Custom, Excise & Service Tax Tribunal
M/S. Gurunanak Metal Works vs Cce,Thane on 10 March, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. E/1097/11 [Arising out of Order-in- Appeal No. SB/139/Th I/2011 dated 5/4/2011 passed by the Commissioner of Central Excise (Appeals), Mumbai-I] For approval and signature: Honble Mr Ramesh Nair, Member(Judicial) =======================================================
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 :
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?
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M/s. Gurunanak Metal Works
:
Appellants
VS
CCE,Thane
:
Respondent
Appearance
Shri. Neerav R. Mainkar, Advocate for the Appellants
Shri. R.K. Maji, Asstt. Commissioner(A.R.) for the Respondent
CORAM:
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 10/3/2016
Date of decision: /2016
ORDER NO.
Per : Ramesh Nair
This appeal is directed against Order-in- Appeal No. SB/139/Th I/2011 dated 5/4/2011 passed by the Commissioner of Central Excise (Appeals), Mumbai-I, whereby Ld. Commissioner(Appeals) upholding the Order-in-Original No. 05/10-11 dated 30/7/2010 rejected the appeal of the appellant.
2. The fact of the case is that appellant are engaged in the manufacture of goods falling under Chapter 72 of the Central Excise Tariff Act, 1985 and they are availing Cenvat Credit on inputs, Capital Goods under Cenvat Credit Rules, 2004. During course of EA -2000 audit it appeared that the appellant had taken credit for the period October, 2005 to November, 2008 of Rs. 4,68,011/- on M.S. Plates, M.S. Channels, M.S. Beams, Joists, and H.R. Coils as capital goods. The appellant vide their letter dated 29/1/2009 stated that the goods viz. H.R. Coils, M.S. Channels, Beams, Joists, hot rolled sheets, H.R. Sheet Coils, although fall under Chapter 72 of Central Excise Tariff are in fact components/spares of the machinery/plant namely rolling mill installed in their factory which falls under Chapter 8455 of Central Excise Tariff, as such qualifying as Capital goods in terms of Rule 2(a) (A)(iii) of Cenvat Credit Rules, 2004. Further, as per letter dated 19/5/2009 submitted by the appellant alongwith a certificate issued by the Chartered Engineer, it has been certified that the M.S. Plates, M.S. Channels, Beams, Joist, H.R. Coils, have been used for repair of Chimney and Furnace. They also used the above items in a structure supporting the Gasifire. Accordingly, proceedings were initiated against the appellant and a show cause notice dated 3/6/2009 was issued. The lower adjudicating authority confirmed the demand and Ld. Commissioner(Appeals) upheld the Order-in-Original. Ld. Commissioner(Appeals) while passing order mainly placed reliance on the judgment in case of Vandana Global Ltd Vs Commissioner of C.Ex. Raipur [2010-TIOL-624-CESTAT-DEL-LB]. Aggrieved by the impugned order appellant is before me.
3. Shri. Neerav R. Mainkar, Ld. Counsel for the appellant submits that as regard the Cenvat credit on the structural steel even though larger bench in case of Vandana Global Ltd(supra) has held that Cenvat credit is not admissible but there are various decisions subsequent to the Vandana Global Ltd judgment where in various High Court even after considering the view of Vandana Global Ltd case held that Cenvat credit is admissible therefore now Vandana Global Ltd case is not good law. Ld. Counsel for the assesee placed reliance on the following judgments:
(1) Commr. of C. Ex. Jaipur Vs. Rajasthan Spinning & Weaving Mills Ltd[2010(255) ELT 481(S.C)] He further submits that demand is for the period October, 2005 to November, 2008, whereas show cause notice was issued on 03/6/2009 thus extended period of demand was invoked. He submits that issue is of admissibility of Cenvat credit on the structural steel. The issue was highly debatable and various contrary decisions were passed, as a result matter was referred to the larger bench, the issue involved is of interpretation of law. Therefore in such nature of cases extended period of demand cannot be invoked. He placed reliance on the following judgments:
(a) Commissioner of Central Excise Vs. M/s. Reliance Industries Ltd[2015-TIOL-363-HC-MUM-CX]
(b) Reliance Industries Ltd. Vs. Commissioner of Central Excise, Mumbai[2013-TIOL-1057-CESTAT-MUM]
(c) Union of India Vs. Bharat Aluminium Co. Ltd. [2012 (26) S.T.R. 101(Chhttisgarh)]
(d) Jaiprakash Industries Ltd. Vs. Commissioner of C. Ex. Chandigarh[2002(146) ELT 481 (S.C.)]
