Custom, Excise & Service Tax Tribunal
Pitti Castings Pvt Ltd vs Hyderabad-Iii on 15 February, 2024
1 Appeal No. E/25666/2013
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
HYDERABAD
REGIONAL BENCH - COURT NO. - I
Excise Appeal No. 25666 of 2013
(Arising out of Order-in-Original No.22/2012-CE-HYD-III-ADJN(Commnr) dated
16.11.2012 passed by Commissioner of Customs, Central Excise & Service Tax, Hyderabad-
III)
Pitti Castings Pvt Ltd., .. APPELLANT
Sy No. 53, Macharam,
Balanagar Mandal,
Mahaboobnagar District,
Telangana - 509 301.
VERSUS
Commissioner of Central Tax .. RESPONDENT
Hyderabad - III Kendriya Shulk Bhavan, L.B. Stadium Road, Basheerbagh, Hyderabad, Telangana - 500 004.
APPEARANCE:
Shri Ch Sumanth, Advocate for the Appellant.
Shri K Sreenivas Reddy, Authorised Representative for the Respondent.
CORAM: HON'BLE Mr. ANIL CHOUDHARY, MEMBER (JUDICIAL) HON'BLE Mr. P.V.SUBBA RAO, MEMBER (TECHNICAL) FINAL ORDER No. A/30236/2024 Date of Hearing:15.02.2024 Date of Decision:15.02.2024 [ORDER PER: ANIL CHOUDHARY] The issue in this appeal is whether Cenvat Credit availed on MS Angles/Channels, HRC Plates, TMT bars etc., used in fabrication/erection of machinery have been rightly dis-allowed relating to the period March 2008 to April 2010.
2. The Appellant is a manufacturer of Castings falling under Chapter sub- heading 7351000 of the First Schedule to the CETA and holders of Central Excise Registration No. AABCV9689AXM002. The Appellant is also availing Cenvat Credit on inputs and capital goods used in the manufacture of final products.
3. For the purpose of manufacture of the final products, the Appellants procured various capital goods/equipments such as EOT Cranes, 3D Marking 2 Appeal No. E/25666/2013 and Layout Machine, Sand Feed Hopper, Reclamation Tower, Rail for transfer car, Sound Proof Cabin, Steel Hoppers, Steel Tubes etc., for use in the factory. The entire quantity of the aforesaid items purchased was duly accounted for. The duty paid on such capital goods was availed as credit by the Appellants.
4. On 10.08.2008, the Appellant intimated the Jurisdictional Range Office regarding setting up of unit and availment of credit on capital goods/inputs.
5. On verification of the ER-1 returns for the period from 2007-08 to 2010-11 it was observed by the department that the Appellant has availed credit on MS items as ineligible credit availed on capital goods used in manufacture of finished goods.
6. During the period 2007 to 2011 the appellant availed Cenvat Credit on various MS items as capital goods used in the erection of machinery. The MS items are used as the bed of the machinery, and accordingly do not fall under the definition of capital goods pursuant to explanation 2 to Rule 2(k) of CCR, which excludes structural items as per the decision of the Larger Bench in the case of Vandana Global Ltd. v. CCE, Raipur.
7. The MS items used in building support structures have no nexus with the process of manufacture.
8. The MS items are used as permanent structures embedded to earth acquiring the character of immovable property making the machines incapable of being bought and sold in the market.
9. The following items cannot be treated as capital goods and not evidence is shown that these items were used for fabrication of capital goods:
(i) The 3D marketing and layout machine is classifiable under Chapter 68 or 73 and cannot be treated as capital goods.
(ii) Reclamation tower support frame, rails for transfer car, paint collection pans, sound proof cabin with cooling systems, Steel hoppers, pouring plates, steel tubes, GP sheets welding mess, poles etc., fall under chapter 73 and accordingly are not classifiable as capital goods.3 Appeal No. E/25666/2013
(iii) Sand hoppers are not like storage tanks and accordingly is classifiable under chapter 73.
10. It is humbly submitted that MS items falling under Chapter 72 and 73 are utilized for setting up the plant and machinery falling under Chapter 84, which are used for manufacture of final product.
11. The Appellant submits that MS angles, beams, plates, sheets etc. purchased are used for the purpose of formation of following major equipment as evidenced by the chartered engineer certificate, wherein the usage of the impugned items under dispute are certified as items required for making the various machinery and equipment is provided. Further, photographs of MS items used in capital goods/ plant and machinery is also provided.
