Custom, Excise & Service Tax Tribunal
Hindustan Zinc Ltd vs Udaipur on 26 October, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL,
WEST BLOCK NO.2, R.K. PURAM, NEW DELHI-110066
BENCH-DB
COURT -II
Excise Appeal No. E/52696/2015-EX [DB]
[Arising out of Order-in-Original No. JAI-EXCUS-002-COM-
30-14-15- Commissioner dated 22.12.2014 passed by the
Commissioner of Central Excise, Udaipur.]
M/s. Hindustan Zinc Ltd. ...Appellant
Vs.
C.C.E., & S.T., Udaipur ...Respondent
Excise Appeal No. E/51381 & 50883/2018-EX [DB] [Arising out of Order-in-Appeal No. 07-08- (CRM)/CE/JDR/2017-18 dated 02.01.2018 passed by the Commissioner Central Goods and Service Tax Commissionerate, Jodhpur.] [Arising out of Order-in-Appeal No. 09-10- (CRM)/CE/JDR/2017-18 dated 02.01.2018 passed by the Commissioner Central Goods and Service Tax Commissionerate, Jodhpur.] M/s. Hindustan Zinc Ltd. ...Appellant Vs. C.C.E., & S.T., Jodhpur ...Respondent Excise Appeal No. E/51294, 51136 & 51146/2018-EX [DB] [Arising out of a common Order-in-Appeal No. 70-72-AG- CE-JDR-2018 dated 02/02/2018 passed by the Commissioner of CGST & Central Excise-Udaipur] M/s. Hindustan Zinc Ltd. ...Appellant Vs. C.C.E., & S.T., Udaipur ...Respondent Present for the Appellant : Mr. B.L. Narasimhan (Adv.) Present for the Respondent : Mr. H.C. Saini, (AR).
2|Page E/52696/2015 E/51381 & 50883/2018 E/51294, 51136 & 51146/2018 Coram: HON'BLE MR. C.L. MAHAR, MEMBER (TECHNICAL) HON'BLE MS. RACHNA GUPTA, MEMBER (JUDICIAL) Date of Hearing.05.09.2018/07.09.2018 Pronounced on:26.10.2918 FINAL ORDER NO. 53167-53172/2018 PER: RACHNA GUPTA Vide the present order 6 appeals have been disposed off, three were heard on 05.09.2018 for which order detailed below:
Present is an Order qua appeal as under against the order no. 198 dated 22.12.2014 passed by the Commissioner as was heard on 05.09.2018.
Appeal No. E/52696/2015
Impugned JAI-EXCUS-002-COM-30-14-
Order-in-Original No. 15-COMMISSIONER dated
22.12.2014
Show Cause Notice Dated 02.08.2013
Period of dispute April 2011 to December
2012
Credit Demand Rs. 71,46,418/-
Penalty Imposed Rs. 35,73,209
Also qua two appeals as below against the order No. 07-08-CRM & 09-10 CRM both dated 02.01.2018 as were heard on 07.09.2018 (Order got reserved for three of these Appeals).
Appeal No. E/51381/2018 E/50883/2018 Impugned Order- 09-10 (CRM) ST/JDR/2017-18 dated in-Appeal 02.01.2018 Order-in-Original 06-08/CE/UDR/2016-Addl. Comm dated 07.01.2016 Show Cause Dated 22.07.2014 Dated Notice 24.098.2015 Period of Dispute July 2013 to March October 2014 to
3|Page E/52696/2015 E/51381 & 50883/2018 E/51294, 51136 & 51146/2018 2014 August 2015 Credit Demand Rs. 33,96,228/- Rs. 49,46,864/- Penalty Demand Rs. 3,30,000/- Rs. 4,90,000/- And also qua remaining three Appeals as below :
Appeal E/51294/2018 E/51136/2018 E/51146/2018 No. Impugn 70-72-AG-CE-JDR-2018 ed Order-
in-
Appeal Order- 06- 73/CE/UDR/20 79/CE/UDR/2 in- 08/CE/UDR/20 16-17 dated 016 dated Original 16-Addl. 30.11.2016 10.01.2017 Comm dated 07.01.2016 Show Dated Dated Dated Cause 24.04.2015 15.10.2015 30.09.2016 Notice Period of April 2014 to October 2014 September Dispute September to August 2015 2016 to June 2014 2016 Credit Rs. Rs. Rs.
