Custom, Excise & Service Tax Tribunal
Cce, Visakhapatnam - I vs M/S Rashtriya Ispat Nigam Ltd on 26 May, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Division Bench Court I Appeal No. E/710/2006 (Arising out of Order-in-Appeal No. 163/2005 (V-I) CE dt. 30.12.2005 passed by CC & CE (Appeals), Visakhapatnam) For approval and signature: Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Honble Sh. Madhu Mohan Damodhar, Member(Technical) 1. Whether Press Reporters may be allowed to see 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 Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? CCE, Visakhapatnam - I ..Appellant(s) Vs. M/s Rashtriya Ispat Nigam Ltd., ..Respondent(s)
Appearance Sh. K.B.K. Raju, Authorised Representative for the Appellant.
None for the Responednt.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Honble Sh. Madhu Mohan Damodhar, Member(Technical) Date of Hearing: 26.05.2015 Date of Decision: 26.05.2015 FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.] The above appeal is filed by Revenue against the order passed by Commissioner (Appeals) which allowed the MODVAT Credit availed on steel plates and sheets used in the manufacture of pipes.
2. The respondent, M/s Visakhapatnam Steel Plant are inter-alia, engaged in manufacture of Iron & Steel products. They were availing facility of MODVAT Credit of duty paid on inputs & capital goods. They availed credit on steel plates & sheets as inputs. It was alleged by department that respondents wrongly availed MODVAT Credit by diverting the steel items for non-manufacturing operations like fabrication, maintenance of structures, etc., and in manufacture of goods exempted from duty.
3. A show cause notice was issued and after due process of law the demand in show cause notice was confirmed vide Order-in-Original dated 28.10.1999. The respondent herein filed appeal before the CESTAT, Bangalore. The Tribunal in Appeal No. E/150/2000 considered the issue of MODVAT Credit on steel plates & sheet pertaining to Rs. 40,79,054/- only. As per order dated 06.02.2004 the Tribunal remanded the matter for fresh adjudication. In pursuance to remand order, the original authority conducted denovo adjudication, and vide Order-in-Original dated 25.06.2004 the adjudicating authority denied the credit & confirmed the demand of Rs. 40,79,054/- along with interest and imposed equal amount of penalty, besides separate penalty of Rs. 1,00,000/- imposed under Rule 173Q.
4. Aggrieved by this order, the respondent herein filed appeal before the Commissioner (Appeals) and vide the order impugned herein the Commissioner (Appeals) allowed the credit. Hence Revenue is now before us.
5. We have heard both sides and perused the records.
6. The learned AR Sh. K.B.K. Raju appearing for appellant submitted that the respondent availed MODVAT Credit on steel sheets and plates under the category of capital goods. The steel sheets & plates were used to manufacture steel pipes. During the relevant period (11/94 12/95) steel pipes were not covered within the definition of capital goods as per Rule 57Q of erstwhile Central Excise Rules, 1944. It is also the case of department that steel pipes were not covered by Notification No. 67/95 CE dated 16.03.1995 as steel pipes did not come within the definition of capital goods. Pipes and tubes were included in the definition of capital goods only w.e.f. 01.03.1997. That steel pipes were not covered under Notification No. 68/95 CE dated 16.03.1995 also, since they were not manufactured in workshop and were not meant for repairs or maintenance of machinery installed in the plant. Therefore, steel pipes though chargeable to duty, the respondents did not discharge their duty liability on such goods manufactured by them. Again, in terms of erstwhile Rule 57C ibid, credit is not to be allowed, if final products are exempt. That therefore respondents are not eligible to take MODVAT Credit on steel plates and sheets even considering them as inputs as directed by CESTAT order, as they were used to manufacture pipes on which no duty was paid.
7. At this juncture, it would be worthwhile to have a look at the relevant discussion in the remand order passed by CESTAT.
In view of the submissions made by both sides, we are of the view that the adjudicating authority is required to examine whether the said inputs are eligible for MODVAT Credit or not and to pass appropriate order in accordance with law.
8. Thus as per the mandate of Tribunal, the original authority had to re-adjudicate the matter in the light of the issue whether credit is admissible on steel plates and sheets under the category of inputs.
9. On perusal of records it is seen that steel sheets & plates were used to fabricate/manufacture steel pipes which in turn were used in the Turbo Generator Unit. The plea raised by respondent is that steel plates and sheets are eligible for credit as inputs as per Rule 57A of Central Excise Rules, 1944.
10. According to department as the respondent did not pay duty on steel pipes, they are not eligible for credit. Further, that steel pipes not being capital goods, the appellants are not eligible for exemption under Notification No. 67/95 CE dated 16.03.1995. For better appreciation the relevant portion of the said notification is noticed as under:
the Central Government hereby exempts goods specified in column (2) of the Table hereto annexed (hereinafter referred to as inputs) manufactured in a factory and used within the factory of production, in or in relation to the manufacture of final products specified in column (3) of the said Table, from the whole of the duty of excise leviable thereon, which is specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986):
Provided that nothing contain in this Notification shall apply to inputs used in or in relation to the manufacture of final products which are exempt from the whole of duty of excise leviable thereon or is chargeable to nil rate of duty.