(e) Mentha & Allied Products Ltd Vs. Commissioner of C. Ex. Meerut[2004(167) ELT 494(S.C.)] He submits that in view of the above decisions of Honble Supreme Court and High Courts demand is clearly time bar.
4. On the other hand, Shri. N.N. Prabhudesai, Ld. Superintendent (A.R.) appearing on behalf of the Revenue submits that as per the Larger Bench decision in case of Vandana Global Ltd, issue has been settled that the Cenvat credit is not admissible on the structural steel. He further submits that as regard the admissibility of the Cenvat credit on the structural steel he places reliance on the following judgments:
(a) Bharti Airtel Ltd Vs. Commissioner of Central Excise, Pune-II[2014(35) S.T.R. 865(Bom.)]
(b) Daya Sugar Vs. Commissioner of Central Excise, Meerut-I[2015(316) ELT 394(All)]
(c) Vandana Global Ltd Vs. Commissioner of C. ex. Raipur[2010(253) ELT 440 (Tri. LB)]
(d) Saraswati Sugar Mills Vs. Commissioner of C. Ex. Delhi-III[2011 (270) ELT 465(S.C.)] As regard the limitation, he submits that as per the Honble Allahabad High Court judgment in case of Commr. of Cus.& C. Ex. Ghaziabad Vs. Rathi Steel & Power Ltd [2015(321) ELT 200(All.)]. Honble High Court observed that fact has to be ascertained that whether there is any suppression of facts on the part of the appellant or otherwise therefore merely because there were divergent decision, that alone cannot be the ground for not invoking extended period.
5. I have carefully considered the submissions made by both sides and perused the record.
6. I find that the Ld. Commissioner (Appeals) denied the Cenvat credit mainly relying on the Honble Larger Bench Decision in case of Vandana Global Ltd (supra), however much water has been flown on the issue as various High courts have either distinguished or overruled, the view taken by the Honble Larger Bench in case of Vandana Global Ltd hence it is no more good law. In case of Vandana Global Ltd, Honble Larger Bench has taken a view that even prior to 7/7/2009 when the explanation 2 of Rule 2(k) was inserted in the Cenvat credit Rules, 2004, it is clarificatory nature and had retrospective effect. As per the said amendment structural steel was explicitly excluded from the definition of input. In the case of Mundra Ports & Special Economic Zone Ltdvs. CCE, & Cus [2015(39) S.T.R. 726(Guj)], Honble High Court of Gujarat made clear that amendment which is effective from 7/7/2009 is not clarificatory in the nature. If this is so then credit on the structural steel is undoubtedly admissible for the period prior to 7/7/2009. I have gone through other judgments as well as judgments relied upon by the Ld. Counsel and find that various High Courts consistently taken the view that the Cenvat credit on structural steel is admissible. Some of the Judgments with operative portion of the orders are reproduced below:
(a) India Cements Ltd
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.
12.?From a perusal of the above said judgment, it is seen that there is no change in the circumstance and this Court had already considered the issue and held that 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 is distinguishable on facts. This Court applied principles laid down in the decision reported in 2010 (255) E.L.T. 481 (Commissioner of Central Excise, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd.) and held that the Tribunal was justified in allowing the assessees contention in respect of the very same assessee.
13.?The present appeal is also in respect of the very same assessee and therefore we find no distinguishable fact or issue contrary to the earlier decision of this Court.
14.?It is relevant to note that this Court in the decision reported in 2014-TIOL-1185-H-Mad-CX = 2014 (310) E.L.T. 636 (Mad.) in respect of the very same assessee in C.M.A. No. 1265 of 2014, following the abovesaid decision of this Court, dismissed the appeal filed by the Revenue.
15.?Accordingly, following the principles laid down in the decision reported in 2010 (255) E.L.T. 481 (Commissioner of Central Excise, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd.) and the earlier decisions of this Court in C.M.A. No. 3101 of 2005, dated 13-12-2012 and C.M.A. No. 1265 of 2014, dated 10-7-2014, we are inclined to allow the appeal, thereby set aside the order of the Tribunal. Accordingly, this civil miscellaneous appeal stands allowed. No costs. Consequently, M.P. No. 1 of 2011 is closed.