Demand 19,71,899/- 1,05,68,940/- 57,32,310/- Penalty Rs. 1,90,000/- Rs. Rs. 5,70,000/-
Demand 10,00,000/-
2. Issue as well as assesse being common in nature for there of these Appeals.
3. The facts relevant for the purpose are that the appellant herein is engaged in manufacture of lead and zinc concentrates, zinc cathode and sulfuric acid falling under chapter 26, 79 and 28 of first schedule to Central Excise Tariff Act. During the course of audit department noticed that the appellant had availed cenvat credit on cement used in mines for filling pits after extraction of ore. The same is denied by the department to be termed as input for the
4|Page E/52696/2015 E/51381 & 50883/2018 E/51294, 51136 & 51146/2018 manufacture of the final product. Resultantly the respective cenvat credits have been disallowed and have been proposed to be recovered respectively for such an amount and for such a period vide such show cause notices as have been detailed in the charts above. The said Show Cause Notices have been decided against the appellant vide the respective orders in original, as also detailed in the above charts. Resultantly, the present appeals.
4. We have heard Sh. B.L. Narshiman for the first set of appeals (as was heard on 05.09.2018) and Sh. H. Bajaj for Appeals as were heard on 07.09.2018, for the appellants. Sh. H C Saini Ld. Dr for the former set of appeals and Shri R. Sharma Ld. DR for the later set of appeals, for the department.
5. It is submitted on behalf of the appellants that they have availed the cenvat credit on the cement used for filling the open pits of the mines prior initiating the subsequent extraction of ore in the said mine that too in compliance of the condition of the mining. Accordingly, the said cement used is very much an input and the appellants are entitled to avail the credit. It is further mentioned that the definition of input has been amended in the year 2011. Prior to the amendment the goods as the one in hand were not to be called as input therefore earlier decisions were against the assessee. But post amendment the situation is different. Otherwise also use of cement in filling of pits prior
5|Page E/52696/2015 E/51381 & 50883/2018 E/51294, 51136 & 51146/2018 extraction is the statutory mandate being in furtherance of mining Rules. Also there is a circular no. 943/2011 dated 29.04.2011, in view whereof, the cement used in the mines pre-extraction of ore is an input. Finally, it is alleged that the adjudicating authority below has wrongly held the cement to have been used only for maintenance and repair of mines, thereby denying the cenvat credit. The order accordingly is prayed to be set aside appeal is prayed to be allowed.
6. While rebutting these arguments and justifying the orders under challenge ld. DR has impressed upon the decision of Hon'ble High Court of Rajasthan in the case of appellant themselves (though the appeal was filed by the Union of India) wherein it was held that cement used for construction repair or maintenance of mines is not an eligible input to avail the cenvat credit. Para 24 of the order under challenge is also impressed upon. The appeal accordingly is prayed to be dismissed.
7. After hearing both the parties and perusing the record we hold as follows:
The moot question to be decided for these Appeals is as to whether the cement used by the appellant who were asked to extract ore from the proposed ore block but only after conducting stopping operations of the said ore blocks, can be called as input. For the purpose the definition of input should be relevant:
6|Page E/52696/2015 E/51381 & 50883/2018 E/51294, 51136 & 51146/2018 Section 2 (k) [(k) "input" means -
(i) all goods used in the factory by the manufacturer of the final product; or
(ii) any goods including accessories, cleared along with the final product, the value of which is included in the value of the final product and goods used for providing free warranty for final products; or
(iii) all goods used for generation of electricity or steam [or pumping of water] for captive use; or
(iv) all goods used for providing any [output service, or];
[(v) all capital goods which have a value upto ten thousand rupees per piece.] but excludes (A) light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol;
(B) any goods used for -
(a) construction of a building or a civil
structure or a part thereof; or
(b) laying of foundation or making of
structures for support of capital goods, except for the provision of any taxable service specified in sub-clauses (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of Section 65 of the Finance Act;
...;
...;
(F) any goods which have no relationship whatsoever with the manufacture of a final product.
