, and imposition of equivalent penalties under Rules 12 and 13 of Cenvat Credit Rules (CCR) 2001/2002.
3. This matter had come before this Tribunal earlier vide Final Order dated 29.06.2007. The matter was then remanded back to the Original Authority to decide afresh on merits. Thereafter, the Original Authority viz. the Asstt. Commissioner of Central Excise, Division, Ratlam vide de novo Order-in-Original No.13/2008 dated 9.9.2008 disallowed the cenvat credit and confirmed the demand of Rs.17,19,091/- along with interest and penalty of equivalent amount.
3.1 The appellant filed an appeal before the Commissioner (Appeals) against the said order dated 9.9.2008 of the Asstt. Commissioner. The Commissioner (Appeals) upheld the said original order dated 9.9.2008 of the Asstt. Commissioner, Ratlam. Now, the assessee appellant viz. Ultra Tech Cement unit - Vikram Cement is before the Tribunal against the Order-in-Appeal No.IND-I/57/2009 dated 19.03.2009 of the Commissioner (Appeals). The period involved here is from Jan. 2002 to May, 2002.
4. The appellant has been represented by ld. Advocate, Shri B.L. Narsimhan, who has, inter alia, pleaded, at the strength of written note, as follows-
i) the subject items such as ducts are in the nature of pipes and chutes and hoppers are in the nature of material handling equipments and hence, covered as capital goods under Rule 2(b) of Cenvat Credit Rules, 2002. The term input was defined under Rule 2(f) of Cenvat Credit Rules, 2001 and Rule 2(g) of Cenvat Credit Rules, 2002 which included goods used in the manufacture of capital goods which are further used in the factory of manufacture. Also, the definition of capital goods included components, spares and accessories of goods falling under Chapter 82,84 and 85 and therefore, if the inputs are used in the manufacture of components, spares and accessories of specified capital goods, such inputs shall be treated as used in the manufacture of capital goods. For capital goods, they should be used in the factory of manufacture of final products for being entitled to credit.
ii) The cenvat credit is available on these items as inputs as they were used in the manufacture of capital goods i.e. parts of specified capital goods which were further used in the factory. Alternatively, credit will be admissible as capital goods under the category of components, spares and accessories of specified capital goods.
iii) To install ducts and cyclones and to make them functional they are mounted/erected on structures to support them and without these support, machinery cannot be installed.
iv) Attending platforms are fabricated as per requirement in the manufacturing process and they are attached to cyclones or ducts and are parts of such goods. Since the machinery is huge, without these platforms, production personnel cannot check machinery and regulate manufacturing process.
v) Credit on steel inputs used in the machinery of parts or components or accessories of specified capital goods has been availed as per law and the same is sustainable.
vi) The steel items have been used as part of setting up of plant and without use of such steel, plant cannot be set up and they are required to be considered as used in or in relation to manufacture of dutiable final products and thus, eligible to credit.
4.1 Ld. Advocate has further submitted that :
i) Cenvat credit would be admissible even if the goods become part of immovable structures.
ii) Since the credit availment in the present case is as per law, no penalty is imposable. Imposition of enhanced penalty in the de novo order is against the remand direction of Honble Tribunal and the same is not sustainable.
iii) The issue is not free from doubt and the appellant entertained bona fide belief in which case, the penalty imposed is liable to be set aside.
iv) Interest is not recoverable since credit has not been taken or utilized wrongly in the present case.
5. The Revenue has been represented by ld. DR, Shri Yogesh Agarwal, who reiterated the findings of impugned order. He additionally has, inter alia, submitted as follows:-
i) The term capital goods consist of two words capital and goods. Cenvat credit is available on inputs defined in Rule 2 (k), input services defined in Rule 2(I), and capital goods defined in Rule 2(a) of CCR.
