Custom, Excise & Service Tax Tribunal
Deepak Fertilizers & Petrochemicals ... vs Commissioner Of Central Excise, ... on 25 June, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. E/85385/14 [Arising out of Order-in-Appeal No. SDK/218/BEL/2013-14 dtd. 29/10/2013 passed by the Commissioner (Appeals) of Central Excise, MumbaiIII] 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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Deepak Fertilizers & Petrochemicals Corporation Ltd.
:
Appellants
VS
Commissioner of Central Excise, Belapur
:
Respondent
Appearance
Ms. Anjali Hirawat, Advocate for the Appellants
Shri. Ashutosh Nath, Asstt. Commissioner (A.R.) for the Respondent
CORAM:
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 25/6/2015
Date of decision: /2015
ORDER NO.
Per : Ramesh Nair
This appeal is directed against Order-in-Appeal No. SDK/218/BEL/2013-14 dtd. 29/10/2013 passed by the Commissioner (Appeals) of Central Excise, Mumbai III, wherein Ld. Commissioner (Appeals) upheld the Order-in-Original dated 27/11/2012 whereby Cenvat Credit in respect of Steel Plates, Foundation Bolt, HR Steel Coils, M.S. Angles, C.R. Sheets, Aluminum Coils & Aluminum Sheets used for fabrication and erection of mounted storage bullets (tank), storage tanks for Hot and chilled water, thermal insulation of various pipes machine installed in the IPA plants was allowed.
2. The fact of the case is that the appellant availed Cenvat Credit in respect of steel items for fabrication and erection of four mounted storage bullets for storing raw material and by product in their factory, availed Cenvat credit in respect M.S. Angles, challans, coils, foundation bolts for manufacture of various tanks in their plant for hot/chilled tank of various input/chemical. Appellant also availed Cenvat credit in respect of aluminium coils, aluminum sheets, used for thermal insulation of various pipes, tubes and machines installed in the plant. The department issued show cause notice proposing denial of Cenvat credit in respect of aforesaid goods. Adjudicating authority vide order in original dropped the proceedings giving detailed findings on merit as well as on limitation. Aggrieved by the said order in original the Revenue filed appeal before the Commissioner (Appeals), who vide impugned order held that Cenvat Credit in respect of aforesaid goods is not admissible and he also held that equal amount of penalty under Section 11AC is also imposed apart from the demand of interest, therefore appellant is before me.
3. Ms. Anjali Hirawat, Ld. Counsel for the appellant submits that input on which the credit was availed such as Steel Plates, Foundation Bolt, HR Steel Coils, M.S. Angles, C.R. Sheets, Aluminum Coils & Aluminum Sheets used in the fabrication and erection of storage tanks. The storage tank is undisputedly capital goods as per the definition of Cenvat Credit Rules, therefore credit is admissible. She further submits that Cenvat Credit, in the identical case wherein input used for fabrication and erection of storage tanks, has been allowed in the various judgments, some of the judgments are cited below:-
(a) SLR Steels Ltd. Vs. CCE [2010(249) ELT 394(T)
(b) CCE Vs. SLR Steels Ltd.[2012(280) ELT 176(Kar.) Affirmed by Honble Karnataka High Court [2014(302)ELT A29(Kar.)]
(c) KCP Ltd. Vs. CCE [2009(237) ELT 500(T)]
(d) Bannari Amman Sugars Ltd. Vs. CCE [2010(250) ELT 326 (Kar.)]
(e) CCE Vs. City Lubricants (P) Ltd. [2011(266) ELT 131(T)]
(f) Laxmi Pipes Ltd. Vs.CCE[2012(280) ELT 448 (T)]
(g) Grasim Industries Ltd. Vs. CCE [2015(315) ELT 426 (T)]
(h) CCE Vs. Doodhaganga Krishna Sahakari Sakkare Karkhane Niyamit[2013(297) ELT 361 (Kar)]
(i) CCE Vs. ICL Sugars Ltd. [2011(271) ELT 360(Kar)]
(j) Shree Rajashtan Syntex Ltd. Vs. CCE [2013(292) ELT 234 (Tri. Del.)] She submits that in view of the above judgments, Cenvat Credit in respect of material used in the fabrication or erection of storage tank is clearly admissible. She submits that even in some of the judgments the issue regarding move-ability/immovability of the fabricated and erected storage tank has also been dealt with. Under the similar set of facts, that even if the storage tank is immovable, Cenvat credit has been extended. As regard the material such as aluminum coils sheet etc. used for purpose of insulation of pipes, tubes installed in the factory as part of the plant, credit is clearly admissible as the same is used as part of the capital goods. In this regard, she placed reliance upon following judgments:
(a) CCE Vs. National Oxygen Ltd. [2007(207) ELT 516(T)]
(b) Shakumbari Sugar & Allied Inds. Ltd. Vs. CCE[2009 (245) ELT 878(T)]
(c) UOI Vs. Associated Cement Company Ltd. [2008(223) ELT 582 (Raj.)]