12. As evidenced by the CA certificate, credit to the tune of Rs.39,62,442/- was availed on MS items used for structural support, prior to 07.07.2009. Even as per the annexure to the SCN, the credit availed after 07.07.2009 is Rs. 22,089/- being 50% of the balance credit availed in April 2010.
13. Further, the credit to the tune of Rs.12,81,838/- was availed in respect of items used in the factory for manufacture of final products.
14. The Appellant also relies on the decision in the case of M/s. Singhal Enterprises Pvt Ltd Vs. Commr of Cus & C.Ex, Raipur reported at [2016 (341) E.L.T.372 (Tri-Del)] where the period was after 07.07.2009 and reliance was placed on the CCE, Coimbatore v. Jawahar Mills Ltd. - [2001 (132) E.L.T. 3 (S.C.)] and it was held as under:
Now we turn to the question, whether credit is admissible on various structural steel items, such as, MS Angles, Sections, Channels, TMT Bar, etc., which have been used by the appellants in the fabrication of support structures on which various capital goods are placed? The same stands denied by the lower authority. The learned DR has sought disallowance of the same by citing the decision of the Larger Bench in the case of Vandana Global Ltd. (supra) and other judgments. Further, he has brought to our notice and emphasized the amendment carried out in Explanation-II to Rule 2(a) which defines the term "Input" w.e.f. 7-7-2009. It has further been pleaded that the Cenvat credit claimed for the period prior to this will be covered within the decision of the Larger Bench in the case of Vandana Global Ltd. (supra).4 Appeal No. E/25666/2013
14. The Larger Bench decision in Vandana Global Ltd.'s case (supra) laid down that even if the iron and articles were used as supporting structures, they would not be eligible for the credit. Considering the amendment made w.e.f. 7-7-2009 as a clarification amendment and hence to be considered retrospectively. However, we find that the said decision of the Larger Bench was considered by the Hon'ble Gujarat High Court in the case of Mundra Ports & Special Economic Zone Ltd., 2015 (04) LCX0197 = 2015 (39) S.T.R. 726 (Guj.), wherein it was observed that the amendment made on 7-7-2009 cannot be held to be clarificatory and as such would be applicable only prospectively.
We find that the controversy can be laid to rest by making a reference to the decision of the Apex Court in the case of CCE, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd., 2010 (255) E.L.T. 481 (S.C.), wherein the Hon'ble Supreme Court has considered an identical issue of steel plates and MS channels used in the fabrication of chimney for diesel generating set. The credit stands allowed in the light of Rule 57Q of the erstwhile Central Excise Rules, 1944. In the said judgment, the Apex Court has referred to the "user test" evolved by the Apex Court in the case of CCE, Coimbatore v. Jawahar Mills Ltd., 2001 (132) E.L.T. 3 (S.C.), which is required to be satisfied to find out whether or not particular goods could be said to be capital goods. When we apply the "user test" to the case in hand, we find that the structural steel items have been used for the fabrication of support structures for capital goods. The appellants have argued that the various capital goods, such as, kiln, material handling conveyor system, furnace, etc. cannot be suspended in mid-air. They will need to be suitably supported to facilitate smooth functioning of such machines. It is obvious that the structural items have been suitably worked upon for this purpose. Accordingly, the goods fabricated, using such structurals, will have to be considered as parts of the relevant machines. The definition of 'Capital Goods' includes, components, spares and accessories of such capital goods. Accordingly, applying the "User Test" to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of 'Capital Goods' as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat credit.
15. The said ruling of Tribunal was affirmed by the Hon'ble Chhattisgarh in Commissioner of CUS., C. EX & S.T., Bilaspur Vs. Singhal Enterprises Pvt. Ltd., 2018 (359) E.L.T. 313 (Chhattisgarh).
16. The Cenvat Credit was denied on the ground that MS items used for structural support and foundation would not fall under the category of capital goods relying on the decision of Vandana Global Limited [2010 TIOL 624 CESTAT (LB-DEL)]. In this regard, the Appellant submits that the said decision stands overruled by the Hon'ble High Court of Chattisgarh in the case of Vandana Global Limited Vs CCE, Raipur - 2018 (16) GSTL 462 5 Appeal No. E/25666/2013 and reliance is also placed on the decision of Mundra Ports & Special Economic Zone Ltd. Vs. CCE & C - 2015 (39) STR 726 (Guj.).
