Madras High Court
The Commissioner Of Central Excise vs Customs on 24 July, 2014
Bench: R. Sudhakar, G.M. Akbar Ali
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED:24.07.2014
CORAM
THE HON'BLE MR.JUSTICE R. SUDHAKAR
AND
THE HON'BLE MR.JUSTICE G.M. AKBAR ALI
C.M.A.No.1585 of 2007
The Commissioner of Central Excise,
Office of the Commissioner of Central Excise,
Trichy .... Appellant
vs
1. Customs, Excise and Service Tax Appellate Tribunal,
South Regional Bench,
Chennai-600 006
2. M/s The Madras Aluminium Company,
Post Box No.4, Mettur Dam,
Salem District 636 402
Civil Miscellaneous Appeal filed under Section 35G of the Central Excise Act, 1994 to set aside the impugned Final Order No.71/06 dated 18.1.2005 passes by the file of the Customs, Excise and Service Tax Appellate Tribunal, Southern Regional Branch, Chennai.
For Appellant : Mr.Vikram Ramakrishnan
For 2nd respondent : MrParthasarathy for
MR.Lakshmi Kumaran
JUDGMENT
(Judgment of the Court delivered by G.M. AKBAR ALI,J.,) The respondent herein is a manufacturer of Aluminium and Articles falling under Chapter 76 of the Scheduled to the Central Excise Tariff Act 1985. The respondent avails credit of the duty paid on various inputs/ components used in the manufacturing of final products. There are 15 items for which credit was taken to the tune of Rs.71,34,612/-. However, the Revenue found that these items are not considered as inputs under Rule 57A of Central Excise Rules and issued a show cause notice dated 24.2.1997.
2. The Assessee replied stating that the credit was extended in respect of all goods which are used in or in relation to the manufacture of the final products, therefore, they are entitled to avail credit. The original authority, considered item by item and rejected the claim of the assessee.
3. The assessee went on appeal to the Commissioner (Appeals)and the Commissioner (Appeals) allowed credit only to 4 items and disallowed the following 11 items.
i) Alfoc Power ii) Agromore rodine iii) Aquachem iv) Steel Wire rope v) MS Plates various sizes vi) Oxygen Gas vii) Acctyne gas viii) MS Welding electrodes ix) Aluminium Welding wire x) CI Welding wire xi) PVC Pipes Against which, the assessee preferred an appeal before the Tribunal.
4. The Tribunal considered the above said eleven items for which the credit was disallowed and allowed the appeal placing reliance on the following case laws:
i) (Varalakshmi Sugars Ltd vs CCE, Hyderabad) (2001 (137) ELT 96 (Tri-Chennai)
ii) Madras Aluminium Co. Ltd vs CCE, Coimbatore (2001 (136) ELT 182 (Tri-Chennai)
iii)CCE Jaipur vs Birla Jute & Industries Ltd (2001 (129) ELT 684 (Tri-Delhi) Aggrieved by which, the Revenue has preferred the present appeal on the ground that all the decisions relied on by the Tribunal are related to eligibility of capital goods under Rule 57Q, but the goods in dispute relates to Rule 57A.
5. On admission, the following substantial questions of law were framed:
i) Whether the Tribunal is correct in holding goods which were not used directly or indirectly for the manufacture of final products are eligible inputs as per erstwhile Rule 57A of Central Excise Rules, 1944?
ii) Whether the Tribunal is right in holding that the said items falling under Chapter 73 are in the nature of capital goods as per erstwhile Rule 57Q of Central Excise Rules, 1944 and whether the declaration filed under Rule 57A is sufficient for Rule 57Q?
6. Heard Mr.Vikram Ramarkishnan for appellant/revenue and Mr. Parthasarathy for the assessee.
7. The learned counsel for the appellant/revenue submitted that the assessee is not entitled for such credit as the inputs are not used directly or indirectly for the manufacture of final products and they are not eligible for credit under Rule 57A. The learned counsel relied on the decision reported in 2011 TIOL 73 SC (Saraswathi Sugar Mills vs Commissioner oc Central Excise, Delhi.
8. On the other hand, Mr.Parthasarathy, learned counsel for the assessee would submit that the Tribunal in the earlier case of the assessee reported in 2001 (136) (ELT) 182 (MALCO vs CCE, Coimbatore) ( Tribunal, Chennai) has held that the inputs are directly or indirectly used in the manufacture of final products and has also referred to Rule 57A and 57Q of the Central Excise Rules. The learned counsel further submitted that in 2008 226 ELT 342 Madras, CCE Vs. Madras Aluminum Ltd, in a reference case of assessee's own case, the division bench of this court has also considered the inputs, upheld the contention of the assessee and rejected the claim of the department.