(b) Chemplast Sanmar Ltd [2014(310) ELT 870(Mad.)]
9.The learned counsel for the assessee submitted that? this court has already considered a similar issue in CMA 1301/2005, dated 31-12-2012 and in C.M.A. No. 1265/2014, dated 10-7-2014 [2014 (310) E.L.T. 636 (Mad.)] and allowed the credit. This court, while considering Rule 57Q of the Central Excise Rules, regarding the goods used as structural support to the plant and machinery, placed reliance on the decision reported in 2010 (255) E.L.T. 481 (Commissioner of Central Excise, Jaipur v. Rajasthan Spinning and Weavinig Mills Ltd.), wherein the Apex Court has rejected the plea of the Revenue while considering the components/parts with reference to the particular industry in question.
10.The Tribunal has considered the components/parts? individually and has found that they are the parts/components falling under the capital goods under 57Q of the Rules. The Tribunal has even considered welding wire used for joining process and held to be eligible for input duty credit under Rule 57A of the Rules. The Tribunal extended such allowance though the declaration was filed under Rule 57Q placing reliance in Commissioner v. Modi Rubber Limited reported in 2000 (119) E.L.T. 197 (Tribunal-LB).
11.The grievance of the Revenue is that many of the? goods are not specified for capital goods under Rule 57Q during the relevant period. However, the substantial question of law raised is whether the Tribunal is correct in allowing Modvat credit in respect of iron and steel products falling under Chapter 73 which are used as structural support to plant and machinery. The said question was considered by us in CMA No. 1265 of 2014 by order dated 10-7-2014. Reliance was placed in Rajasthan Spinning and Weaving Mills Limited cited supra, wherein the Apex Court has applied the user test in a case of M.S. Angles, Beams and Channels used in the erection of machineries and held that it would become component of the same. Therefore, we are of the considered view that credit cannot be denied on the ground that the goods are not covered under the definition of capital goods under Rule 57Q as it stood before 16-3-1995.
12.The case on hand is squarely covered by the? decision reported in 2010 (255) E.L.T. 481 (Commissioner of Central Excise, Jaipur v. Rajasthan Spinning and Weavinig Mills Ltd.) and the goods used by the assessee are falling under the capital goods, eligible for credit.
13.For the reasons stated above, the appeal fails and? the questions of law is answered in favour of assessee and the appeal is dismissed. No costs.
(c) The Commissioner of Central Excise and Customs Vs. The Customs Excise and Gold (Control) appellate Tribunal, and M/s. Lloyds Steel Industries Central Exicse Reference No. 5/2004, date of pronouncement 24/10/2007- High Court of Bombay- Bench of Nagpur.
5.We have considered the submissions made by the Counsel for the rival parties and perused the records and Judgments relied upon. In our opinion, the issue raised in the present reference is squarely covered by the judgment of the Apex Court in Commissioner of Central Excise Vs. Jawahal Mills Ltd. [2001(132) ELT 3(SC). In paragraphs 4 and 5 of the said judgment, the Apex Court has observed as under:
4. The aforesaid definition of Capital goods is very wide. Capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances. Any of these goods if used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product would be Capital goods, and, therefore, qualify for availing Modvat credit. Per clause (b), the components, spare parts and accessories of the goods mentioned in clause (a) used for the purposes enumerated therein would also be Capital goods and qualify for Modvat credit entitlement. Clause (c) makes moulds and dies, generating sets and weigh bridges used in the factory of the manufacturers as capital goods and thus qualify for availing Modvat credit. The goods enumerated in clause (c) need not be used for producing the final product or used in the process of any goods for the manufacture of final product or used for bringing about any change in any substance for the manufacture of final product and the only requirement is that the same should be used in the factory of the manufacturer. Thus, it can be seen that the language used in the explanation is very liberal.
