Custom, Excise & Service Tax Tribunal
M/S Kisan Sahkari Chinni Mills Ltd vs Cce, Lucknow on 2 April, 2012
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Date of Hearing : 2.4.2012 Excise Appeal No. 2600 of 2009-SM [Arising out of the Order-in-Appeal No. 128-CE/LKO/2009 dated 11.5.2009 passed by the Commissioner (Appeals), Central Excise, Lucknow] For Approval & Signature : Honble Shri Mathew John, Member (Technical) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? Yes 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3. Whether their Whether their Lordships wish to see the fair copy of the order? Seen 4. Whether order is to be circulated to the Department Authorities? No M/s Kisan Sahkari Chinni Mills Ltd. Appellants Vs. CCE, Lucknow Respondent
Appearance:
Appeared for Appellant : Shri Vikrant Kackaria, Advocate
Appeared for Respondent : Shri B.L. Soni, A.R.
CORAM: Honble Shri Mathew John, Member (Technical)
Order No.dated.
Per Mathew John :
The appellants are manufacturers of sugar. During the period May 2000 they had taken Modvat credit on various items which were used for fabricating items like vacuum tank, syrup extraction receiver, stationary flange juice guard etc. and claimed Modvat credit on these items under Rule 57Q of the Central Excise Rules, 1944. The Revenue felt that on these items the appellants could not have taken Modvat credit for reasons like that the goods were structural items, the goods were not covered by the definition of Capital Goods in Rule 57Q, the goods were not covered by the declaration given under Rule 57(T) etc. A Show Cause Notice was issued for recovery of such credit taken amounting to Rs. 7,41,415/-. The demand was initially confirmed for Rs. 7,40,935/- along with interest and penalties. The appellants filed appeal with the Commissioner (Appeals) who give relief in respect of credit on many items and restricted the demand to Rs.1,79,126.38 and reduced the penalty to Rs.1000/-. Aggrieved by the said order, the Appellants came in appeal before the Tribunal. The Tribunal passed the following order :-
The appellant filed this appeal against order-in-appeal No. 332-CE/2005 dated 24th June 2005 in so far as denial of cenvat credit on iron and steel structure. The Commissioner (Appeals) observed that the appellant failed to establish that these items were used as parts and accessories of the goods falling under specific heading. The learned Counsel has taken to the bench to the relevant portion of the adjudication order. It is seen from the adjudication order that the adjudicating authority observed that the goods are described as fixture holder, F.W. tank assembly, blow down tank fabricated structure, foundation bolt, perforated ladder, channels, beams, angles, conveyor belting, M.S. Fab cold & hot water tank, M.S. hardware & trough portion etc. The learned Counsel also submits that they have placed the use of the items before the authorities below. I find that use of the capital goods are required to be examined by the authorities below. Therefore, I set aside the impugned order in so far as denial of the cenvat credit on structure and structural materials, the matter is remanded back to the adjudicating authority to examine the use of this structure and structural materials. Needless to say the adjudicating authority shall give an opportunity of personal hearing to the appellant before deciding the matter. The appeal is allowed by way of remand.
2. The matter was adjudicated in pursuance of the said order of the Tribunal. The adjudicating authority re-confirmed the demand of Rs.1,79,126.38 and also imposed a penalty of Rs.1,79,126.38 during this round of litigation as compared to penalty of Rs.1000/- upheld by Commissioner (Appeals) in first round of litigation. The adjudicating authority or the Commissioner (Appeals) has not carried out the instructions of the Tribunal to verify the use declared by the appellants for each and every item on which disputed Cenvat credit has been taken. Instead a few case laws have been discussed and some reasoning given. The reasoning given in the impugned order is as under :-
I observe that in this case all the goods have been received after 1997 and as per the rule 57Q as existing after 1997, only those goods as are specified in the table to the rule would get credit as capital goods. The decisions quoted by the appellant have been given in the context of Rule 57Q as existing prior to March, 1997 and cannot be applied to decide cases relating to post 1997 period. Since the appellant has not provided any document such as catalogue etc. in the support of their claim that the goods are part/accessories of sugar mill machinery and from the relevant invoices also same cannot be ascertained, therefore the credit involved on such goods is not admissible.
3. The counsel for the appellant submits that the adjudicating authority or the first appellate authority was not willing to verify the declared use furnished by the appellants. They have also kept silent whether the actual use as declared by the appellant is correct or not. It is the contention of the appellant that since the department is refusing to verify the facts as declared by the appellant, the declaration given by the appellant should be taken to be correct and he submits that in such a case the appellants are eligible for disputed credit.