9. Heard and perused the materials available on record.
10. Out of 15 items, for which, the assess has availed credit, the above said 11 items are in dispute.
11. As far as item Nos.1 and 2 (Alfoc Powder and Agromore rodine) are concerned, in the assessee's own case reported in 2001 (136) (ELT) 182 (MALCO vs CCE, Coimbatore) ( Tribunal, Chennai) in paragraph 16, it is observed as follows:
16. With regard to the items namely, Rodine & Alfloc, it is observed the the order-in-original has not recorded any separate findings except as extracted in para-13 herein above. Since these items as recorded at Sl.Nos.34 & 35 of Para 3 of Order-in-Appeal are used in boiler water for the preparation of softening watering so that scale formations re reduced and break down of boiler does not take place where steam is generated for use and also reduce the corrosive effects of acid in washing the Evaporator and Heat Exchanger which are essential for heat transfer, the credit would be eligible under Rule 57A following the decision in the case of Andhra Pradesh Paper Mills 1990 (50) ELT 252 for Alfloc and other decisions for cleaning the chemical used to prepare machinery for effective functioning as held in the case of Cans & Closures Ltd 1991 (56) ELT 474 and CCE vs Asian Cables Ltd 1996 (81) ELT 509 and J.K. Sunthetics Ltd vs CCE 1996 (85) ELT 286 of Rodine, where credit has been allowed as eligible on chemicals used in cleaning and preparation of the machinery for more effective functioning of the machine as eligible inputs. Therefore, no reason is found to deny the credit on these items.
12. This eligibility was also confirmed by a division bench of this court in assessee's own case reported in 2008 226 ELT 342 Madras, CCE Vs. Madras Aluminum Ltd.
13. As far as item no.3 Aquachem is concerned, the learned counsel for the respondent would submit that it is also used for the same purpose and therefore, it is eligible for credit.
14. Even according to the original authority, the above said inputs viz Alfoc Power, Agromore and Acqahcem were used for the maintenance of plant and machinery. Therefore, what is applicable to item nos.1 and 2 is also applicable to item no.3 and it is eligible for credit.
15. As far as item no.4, Steel Wire rope, is concerned, the tribunal's decision reported in 2000 (116) E.L.T 50 (Tribunal) ( Rathi Ispat Ltd vs Commissioner of C.Ex. Meerut), the steel wire rope was considered for eligibility under Rule 57Q and held eligible. Therefore, this item is eligible for credit.
16. As far as item Nos. 5,6,7,8,9 and 10 MS Plates various sizes, Oxygen Gas, Acctyne gas, MS Welding electrodes, Aluminium Welding wire and CI Welding wire are concerned, these inputs were under the consideration of Tribunal's decision in the assessee's own case reported in 2001 (136) (ELT) 182 (MALCO vs CCE, Coimbatore) ( Tribunal, Chennai), which is subsequently confirmed by the division bench of this court in the case reported in 2008 226 ELT 342 Madras, CCE Vs. Madras Aluminum Ltd. Therefore, these items are also eligible for credit.
17) As far as item no.11 PVC Pipes is concerned, in the case of Vardhman Acrylics Ltd vs Commissioner of C.Ex.& Cus reported in 2006 (194) ELT 85 (Tri-Mumbai) and CCE, Chennai vs Pepsico India Holding Ltd reported in 2001(130) E.L.T 193, it is held that this item is also eligible for credit and therefore, this item is also eligible for credit.
18) Sec.57 of the Central Excise Rules deals with credit of duty paid on the excisable goods used as inputs. Rule 57Q relates to credit of duty paid on capital goods used by the manufacturer of specified goods. The Tribunal had relied on assessee's own case reported in 2001 (136) (ELT) 182 (MALCO vs CCE, Coimbatore) ( Tribunal, Chennai). The said order deals only with 57A of the Central Excise Rules, where many of the inputs were considered for credit. Therefore, the Tribunal is correct in holding that the inputs are used directly or indirectly for the manufacture of final product as per Rule 57A of the Central Excise Rules during the relevant period.
19. Therefore, we are of the considered view that the assessee is entitled for credit for the above said items and the substantial question of laws are answered in favour of the assessee.
20. In the result, appeal is dismissed and the Final Order passed by the file of the Customs, Excise and Service Tax Appellate Tribunal, Southern Regional Branch, Chennai in Final Order No.71/06 dated 18.1.2005 is confirmed. No costs.
(R.S.J.,) (G.M.A.J.,)
24.07.2014
sr
Index:yes
website:yes
To
1. The Commissioner of Central Excise,
Office of the Commissioner of Central Excise,
Trichy
2. Customs, Excise and Service Tax Appellate Tribunal,
South Regional Bench,
Chennai-600 006
R. SUDHAKAR,J.,
and
G.M. AKBAR ALI,J.,
sr
C.M.A.No.1585 of 2007
24.07.2014