5.In the case of? Indian Farmers Fertiliser Cooperative Ltd. (supra) this Court interpreted the notification which conferred exemption in respect of such raw naphtha as was used in the manufacture of ammonia provided such ammonia was used elsewhere in the manufacture of fertilizers. The facts of that case were that the appellant was manufacturer of urea - a fertilizer and utilized for that purpose raw naphtha. The question therein was whether ammonia used in the off-site plants was also ammonia which is used elsewhere in the manufacture of fertilizers. The off-site plants were held to be part of the process of the manufacture of urea. Relying upon the phraseology used in the exemption notification, it was held that there was no good reason why the exemption should be limited to the raw naphtha used for producing urea that is utilized directly in the urea plant since the notification only required that the ammonia should be used in the manufacture of fertilizers and not that it should be used directly in the manufacture of fertilizers. The Court said that :
The exemption notification must be so construed as to give due weight to the liberal language it uses. The ammonia used in the water treatment, steam generation and inert gas generation plants, which are a necessary part of the process of manufacturing urea, must, therefore, be held to be used in the manufacture of ammonia and the raw naphtha used for the manufacture thereof is entitled to the duty exemption.
6. The Tribunal has held that the cement, steel plates and bars in respect of which modvat credit has been availed of by the respondent no. 2 have been used for providing support to machines. This is a pure findings of fact recorded by the Tribunal which cannot be said to be perverse and, therefore, binding. In view of the clear ratio laid down by the Apex in the case of Jawahar Mills Ltd(supra) we find no illegality in the order passed by the Tribunal. Since the issue is squarely covered by the judgment of the Apex Court in the case of Jawahar Mills Ltd., in our opinion, no substantial question of law is involved in the present references. On this ground only the references are deserved to be rejected. We do not deem it necessary to deal with the other submissions made by the learned counsel for the parties.
In view of the above, all the references are rejected
(d) Mundra Ports & Special Economic Zone Ltd
6. Before deciding the question, we deem it appropriate to extract Rule 2(k) and 2(l) of the Cenvat Credit Rules 2004.
"Rule 2(k) "input" means-
(i) all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production;
(ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service;
Explanation 1.- The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.
Explanation 2.- Input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer;
(l) "input service" means any service,-
(i) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes service used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal."
7. It is not disputed that jetty was constructed and input credit was claimed on cement and steel. The aforesaid definition of Rule 2(k) was applicable and Explanation 2 did not provide that cement and steel would not be eligible for input credit. According to learned counsel for the appellant, the appellant is not manufacturer and, therefore, the provisions Explanation 2 of Rule 2(k) would be applicable only to the factory and manufacturer. The appellant is neither having any factory nor he is manufacturer. The appellant is a service provider of port. We need not go into this question as to whether the appellant is a factory or manufacturer or service provider in view of the fact that it is not disputed by Mr.Y.N.Ravani, learned counsel appearing for the revenue in this Tax Appeal that the appellant provides service on port for which he is getting jetty constructed through the contractor and the appellant has claimed input credit on cement and steel. The cement and steel were not included in Explanation 2 from 2004 upto March 2006. The Cenvet Credit Rules 2004 were amended in exercise of the powers conferred by section 37 of the Central Excise Act 1944 with effect from 7.7.2009, the date on which it was notified by the Central Government from the date of the notification. According to learned counsel for the appellant, this amended definition would apply only to the factory or manufacturer and would not apply to the service provider. According to him, either before the amendment made in the year 2009 or thereafter, the appellant was neither factory nor manufacturer and he has only constructed jetty by use of cement and steel for which he was entitled for input credit as jetty was constructed by the contractor, but the jetty is situated within the port area and the appellant is a service provider. According to the appellant, his case is squarely covered by the judgment of the Division Bench of the Andhra Pradesh High Court in Commissioner of Central Excise, Visakhapatnam-II Vs Sai Sahmita Storages (P) Limited, 2011(270) E.L.T. 33 (A.P.) = 2011-TIOL-863-HC-AP-CX wherein in paragraph 7, it has been clearly held that a plain reading of the definition of Rule 2(k) would demonstrate that all the goods used in relation to manufacturer of final product or for any other purpose used by a provider of taxable service for providing an output service are eligible for CENVAT credit. It is not in dispute that the appellant is a taxable service provider on port under the category of port services. Therefore, the appellant was entitled for input credit and the decision of the Division Bench of the Andhra Pradesh High Court squarely applies to the facts of the case and answered the question on which the appeal has been admitted.