8. The department has relied upon 2k(iv) F clause of the definition that goods which have no relationship whatsoever with the manufacture of a final product are not the input. Therefore, it becomes necessary to understand as to whether the cement herein has any relation with the
7|Page E/52696/2015 E/51381 & 50883/2018 E/51294, 51136 & 51146/2018 manufacture of final product or not (extraction of ore in present case).
9. For the purpose the Metalliferous Mines Regulations Act, 1961 (as impressed) are looked into Regulation 107(93) reads as follows:
1[(3) No extraction or splitting or reduction of pillars or blocks of minerals shall be commenced, conducted or carried out except with the prior permission in writing of the Chief Inspector and in accordance with such conditions as he may specify therein. An application for such permission shall be accompanied by an up-to-date plan of the area where the pillars or blocks of mineral are proposed to be extracted or reduced, showing the proposed extent of extraction or reduction, the manner in which such extraction or reduction is proposed to be carried out, the thickness and other characteristics of the mineral deposit, the rate and direction of general dip and of the pitch of the vein, the nature of hangwall, and footwall, the stoping width, the depth of the workings, and such other particulars as the Chief Inspector may require. A copy of the application and the plan shall simultaneously be sent to the Regional Inspector.
(3-A) The operations of extraction, splitting and reduction of pillars or blocks of mineral shall be commenced, conducted or carried out in such a manner as to prevent, as far as possible, the extension of a collapse in the stoped-out area over-riding the pillars or blocks of minerals that have not been extracted].
10. The said provisions originates from the Mines Act, 1952. Perusal of record shows that there has been a permission under the aforesaid regulation in favour of the appellant vide which the appellant was permitted to conduct stopping operations of the ore block by making use of
8|Page E/52696/2015 E/51381 & 50883/2018 E/51294, 51136 & 51146/2018 impugned cement and the method of extraction shall be by VRM Stoping method post filled by mill failing mixed with cement in the ratio as prescribed therein. The permission specifically recites that extraction of ore from the proposed area shall be commenced only after proper settlement and consolidation of the fill of stopped out ore block, immediately below the proposed ore block. Perusal of these clauses in the permission by the mines department in favour of the appellant makes it abundantly clear that filling of the open ore pits with cement was a mandatory pre- requisite for the appellant to extract ore. As already observed above it was a statutory requirement as well in view of the regulation 107 (3).
11. Further, it has been the settled law that:
"all goods used in the factory of the manufacturer of final product, other than the goods itemized in the excluded category mentioned therein, are eligible for consideration as input for the purpose of taking Cenvat credit. Thus, an assessee only needs to prove that the goods were received in the factory and that the same are not covered by any of the exclusions, since the definition of input is very wide intending to take within its ambit all goods used in the factory of the manufacturer of final product. Undisputedly, in the present case, cement has been used within the mining area, thus qualifies for cenvat credit. In support of this, reliance is placed upon the decision of the Hon'ble Tribunal in the case of Prism Cement Ltd. Vs. CCE & ST, Jabalpur, 2016 (338) ELT 593 (Tri.-Del.)".
9|Page E/52696/2015 E/51381 & 50883/2018 E/51294, 51136 & 51146/2018 Thus we opine that the cement used herein is a good which has relation, though indirectly, with the extraction of ore thus it qualifies for audit under Rule 2(k), prevailing during the relevant period.