(d) UOI Vs. Grasim Industries Ltd. [2008(223) ELT 582 (Raj.)]
(e) Hindustan Zinc Ltd. Vs. CCE [2012 (286) ELT 593(Tri. Del.)] She submits that in view of the above judgments the material used as insulation material in the plant is admissible for Cenvat Credit. As regard the credit on foundation bolt used in the erection of stack, she submits that stack is capital goods and foundation is used as part of the said capital goods for its erection. She submits that foundation bolt, in the duty paying documents has been classified under chapter 84 as part of the machine. Therefore it is squarely covered under the definition of capital goods as part of machine hence credit is legally admissible on foundation bolt. As regard the issue on limitation, she submits that the appellant vide letters dated 12/7/2005 and 20/3/2006 informed department regarding set up of new IPA plant. She further submits that in view of the above communication to the department, the appellant had proved their bonafide that they never intended to take any wrong benefit. It was upon the department to issue a show cause notice, if at all the department of the view that credit was not admissible and show cause notice could not have been issued within the normal period. Since, the show cause notice, even after having submitted details regarding the availment of credit, issued beyond the limitation of one year, show cause notice is clearly time barred. She further submits that the Ld. Commissioner (Appeals) has heavily relied upon the judgment of larger bench of this Tribunal in the case of Vandana Global Ltd. Versus Commissioner Of C. EX., Raipur [ 2010 (253) E.L.T. 440 (Tri. - LB)]. It is her submission that there were various judgments on the issue involved, in the favour of assessees. Due to different view by division bench the matter was referred to the larger bench. The assessees through out the country had entertained bonafide belief, following earlier judgments on the issue of Cenvat Credit in respect of structural steel, that credit is admissible. It is only after Vandana Global judgment was delivered and earlier judgments which allowed credit on the similar items stood overruled. Therefore for this reason also, malafide intention to evade duty, cannot be construed against the appellant. Since the issue is highly contentious and debatable issue, this is a case of interpretation of law, therefore extended period cannot be invoked.
4. On the other hand, Shri. Ashutosh Nath, Ld. Asstt. Commissioner (A.R.) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that storage tank fabricated and erected by the input on which the credit was taken is not admissible as it is immovable. Therefore it has been decided in various judgments, if the capital goods is fabricated and erected in the factory is immovable then it is not goods and therefore credit in respect of input service used for fabrication and erection of immovable goods is not admissible. In support of his submission he placed reliance on following judgments and Board Circular:
(a) CBEC Order No. 58/1/2002 CX dated 15/1/2002
(b) CBEC- Instruction NO. 267/11/2010-CX dated 8/7/2010
(c) Ambuja Cements Ltd. Vs. Union of India [2010(256) ELT A59 (S.C)]
(d) Hindustan Zinc Ltd. Vs. CCE [2012(286)ELT 593(Tri. Del.)]
(e) CCE Vs. Virdi Brothers [2007(207) ELT 321(S.C.)]
(f) Bajaj Hindusthan Ltd. Vs. Union of India [2013(295) ELT 20(All.)]
(g) Bajaj Hindusthan Ltd. Vs. UIO 2014(299) ELT 431 (All.)]
(i) Upper Ganges Sugar & Industries Ltd. Vs. CCE [2013(293) ELT 186(All.)
(j) Saraswati Sugar Mills Vs. CCE [2011(270) ELT 465(S.C)] In view of the above judgments and board clarifications, he submits that credit in respect of subject goods is not admissible particularly in view of the settled position in the case Vandana Global Ltd. (supra). As regard the limitation, it is his submission that appellant have not disclosed the complete details of their availment of Cenvat Credit in respect of steel and aluminium items. The appellant also not disclosed details, where such items have been used and what type of capital goods are fabricated. In absence of any such details and particularly the appellant is working under the self assessment regime, it cannot be said that appellant have disclosed the information. Therefore there is clear suppression of facts in availing Cenvat credit by the appellant. For this reason Ld. Commissioner (Appeals) has correctly invoked the extended period for demanding Cenvat Credit and for the same reason penalty under Section 11AC was also rightly imposed.