8. Mr.Y.N.Ravani, learned counsel for the revenue has placed reliance on the decision of the Larger Bench of the Tribunal in Vandana Global Limited Vs Commissioner of Central Excise, Raipur, 2010 (253) E.L.T. 440 = 2010-TIOL-624-CESTAT-DEL-LB. We have carefully gone through the decision of the Larger Bench of the Tribunal. We do not find that amendment made in Cenvet Credit Rules 2004 which come into force on 7.7.2009 was clarificatory amendment as there is nothing to suggest in the Amending Act that amendment made in Explanation 2 was clarificatory in nature. Wherever the legislature wants to clarify the provision, it clearly mentions intention in the notification itself and seeks to clarify existing provision. Even, if the new provision is added then it will be new amendment and cannot be treated to be clarification of particular thing or goods and/or input and as such, the amendment could operate only prospectively. In our opinion, the view taken by the Tribunal is based on conjectures and surmises as the Larger Bench of the Tribunal used the expression that intention behind amendment was to clarify. The coverage under the input from where this intention has been gathered by the Tribunal has not been mentioned in the judgment. There is no material to support that there was any legislative intent to clarify any existing provision. For the same reason, as mentioned above, the decision of the Apex Court in Sangam Spinners Limited Vs Union of India and others, reported in (2011) 11 SCC 408 = 2011-TIOL-31-SC-CX would not be applicable to the facts of the instant case.
9. Mr.Ravani has also vehemently urged that since jetty was constructed by the appellant through the contractor and construction of jetty is exempted and, therefore, input credit would not be available to the appellant as construction of jetty is exempted service. The argument though attractive cannot be accepted. The jetty is constructed by the appellant by purchasing iron, cement, grid etc. which are used in construction of jetty. The contractor has constructed jetty. There are two methods, one is that the appellant would have given entire contract to the contractor for making jetty by giving material on his end and then make the payment, the other method was that the appellant would have provided material to the contractor and labour contract would have been given. The appellant claims that he has provided cement, steel etc. for which he was entitled for input credit and, therefore, in our opinion, the appellant was entitled for input credit and it cannot be treated that since construction of jetty was exempted, the appellant would not be entitled for input credit. The view taken contrary by the Tribunal deserves to be set aside.
10. For the reasons given above, this Tax Appeal succeeds and is allowed. The denial of input credit to the appellant by the respondent is set aside. The appellant would be entitled for input credit. The question is answered in favour of the assessee appellant and against the department. No order as to costs.
(e) Rajasthan Spinning & Weaving Mills Ltd
6.?Per contra, Mr. B.L. Narsimhan, learned counsel appearing on behalf of the assessee supported the decision of the Tribunal. He submitted that the issue sought to be raised by the Revenue in this appeal stands concluded in favour of the assessee by a decision of this court in Commissioner of Central Excise, Coimbatore & Ors. v. Jawahar Mills Ltd. & Ors., wherein observing that the exemption notification must be so construed as to give due weight to the liberal language it uses and that any goods that may be used in the factory of the manufacturer of final product would be capital goods and would be entitled to Modvat credit. It was, thus, asserted that the said items used in the fabrication of chimney, which in turn is an important component of diesel generating set, qualify the test of capital goods and would be entitled to MODVAT credit.
7.?The short question arising for determination is whether the assessee was right in availing MODVAT credit in respect of the afore-stated items by treating them as capital goods in terms of Rule 57Q?
8.?Rule 57Q was substituted by Notification No. 6/97-C.E. (N.T.), dated 1st March, 1997. It enables the manufacturers of specified goods to claim modvat credit of duty paid on capital goods used by them in the factory for manufacture of final product. The Rule, insofar as it is relevant for this case, reads as under :
RULE 57Q. Applicability. - (1) The provisions of this section shall apply to goods (hereafter in this section, referred to as the final products) described in column (3) of the Table given below and to the goods (hereafter, in this section, referred to as capital goods), described in the corresponding entry in column (2) of the said Table, used in the factory of the manufacturer of final products.
TABLE S.No Description of capital goods falling within the schedule to the Central Excise Tariff Act, 1985 (5 of 1986) and used in the factory of the manufacturer Description of final products (1) (2) (3) 1 ....................................
2 .......................
3.
All goods falling under chapter 85 (other than those falling under heading Nos. 85.09 to 85.13, 85.16 to 85.31, 85.39 and 85.40);
4. ......................