ii) As per the Honble Supreme Courts decision in the case of Union of India Vs. Delhi Cloth and General Mills Co. Ltd. 1977 (1) ELT (J 177) (SC) and Indian Cable Co. Ltd. Vs. CCE, Calcutta- 1994 (74) ELT 22, the subject goods, which are steel structures in the form of supports of various ducts /cyclones/platforms and staircases are immovable and cannot be called excisable goods or capital goods. In this regard, he has further cited the following cases laws:-
(a) Mittal Engineering Vs. CCE 1996 (88) ELT 622 (SC)
(b)Silical Metallurgical Vs. CCE- 1999 (106) ELT 439 (SC)
(c) Tata Robbins Fraser Ltd. 1999 (110) ELT 755 (T-Delhi)
iii) Capital goods must be first covered as excisable goods and thereafter, only credit can be taken of the duty paid on inputs of such excisable goods.
iv) On inputs on which cenvat credit is being claimed must be used for manufacture of capital goods and not for structures like foundations or supporting structures or permanently embedded plant, which are not the goods.
5.1 Further, ld. AR, Shri Yogesh Agarwal appearing for the Revenue submitted as follows:-
* The present definition of capital goods is covered in Rule 2 (a) of CCR, 2007 which is similar to the definition existing since 23.7.96 except the coverage of specified goods has been broadened steadily. It covers goods falling in Chapter 85,86, 90, 82, 6805, 6804, 860692 (wagons);csa(comp, spare parts and accessories of these); pollution control equipment and their parts; moulds, dies, jigs, fixtures, refractories; tubes /pipes/their fittings; storage tank; motor vehicles and their chassis including dumpers and tippers. (from 1.4.2012).
5.2 In support, Ld. AR also cited the decision of the Honble Allahabad High Court in the case of Daya Sagar Vs. CCE 2015 (316) ELT 394 (HC).
6. We have carefully considered all the facts on record and submissions of both the sides along with the case laws cited.
7. We find that this is a second round of litigation before us. In the remand order dated 29.06.2007, the Tribunal directed the Original Authority to find out factual position about actual use of various Iron Steel items on which credit of duty have been availed by the appellant. The de novo order was passed denying the cenvat credit. On an appeal vide the impugned order, the Commissioner (Appeals) confirmed the original order.
7.1 We note that there are three main categories of items which are in dispute. In First Category, M.S. Beams, Angles, Plates and Channels were used to support the various ducts and cyclones in the appellants factory. These ducts were for transportation of materials in process. The ducts and cyclones are integrally connected to capital goods used in the manufacture of final products. Second, the iron steel items were also used for fabricating, attending platforms, which are generally erected around a machinery. This helps in regular monitoring, repair and check-up of these capital goods. These attending platforms are attached to the machinery and are a part and parcel of overall configuration of manufacturing machinery. The third set-up of items are staircases and ladders and fabricated using the angles, plates, etc. These are apparently not general purpose staircases or ladders but are specifically made and attached to various capital goods in the manufacturing facility for access, supervision and management of various machineries. In this regard, we have examined the photographic evidence to show the place of use of these items.
7.2 We find that the lower authorities denied the credit mainly on the ground that the M.S. items, on which credits have been taken are falling under Chapter 72, which is not covered under the category of capital goods. The second main objection is that these items were used for fabricating the structures, which become immovable upon fixing and hence, results in a non-excisable item. Hence, the credit is not eligible on any of them. We find that the denial of credit by the lower authorities is on the ground that the items are not used in the manufacture of capital goods as none of the items, as described above, arising after fabrication, can be considered as accessories of the capital goods. Further, they become immovable upon fabrication. We find both these arguments as un-sustainable. Much emphasis has been made on the requirement and necessity of emergence of excisable items after fabrication using the impugned goods. We do not find any such requirement specifically mentioned in the definition of either in the inputs or capital goods under Cenvat Credit Rules.
7.3 Admittedly, various capital goods and machinery for the plants are bought individually, wherever they are used they are identifiable machinery under due classification and on payment of duty. However, to have a manufacturing facility in such a complex operation, all these machineries and their accessories are to be integrated properly. Hence, various other items are fabricated in the appellants unit also. Now, we are dealing with some such fabrication, which are done inside the appellants unit. We find that various capital machineries are integrated for the manufacture of cement. Certain structures like standing platforms, ladders, support system for material transporting ducts are essential parts of these capital goods. Admittedly, in a cement plant, the capital goods are integrated and fixed. When various additional structures are added for functional and operational purposes, it cannot be questioned on the ground that such fabricated structures are not movable after such fabrication. In other words, it is of common knowledge that most of the capital goods and their accessories were put in place of their operation by various degrees of fixation and embedding. It cannot be alleged that such fixation and embedding will make all the capital goods and machineries as immovable property. The matter has to be examined on case to case basis and no sweeping statement can be made on such facts.