5. I have carefully considered the submissions made by both sides and perused the record.
6. I find that steel materials were used for fabrication and erection of storage tank within the factory of the appellant. The said storage tanks are undisputedly used for the storage of input finished goods and chemicals plant which is further used in the manufacture of the final product. In the chemical plant the storage tank is vital part of the entire plant and machinery. Therefore, in my view storage tank are capital goods. This issue has been dealt in the various judgments. In the case of SLR Steels Ltd.(supra) the Division bench of this Tribunal has held as under:
6.2?Before us also, the Revenue has not produced any evidence against the order of the adjudicating authority. It is seen from the factual findings of the adjudicating authority that the cement or steel are used by the appellant for the purpose of constructing Iron/Coke Storage tank, Gas storage tanks. There is also a clear factual finding, which the Revenue has not disputed, the fact of the usage of the items in the construction of Storage tanks/Pollution control Equipments. It is also seen from the records that there was an actual visit by the Assistant Commissioner to the factory premises of the appellant and vide his letter dated 27-12-2005, has confirmed that the said items were used only for the construction of Storage Tanks and Pollution Control equipments. If that be so, we find that the impugned order is totally incorrect and not in consonance with law as settled by the Honble Supreme Court in the case of Jawahar Mills Ltd. (cited supra). We also find that the decision of the Tribunal in the case of Lloyds Steel Industries Ltd. v. CCE, Nagpur - 2007 (211) E.L.T. 275 (Tri.-Mumbai) on an identical issue would cover the matter in favour of the appellants. We also find that this Bench in Divis Laboratories Ltd. v. CCE, Visakhapatnam - 2006 (196) E.L.T. 285 (Tri.-Bang.) had clearly held that credit is eligible in respect of angles, channels, beams, pipes, etc. used as parts of a Technological structures which support a reaction vessel. In the case before us, the factual aspect of the inputs viz. steel and cement having been used for the manufacture of storage tanks is not disputed by the Revenue. In the absence of any contrary evidence to the factual evidence as noticed by the adjudicating authority during the visit to the factory premises, the impugned order is not sustainable.
It is observed that in the above judgment the facts are absolutely identical to the fact of the present case. Moreover aspect of immovable properties of the capital goods was also examined and credit on steel material have been allowed. The above judgment was upheld by the Honble Karnataka High Court reported in [2014 (302) E.L.T. A29 (Kar.)] .
6.2 The similar issue has been dealt in case of KCP Ltd. (supra), Bannari Amman Sugars Ltd. (supra) of Honble Karnataka High Court, and various other judgments, wherein the Cenvat Credit on steel material used for fabrication and erection of the storage tank, has been allowed. Therefore, following the ratio of the above judgments, I am of the view that Cenvat credit in respect of input used in fabrication and erection of storage tank is admissible. As regard the Cenvat credit availed by the appellant in respect of aluminium sheets/coils etc. for insulation of pipes and tubes installed in the appellant factory, I find that in the chemical plant tubes and pipes are integral part of the entire plant. The pipes and tubes are compulsory for the purpose of maintaining temperature insulation and for such insulation the aluminium coils and sheets are used, therefore aluminium coils and sheets are used in plant and the credit should be allowed on such material. This issue has been considered in the judgment of National Oxygen Ltd.[2007 (207) ELT 516(T)] wherein Division Bench of this Tribunal held as under:
4.1?The items mentioned at Sl. No. 20 to 33 above are electrical devices which are capital goods as per the ratio of the Jawahar Mills Ltd. v. CCE, Coimbatore [1999 (108) E.L.T. 47 (Tri.-LB)].
5. We find that all items other than inputs including Red oxide, Primers and Paints conform to the definition of capital goods given in clauses (a) & (b) of Explanation 1 to Rule 57Q. Each of these items is either a machine, machinery, plant, equipment, apparatus, tool or appliance used for producing or processing of any goods or to bring about any change in any substance for the manufacture of final product or, is a component, spare part or accessory of such machine, machinery etc. The Revenues appeals have no merit as regards these items and have to be dismissed. In the circumstances the appeals are allowed only as regards Red Oxide, Synthetic enamel black paint, Zinc chromate, Yellow primer and Enamel. The appeals are disposed accordingly.