17. The Appellant submits that the explanation which came into effect from 07.07.2009, is only prospective in nature. In this regard reliance is placed on the decision in the case of M/s Prism Cement Limited Vs. Commissioner of Excise and Service Tax reported at [2016-TIOL- 3261-CESTAT-DEL] wherein it was held as under:
It is the case of the appellant that exclusion made w.e.f. 7.7.2009 as per the amended definition under Rule 2(k) of CCR is of no relevance to their case. The exclusion made is to the effect that the inputs used in the manufacture of capital goods eligible for credit shall not include cement, angles, channels, CTD bar, TMT bars and other items used for construction of factory shed, building or laying foundation or making structures for support of capital goods. The applicability of such exclusion for the period prior to 7.7.2009 has been examined by the Hon'ble Gujarat High Court in the case of Mudra Port (supra).It was held that exclusion brought in by the amendment cannot be given retrospective effect. The Hon'ble Madras High Court in Thiru Arooran Sugars - 2015-TIOL-1734-HC MAD-CX.
18. The Appellant further relies on the decision of the Hon'ble Apex Court in the case of CCE, Jaipur Vs Rajasthan Spinning & Weaving Mills Limited reported at [2010-TIOL-51-SC-CX], applying the user test, it was held that steel plates and MS channels used for fabrication of capital goods also comes under the ambit of definition of capital goods. In the said judgment, the Apex Court has referred to the case of CCE, Coimbatore v. Jawahar Mills Ltd. - [2001 (132) E.L.T. 3 (S.C.)], it is required to be satisfied to find out whether or not particular goods could be said to be capital goods. The Hon'ble High Court of Madras relying on the above decision of the Apex court allowed cenvat credit on various MS items used for fabrication of machinery in the case of India Cements Limited Vs. CCE, Chennai reported at [2015-TIOL-650-HC-MAD-CX].
19. Even otherwise, all the items were received into the premises prior to 07.07.2009 and it is settled position of law that the relevant date for deciding availing of credit, is the date of receipt of goods in the factory. Reliance is placed on the following decisions:
(a) Grasim Industries Limited Vs. Commissioner of Central Excise, Trichy [2004 (176) E.L.T. 265 (Tri. - Chennai)]
(b) CCE v. Hindustan Zinc [2023 (7) TMI 427 - CESTAT NEW DELHI] 6 Appeal No. E/25666/2013
20. The Appellant further submits that entire demand is barred by limitation and extended period cannot be invoked in the present case as the credit availed is clearly disclosed in the returns and vide letter dated 10.08.2008, the Appellant intimated the jurisdictional range office regarding setting up of unit and availment of credit on capital goods. Further, the subject matter involves interpretation of law as the SCN was referred to Larger Bench ruling in Vandana Global. In this regard reliance is placed on the following decision:
(a) CCE vs. Reliance Industries, [2023 (7) TMI 196-SC]
(b) UltraTech Cement Ltd Vs. CCE, Jaipur- [2017-TIOL-91-CESTAT DEL]
21. Learned AR for Revenue relies on the impugned order.
22. Having considered rival contentions, we find that the show cause was issued based on the Larger Bench ruling of this Tribunal in Vandana Global Ltd., which judgment have been reversed and allowed in favour of the assessee by the Hon'ble Chattisgarh High Court reported at [2018 (16) GSTL 462]. In this view of the matter, we hold that the appellant is entitled to Cenvat Credit of the capital goods / inputs like EOT Cranes, 3D Marking and Layout Machine, Sand Feed Hopper, Reclamation Tower, Rail for transfer car etc., which have been admittedly received in the factory for use. We further hold, eligibility to Cenvat Credit has to be considered on the day goods are received. It is not the subsequent user which decides the eligibility of Cenvat Credit.
23. In view of our aforementioned findings, we allow the appeal and set aside the impugned order. So far the Cenvat Credit of Rs. 51,28,920/- , appellant shall be entitled to consequential benefits.
24. Appeal allowed.
(Operative part of this Order was pronounced in court on conclusion of the hearing) (ANIL CHOUDHARY) MEMBER (JUDICIAL) (P.V.SUBBA RAO) MEMBER (TECHNICAL) jaya