12. Hon'ble Apex Court in the case JK Cottons Spinning and Weaving Mills Co. Ltd. Vs. Sales Tax Officer, Kanpur 1991 (91) ELT 34 has held that :
"The expression "in the manufacture of goods" should normally encompass the entire process carried on by the dealer of converting raw materials into finished goods. Where any particular process is so integrally connected with the ultimate production of goods that but for that process, manufacture or processing of goods would be commercially inexpedient, goods required in that process, would, in our judgment, fall within the expression "in the manufacture of goods." In that case Hon'ble Apex court even went to the extent of holding that:
the use of electrical equipments, like lighting, electrical humidifiers, exhaust fan etc. were also taken to be necessary equipment, to effectively carry on the manufacturing process. This was the observation of the Hon'ble Apex court even at the time of scope of definition of input was very very restricted. Further, we observe that even prior to this in the case of Collector of Central Excise Calcutta Vs. East and Paper Industries Ltd.
1989 (43) ELT 201 the Hon'ble Apex Court has held, 10 | P a g e E/52696/2015 E/51381 & 50883/2018 E/51294, 51136 & 51146/2018 "Where any particular process is so integrally connected with the ultimate production of goods that, but for that process, manufacture or processing of goods would be commercially inexpedient, articles required in that process, would fall within the expression in the manufacture of goods."
13. This Tribunal also in final order 56900/2017 dated 28.09.2017 has relied upon the decision of Fertilizer Cooperation Ltd. Vs. CCE Ahmadabad 1996 (86) ELT 177(SC) has quoted as follows:
"2. The primary contention of the revenue in this case is that the items are not used in or in relation to the manufacture of final product. The first of the items is Hydrochloric Acid (HCL). According to the department, HCL was used to treat the effluent which was a wastage obtained and hence it was not used in or in relation to the manufacturing process. This issue is no longer res integra as it has already been considered by the Supreme Court in the case of Indian Farmers Fertiliser Co-operative Ltd. v. C.C.E., Ahmedabad, 1996 (86) E.L.T. 177 (S.C) = AIR 1996 SC 2542. In that case raw naptha was obtained at the concessional rate and used for producing ammonia which in turn was used partly, directly in the urea plant and partly, indirectly in the production of urea by being employed in off-site plants, namely, water treatment plant, steam generation plant, inert gas generation plant and effluent treatment plant, all of which were part of the 11 | P a g e E/52696/2015 E/51381 & 50883/2018 E/51294, 51136 & 51146/2018 integral process of the manufacture of urea. After taking into consideration the earlier judgment in the case of C.C.E., Calcutta-II v. M/s. Eastend Paper Industries Ltd. AIR 1990 SC 1893, J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. Sales Tax Officer, Kanpur, AIR 1965 SC 1310, C.C.E., New Delhi v. M/s. Ballarpur Industries Ltd.- 1989 (43) E.L.T. 804 (S.C.) = AIR 1990 S.C. 196 and Deputy CST v. Thomas Stephen & Co. Ltd., 1988 (34) E.L.T. 412 (S.C.) = AIR 1988 S.C. 997 in paragraph 9, the Supreme Court held as follows : 9. That leaves us to consider whether the raw naphthaused to produce the ammonia which is used in the effluent treatment plant is eligible for the said exemption. It is too late in the day to take the view that the treatment of effluents from a plant is not an essential and integral part of the process of manufacture in the plant. The emphasis that has rightly been laid in recent years upon the environment and pollution control requires that all plants which emit effluents should be so equipped as to rid the effluents of dangerous properties. The apparatus used for such treatment of effluents in a plant manufacturing a particular end product is part and parcel of the manufacturing process of that end product. The ammonia used in the treatment of effluents from the urea plant of the appellants has, therefore, to be held to be used in the manufacture of urea and the raw naphtha used in the manufacture of such ammonia to be entitled to the said exemption.