From the above judgment it can be seen that the Cenvat Credit on the same item i.e. Aluminium sheets/coils used for insulation for the purpose of cooling system, has been allowed. Following the ratio of the above judgments, I am of the view that appellant is entitle for the Cenvat credit in respect of aluminium coils/sheets etc. used for insulation of pipes and tubes in the plant of the appellant.
6.3 As regard the credit on foundation bolt of stack which is used for installation of stack which in turn used for disposal of gas of the unwanted gases of the plant. The foundation bolt admittedly classified by the supplier under Chapter 84 as spare parts. In the definition of capital goods provided under the Cenvat Credit Rules certain chapter has been specified. One of the chapters is chapter 84, and should be used in the factory of the appellant. Since foundation bolt is classified under Chapter 84 and admittedly used in the factory of the appellant, this is sufficient to qualify the item as capital goods in term of definition of capital goods. Therefore the Cenvat credit on the foundation bolt is clearly admissible. Now I take up the matter of limitation, I find that the appellant way back in 2005 and also in 2006 vide their letter dated 12/7/2005 and 20/3/2006 informed the department as under:
Letter dated 12th July, 2005 This is to inform your office that we have recently stared work on our new IPA plant situated in Plot No. K-2, MIDC Indl. Area, Taloja, in our factory premises. The main excisable goods to be manufactured in this plant is ISO PROPANOL(IPA) and the by product viz. PROPANE and NORMAL PROPANOL(NPA).
The intended annual production capacity of the above products will be as follows:
(a) IPA - 70,000 MTA
(b) PROPANE - 33,000 MTPA
(c) NPA - 4,400 MTPA The expected date of commissioning is around February, 2006.
We are taking Cenvat credit of duty paid on inputs [like MS Plates, electrodes etc] used in the fabrication of Capital goods in the IPA plants. We are also taking credit of duty paid on Capital Goods, Spares, components and accessories used in the IPA plant/factory.
Letter dated 20th March, 2006 Enclosed please find herewith copies of lease agreements entered with MIDC in respect of purchase of various plots and allotment letters thereof.
Further, we wish to state that though our Registration Certificate mentions our address only as Plot-K-1, MIDC Area, our all other plots are registered with Excise Department. The address Plot K-1, MIDC Indl. Area is mentioned as a general practice i.e. as appeared in our Letter Heads. We have requested your office about inclusion of other plots long back vide our letter no. 401/91-92/3009 dated 31/7/1991 alongwith detailed Ground Plan. The premises on plots and boundaries was once again informed to the Exicse Deptt. Vide request for Central Excise Registration filed on 10/12/2001.
IPA plant is situated on Plot K1, K2, K3, K4 and K5. The Plot-K-2 is transferred in our companys name in December 2002 by MIDC and includes in our Factory premises since then. The fact was informed to you vide our letter No. 150/CE/01/2005-06/30 dated 12/7/2005 with information about taking Cenvat Credit on Capital Goods, Spares, components and accessories used in IPA plant.
We once again state that we take 50% Cenvat Credit of duty paid on capital goods, spares, components and accessories used in IPA plant and balance credit will be taken after commissioning of plant so far we have taken Rs. 4,28,89,202/- as Cenvat credit of duty paid on Capital Goods received for IPA plant till January 2006.
From the above correspondence which is not under dispute, it is clear that the appellant have clearly expressed their intention and activity related to availment of Cenvat Credit on the items in question. With this information, the Revenue was at their own liberty to question the admissibility of Cenvat credit. I am of the view that the informations provided by the appellant are more than sufficient for the Revenue, that if at all they are of the view that the Cenvat credit is not admissible they could have extended their investigation and could have issued show cause notice well within the normal period of one year. In failing to do so, the suppression of facts cannot be alleged on the Appellant.
6.4 In view of the above discussion, I am of the view that demand of Cenvat Credit is not sustainable on merit as well as on limitation. The impugned order is set aside and the appeal of the appellant is allowed with consequential relief, if any, in accordance with law.
(Order pronounced in the court on _________) Ramesh Nair Member (Judicial) sk 13