7.3.1 The reliance placed by the lower authorities on Daya Sagar (supra) is not proper. In that case, the party admitted that the steel items were used for raising civil structures. The decision of the Honble Surpeme Court in Saraswati Mills (supra) was examined in detail and distinguished by the Honble Madras High Court in India Cements Ltd. 2015 (321) ELT 209 (Madras). The Honble Madras High Court observed as below:-
9.?It is not in dispute that the impugned goods were used for fabrication of structurals to support various machines like crusher, kiln, hoopers, etc., and that without these structurals, the machinery could not be erected and would not function.
10.?In the case of Commissioner of Central Excise, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd., reported in 2010 (255) E.L.T. 481, relied on by the learned counsel appearing for the assessee, the Apex Court, while dealing with the issue in question, in Paragraph Nos. 7 and 8, held as follows :
7.?In the present case, it is seen that the items in question were used in the erection of various machineries such as, - new additional Electrostatic Precipitator for raw mill project, additional fly ash handling system, MMD crusher etc. for the Dry Process Cement Manufacturing Plant. It is evident that MS Angles, MS Beams, MS Channels etc. were used in the erection of machineries it become component of the same, which are integral part of Dry Process Cement Manufacturing Plant. It is noted that Fly Ash handlish system is a pollution control equipment and particularly mentioned in Rule 2(a)(A)(ii) of Rules, 2004. The allegation in the above show cause notice that the Chapter Heading of these items were not covered under Rule 2(a) of the Rules, 2004, is not sustainable, in respect of pollution control equipments because the rule does not specify the tariff headings under which pollution control equipment should be falling. The appellant established that these items were used for erection of capital goods namely Dry Process Cement Manufacturing Plant, which falls under Chapter 84, as mentioned in Serial No. (i) of Rules 2(a)(A). Thus, the items in question are covered in serial No. (iii) of Rules 2(a)(A) of the Rules, C.B.E. & C. has clarified that all parts, components, accessories which are to be used with capital goods in serial (i) and (ii) of Rules 2(a)(A) and classifiable under any chapter heading are eligible for availment of Cenvat credit. A plain reading of serial (iii) cannot lead to a different conclusion either.
8.?After considering the use of the goods in question, in our considered view, the present case is covered by the decision of the Honble Madras High Court in appellants own case as referred above. We have also noticed that the Honble Supreme Court in the case of Rajasthan Spinning and Weaving Mills Ltd. (supra) as relied upon the Honble High Court in the appellants own case, allowed Modvat credit on MS channels, steel plants etc. as capital goods used for erection of chimney for diesel generating set. The findings of the Commissioner that these are structures fixed to earth with concrete foundations and are immovable appears to be beyond the scope of the show cause notice. So, the case of M/s. Triveni Engineering & Industries Ltd. (supra) as relid upon by the learned AR is not applicable in the present case.
11.?As far as the reliance placed on the decision reported in 2011-TIOL-73-SC-CX = 2011 (270) E.L.T. 465 (S.C.) (Saraswati Sugar Mills v. Commissioner of Central Excise, Delhi - III) in Civil Appeal No. 5295 of 2003, dated 2-8-2011 by the learned Standing Counsel appearing for the Revenue is concerned, we find that this Court had earlier considered the case of the assessee in two similar cases of the previous assessment years in C.M.A. No. 1301 of 2005, dated 31-12-2012, where a reference was made to an order passed earlier in respect of the very same assessee. While dismissing the appeal filed by the Revenue, the Division Bench of this Court held as follows :
8.?Even though learned standing counsel appearing for the Revenue submitted that the judgment in the assessees own case reported in AIT-2011-358-HC (The Commissioner of Central Excise v. M/s. India Cements Limited) had been appealed against, as of today, there are no details; in any event, the fact herein is that the Revenue does not controvert the facts found by the Assistant Commissioner that the impugned goods were used for fabrication of structurals to support various machines like crusher, kiln, hoppers, pre-heaters conveyor system etc. and that without these structurals, the machinery could not be erected and would not function.