14. Following these earlier decisions and keeping in view the above discussion, we are of the opinion that without 12 | P a g e E/52696/2015 E/51381 & 50883/2018 E/51294, 51136 & 51146/2018 filling of the ore pits the appellant was statutorily, not in position to extract the ore, i.e. the final product thus the use of cement was very much in relation to the manufacture which was extraction of ore in the impugned cases. Therefore, we hold that the appellant is entitled to treat the same as input. The clarification to this effect is rather available in circular no. 943/4/2011-CX dated 29.04.2011, the relevant extract thereof is:
S. Issue Clarification
No.
1. Can credit of capital As per Rule 6(4) no credit can be
goods be availed of availed on capital goods used
when used in exclusively in manufacture of
manufacture of exempted goods or in providing
dutiable goods on exempted service. Goods in respect
which benefit under of which the benefit of an exemption
Notification 1/2011- under Notification No. 1/2011-C.E.,
C.E. is availed or in dated the 1st March, 2011 is availed
provision of a service are exempted goods [Rule 2(d)]. whose part of value Taxable services whose part of value is exempted on the is exempted on the condition that no condition that no credit of inputs and input services, credit of inputs and used for providing such taxable input services is service, shall be taken, are taken? exempted services [Rule 2(e)].
Hence credit of capital goods used exclusively in manufacture of such goods or in providing such service is not allowed.
2. How is the "no Credit of all goods used in the relationship factory is allowed except in so far as whatsoever with the it is specifically denied. The manufacture of a expression "no relationship final product" to be whatsoever with the manufacture of determined? a final product" must be interpreted and applied strictly and not loosely. The expression does not include any goods used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not. Only credit of goods used in the factory but having absolutely no relationship with the manufacture of final product is not allowed. Goods such as furniture and stationary used in an office within the factory are goods used in the factory and are used in relation to the manufacturing business and hence the credit of same is allowed.
13 | P a g e
E/52696/2015
E/51381 & 50883/2018
E/51294, 51136 & 51146/2018
S. Issue Clarification
No.
3. Is the credit of input Credit of input services used for services used for repair or renovation of factory or repair or renovation office is allowed. Services used in of factory or office relation to renovation or repairs of a available? factory, premises of provider of output service or an office relating to such factory or premises, are specifically provided for in the inclusive part of the definition of input services.
4. Does the expression The definition of "input" is given in "in or in relation" Rule 2(k) and Rule 6 only intends to used in Rule 6 segregate the credits of inputs used override the towards dutiable goods and definition of "input" exempted goods. While applying under Rule 2(k) for Rule 6, the expression "in or in determining the relation" must be read harmoniously eligibility of Cenvat with the definition of "inputs". credit?
15. Resultantly, we hold that the adjudicating authority below has committed an error while denying the credit on cement used by appellant in filling pits for making area fit for ore extraction. The authority as relied upon in the case of Hon'ble Rajasthan High Court and as also been impressed upon by the ld. DR are opined to be not applicable to the present case, it being prior to the amendment in the definition of the inputs. The decision of Hon'ble Apex Court in appellants own case Hindustan Zinc Ltd. Vs. Union of India 2015 325 ELT a115 (SC) is also not applicable for the present case because that case was dismissed mainly on the ground that the grounds taken before the Hon'ble Apex Court were not taken before CESTAT hence were not allowed to be taken for the first time in appeal even before of the High Court. Here we draw our support from the decision Hon'ble SC in the Case 2001 (129)ELT SC 14 | P a g e E/52696/2015 E/51381 & 50883/2018 E/51294, 51136 & 51146/2018 wherein it was held that refusing of special leave by a non speaking order does not attract the doctrine of merger.
16. As a result of entire above discussion we hereby set aside all the impugned orders under challenge. Resultantly, all 6 appeals stands allowed.
(Pronounced in the open court on 26.10.2018) (C. L. MAHAR) (RACHNA GUPTA) MEMBER(TECHNICAL) MEMBER (JUDICIAL) Sakshi