11. Again, Rule 57D clause (2) reads as under:
Credit of specified duty allowed in respect of any inputs should not be denied or varied on the ground that any intermediate product have come in to existence during the course of manufacture of the final product and that such intermediate products or such inputs are used in the manufacture of capital goods as defined in rule 57D and that such intermediate products or capital goods, as the case may be are for the time being, exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty. The third proviso to the said Rule reads as follows:
Provided also that credit of specified duty shall be allowed in respect of inputs which are used for generation of electricity or steam used for manufacture of final products or for any other purpose, within the factory of production.
12. The strong argument put forward by Revenue is that the steel pipes cannot be considered as intermediate product to the finished goods. It is also contended that when no duty was paid on steel pipes manufactured from inputs (steel sheets & plates) and those pipes not being intermediate product for the finished goods, credit is not admissible.
13. Undeniably steel pipes are an essential/integral part of T.G. set without which the T.G. set cannot be put into use. T.G. sets would fall under the category of capital goods as generating sets are expressly mentioned in the definition. The learned counsel for respondent adverted to the judgment laid in Bharat Electric Steel Company Ltd., Vs CCE, Calcutta [1995 (77) ELT 289 (Tri)]. In the said case, MODVAT Credit was availed on inputs used to prepare sand moulds and sand cores for manufacturing the final product viz: steel castings. The relevant portion of the judgment reads as under:
The expression, intermediate goods as occurring in Rule 57D has not been defined. This Rule, it is to be noted, is meant to cover a vast variety of excisable goods not only to chemicals but also to other industrial and consumer goods. When the Department states that resins etc. i.e. the inputs, which are for consideration before us, have been utilized in the manufacture of sand moulds and not in relation to the manufacture of iron/steel castings, the Department is giving a narrow meaning to the expression, intermediate goods. The Department appears to be considering the single process of manufacture of goods. It forgets that there may be products, as in this case, that several preliminary processes of various goods are undertaken and those processes further converge into another process to make the final product, which is the aim of the manufacturing unit. All the products which are coming at any stage in between by different manufacturing processes between the inputs brought in by the manufacturers and the final products or bye-products arising in the factory will have to be treated as intermediate goods occurring in Rule 57D is not given, then that Rule would be applicable only to the single-process manufactured goods i.e. to chemicals and reactants arising in the case of chemical reactions of various chemicals prior to production of final product in a single chain or reaction. This in our opinion, would not be the correct view in the vast variety of goods which are liable to excise duty and which are entitled to the facility of MODVAT Credit under a notification issued under Rule 57A. From that angle we respectfully agree with the observations of the Honble High Court of Madras in the case of Ponds (India) Ltd., what it says in para 20 as already set out above.
14. Similar view was taken in Shalimar Paints Ltd., Vs CCE, Calcutta [1994 (72) ELT 186 (Tri)]. In Brooke Bond India Ltd., Vs CCE [1991 (55) ELT 342 (Tri)] it was observed as under:
There is no dispute that the paper bags are exempted from payment of duty. Under Rule 57C the benefit of MODVAT Credit in respect of the inputs is not available if the same are used for manufacture of the final product which is exempt from payment of duty. According to Rule 57D, credit of specified duty allowed in respect of any inputs shall not be denied or varied on the ground that any intermediate products have come into existence during the course of manufacture of the final product and that such intermediate products are for the time being exempt from the whole of the duty of excise leviable thereon or chargeable to nil rate of duty. It is pertinent to note that the products in relation to which inputs have been described both under Rule 57C and 57D (2) as final products and the final product in the case of the appellants is package tea which is an excisable commodity and which comes into existence only after tea is put in the paper bags. The formation of paper bags therefore has to be taken as a process for bringing into existence the final product which is the package tea in the present case. The formation of paper bags in other words has to be treated as a step in the direction of the manufacture of the final product and the paper bags can be considered as an intermediate product for the purpose of bringing into existence of the final product, viz: package tea. In this view of the matter, in terms of Rule 57D (2), the appellants are eligible for the benefit of MODVAT Credit. We, therefore, allow the appeal.
15. In Escorts Lts., Vs CCE, Delhi [2004 (171) ELT 145 (S.C)] the Honble Apex Court had occasion to discuss the admissibility of credit on inputs used in the manufacture of parts of tractor.
In this view of the matter, we set aside the impugned Judgment and the Order of the Commissioner of Central Excise. It is held that the Appellants will be entitled to MODVAT Credit on duties paid for the inputs used for manufacture of parts, so long as the parts are used in the manufacture of tractors on which duty is paid. We clarify that in respect of parts which are sold in the open market and/or used for manufacture of tractors on which no duty is paid, the benefit of the Notification No. 217/86 C.E. dated 2nd April, 1986 may not be available.
16. In view thereof we do not find any infirmity in the impugned order. The appeal filed by Revenue is dismissed.
(Operative part of this order was pronounced in court
on conclusion of the hearing)
(MADHU MOHAN DAMODHAR) (SULEKHA BEEVI C.S.)
MEMBER(TECHNICAL) MEMBER(JUDICIAL)
Jaya.
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