9.?In the decision reported in AIT-2011-358-HC (The Commissioner of Central Excise v. M/s. India Cements Limited), pointing out to Rule 57Q and the interpretation placed by the Apex Court in the decision reported in 2010 (255) E.L.T. 481 (Commissioner of Central Excise, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd.) and in particular Paragraph Nos. 12 and 13, wherein the Apex Court had applied the user test by following the Jawahar Millss case, this Court held that steel plates and M.S. Channels used in the fabrication of chimney would fall within the ambit of capital goods. In the face of this decision in the assessees own case there being no new circumstance or decision in favour of the Revenue, we do not find any good ground to take a different view herein too.
10.?As far as the reliance placed by the Revenue on the decision reported in 2011 (270) E.L.T. 465 (S.C.) (Saraswati Sugar Mills v. Commissioner of C.Ex., Delhi-III) is concerned, we do not think that the said decision would be of any assistance to the Revenue, considering the factual finding by the Tribunal therein in the decided case that the machineries purchased by the assessee were machineries themselves. Thus, after referring to the decision reported in 2010 (255) E.L.T. 481 (Commissioner of Central Excise, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd.), the Apex Court held that in view of the findings rendered by the Tribunal that the machineries were complete and having regard to the meaning of the expression components/ parts, with reference to the particular industry in question, the Apex Court rejected the appeal filed by the assessee.
11.?Thus going by the factual finding, which are distinguishable from the facts found by the authorities below in the case on hand, we have no hesitation in rejecting the Revenues appeal, thereby confirming the order of the Tribunal.
12.?Learned standing counsel appearing for the Revenue pointed out that the Tribunal had merely passed a cryptic order by referring to the earlier decisions. We do not think that this would in any manner prejudice the case of the Revenue, given the fact that on the identical set of facts, the assessees own case was considered by this Court and by following the decision reported in 2010 (255) E.L.T. 481 (Commissioner of Central Excise, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd.), the Revenues appeal was also rejected. In the circumstances, this Civil Miscellaneous Appeal is dismissed. No costs. Consequently, C.M.P. No. 16107 of 2005 is also dismissed. 7.4 The Larger Bench of the Tribunal in Mahindra & Mahindra Ltd. 2005 (190) ELT 301 (Tribunal-LB) examined the question of fabrication of immovable structures. It was held that it was not correct to say that no parts of the structures came into existence as commodity because ultimately they got permanently fixed as immoveable structure. It was held that the movability is when they have separate identity prior to permanent fixation. In the present case, the lower authorities have not categorically established that upon fabrication an immovable civil structure is emerged. Fabrication of structural as an accessory for necessary operation of capital machinery cannot be considered as creation of immovable property. We note that the Tribunal in the case of Jindal Vijayanager Steels Ltd. -2005 (191) ELT 459 (Tribunal-Bangalore) (para-6) allowed the credit on G.I. Pipes, platforms, ladders, spring, hanger supports. Reference can also be made to the Tribunals decision in Ispat Industries Ltd. 2006 (195) ELT 164 (Tribunal-Mumbai) (Para-14), which has been affirmed in the case of City Lubricant (P) Ltd. 2011 (266) ELT 131 (Tribunal-Bang.) (para-5).
7.5 It is relevant to note the Honble Supreme Courts observation in Rajasthan Spg. & Wvg. Mills Ltd. 2010 (255) ELT 481 (SC). The Honble Apex Court allowed the credit on steel plates and M.S. channels used in the fabrication of chimney applying user test. In other words, the usage of a particular item in the appellants premises will determine the credit eligibility rather than its classification alone.
8. Considering the above discussions and analyses, we find no merit in the impugned order and accordingly set aside the same and allow the appeal. Appellant will get the relief accordingly.
[Order pronounced on 16.09.2016.] ( Justice Dr. Satish Chandra) President ( Ashok K. Arya) Member (Technical) Ckp.
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