5. components, spares and accessories of the goods specified against S. Nos. 1 to 4 above;
9.?The language of Rule 57Q is clear and unambiguous. It applies to the final products described in column (3) of the Table under the Rule as also to other goods, referred to as capital goods, described in the corresponding entry in column (2) of the said Table, used in the factory of the manufacturer of final product. The parties are ad idem that diesel generating set falls under Chapter 85 under Heading No. 85.02, as described at Serial No. 3 of the afore-extracted Table. Similarly there is no dispute that chimney attached with the generating set is covered by the items described in Serial No. 5 thereof. However, the controversy centres around the question whether the steel plates and M.S. channels used in the fabrication of chimney would fall within the purview of Serial No. 5 of the Table below Rule 57Q.
10.?Having examined the question in the light of the language employed in Rule 57Q and the case law on the point, we are of the opinion that the appeal is devoid of any merit.
11.?In Jawahar Mills Ltd. (supra), heavily relied upon by the learned counsel for the assessee, the question which came up for consideration was whether the claim of modvat credit by some manufacturers in respect of certain items by treating them as capital goods in terms of Rule 57Q was in order. Some of the items under consideration were power cables, capacitors, control panels, cable distribution boards, air compressors, etc. The Court examined the question in the light of the definition of capital goods given in Explanation to Rule 57Q, which read as follows :
capital goods means--
(a)?machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products;
(b)?components, spare parts and accessories of the aforesaid machines, machinery, plant, equipment, apparatus, tools or appliances used for aforesaid purpose; and
(c)?moulds and dies, generating sets and weighbridges used in the factory of the manufacturer.
12.?Inter alia observing that capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances if any of these goods is used for producing or processing of any goods or for bringing about any change in the substance for the manufacture of final product, although this view was expressed in the light of the afore-noted definition of capital goods in the said Rule, which is not there in Rule 57Q, as applicable in the instant case, yet the user test evolved in the judgment, which is required to be satisfied to find out whether or not particular goods could be said to be capital goods, would apply on all fours to the facts of the present case, in fact, in para 6 of the said judgment, the court noted the stand of the learned Additional Solicitor General, appearing for the Revenue, to the effect that the question whether an item falls within the purview of capital goods would depend upon the user it is put to.
13.?Applying the user test on the facts in hand, we have no hesitation in holding that the steel plates and M.S. channels, used in the fabrication of chimney would fall within the ambit of capital goods as contemplated in Rule 57Q. it is not the case of the Revenue that both these items are not required to be used in the fabrication of chimney, which is an integral part of the diesel generating set, particularly when the Pollution Control laws make it mandatory that all plants which emit effluents should be so equipped with apparatus which can reduce or get rid of the effluent gases. Therefore, any equipment used for the said purpose has to be treated as an accessory in terms of Serial No. 5 of the goods described in column (2) of the Table below Rule 57Q.
14.?We are, therefore, of the opinion that the Tribunal was correct in law in holding that the assessee was entitled to avail of modvat credit in respect of the subject items viz. steel plates and M.S. channels used in the fabrication of chimney for the diesel generating set, by treating these items as capital goods in terms of Rule 57Q of the Rules.
15.?For the foregoing reasons, we find no substance in the appeal preferred by the Revenue. The same is dismissed accordingly. Parties are left to bear their own costs.
From the above judgments, the Honble High Courts have held that Cenvat credit is admissible on the structural steel therefore Larger Bench decision in case of Vandana Global Ltd clearly stands distinguished, the entire foundation of the impugned order gets demolished. Since I hold on merit that Cenvat credit is admissible on structural steel in light of the above referred judgments, I do not incline to go into the limitation aspect. As per the judgment in case of Rajasthan Spinning & Weaving mills Ltd(supra) Cenvat credit on capital goods i.e steel plates and M.S. Channels used in fabrication of chimney is allowed which is based on the Honble Supreme Court judgment in case of Jawahar Mills. As per my above discussions and following the judgments of the various High Courts and Suprme Court, I am of the view that Cenvat credit on structural steel is admissible to the appellant. Impugned order is modified and appeal filed by the assesse is allowed.
(Order pronounced in court on _____________________) Ramesh Nair Member (Judicial) sk 24 E/1097/11