4. The Counsel disputes the finding of the Commissioner (Appeals) that after 1997 till April 2000 only goods which were covered under headings of Central Excise Tariff specified under Rule 173Q were eligible to Cenvat credit. He relies on clause (ii) in Rule 57Q to the effect that credit was allowable. The said Rule read 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.
(1) (2) (3) All goods falling under heading Nos.82.02 to 82.11; All goods specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986, other than the following namely:-
(i) all the goods falling under Chapter 24; and
(ii) all goods falling under heading Nos. 36.05 or 37.06
(iii) ingots and billets on non-alloy steel falling under sub-heading No.s 7206.90 and 7207.90, manufactured in an induction furnace unit, whether or not any other goods are produced in such induction furnace, and hot re-rolled products of non-alloy steel falling under sub-heading Nos. 7211.11, 7211.19, 7211.30, 7211.52, 7211.59, 7211.60, 7211.92, 7211.99, 7213.90, 7214.90, 7215.90, 7216.10 and 7216.90 on which duty is paid under section 3A of the Central Excise Act, 1944 (1 of 1944)]
2. All goods falling under chapter 84 (other than internal combustion engines fallng under heading No. 84.07 or 84.08 and of a kind used in motor vehicles, compressors falling under heading No. 84.14 and of a kind used in refrigerating and air-
conditioning appliances and machinery, heading or sub-
heading Nos.84.15. 85.18, 8422.10 [8424.10, fire extinguishers falling under sub-heading No.8424.80, 8424.91, 8424.99], 84.29 to 84.37, 84.40, 84.50,84.52, 84.69 to 84.73, 84.76, 84.78, expansion valves and solenoid valves falling under sub-
heading No.8481.10 of a kind used for refrigerating and airconditioning appliances and machinery);
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. All goods falling under heading Nos.
90.11 to 90.13, 90.16, 90.17, 90.22 (other than for medical use), 90.24 to 90.31 and 90.32 (other than of a kind used for refrigeration and airconditioning appliances and machinery);
5. Components, spares and accessories of the goods specified against S.Nos 1 to 4 above;
6. Moulds and dies;
7. Refractories and refractory materials :
8. Tubes and pipes and fittings thereof, used in the factory;
9. Pollution control equipment;
10. Grinding wheels and the like goods falling under sub-heading No. 6801.10;
11. Goods falling under heading No.68.02;
and
12. Lubricating oils, greases, cutting oils coolants.
5. The contention of the Counsel is that the appellants claimed credit under item 5 of the table of Rule 57Q and in respect of such items it is not necessary that the goods should have been falling under Headings specified in items 1 to 4. Therefore, he submits that the appellants are eligible for Modvat credit on the disputed items.
6. Further he points out that in the first round of litigation, the Commissioner (Appeals) had upheld a penalty of Rs.1000/- only. The department did not come in appeal against the said order whereas the appellants had challenged the merits of the claim itself and the matter was remanded back to the adjudicating authority to decide the merits of the claim only and in such a proceeding he should not have increased the penalty from Rs.1000/- to Rs.1,79,126.38. He submits that the findings of the adjudicating authority and first appellate authority are not consistent with the provisions under Section 57Q as stood at the relevant time. Therefore, credit should be allowed fully and penalty should be set aside.
7. The departmental officers have not given any findings on the declared use, when case was remanded by Tribunal with specific direction to do so. In the circumstances I made it clear to the Authorised Representative of the Revenue that I propose to accept the declarations given by the appellant to be true and correct and proceed in the matter.
8. Thereupon the Authorised Representative submitted that the declared use should be tested against the ratio laid down by the Apex Court in the case of Saraswati Sugar Mills Vs. CCE- 2011 (270) ELT 465 (SC) and the decision of the Larger Bench of the Tribunal in the case of Vandana Global Ltd. Vs. CCE-2010 (253) E.L.T. 440 (Tri. LB).
9. As already stated this is a second round of litigation. There is unwillingness on the part of lower authorities to verify the actual use of the item. They might have had serious difficulty in verifying the use of items which were put to use almost 12 years ago. I do not think that any purpose will be served by remitting the matter for denovo consideration. So the issue has to be decided on the basis of what is available on record.
10. The credits in dispute are on goods received in the factory prior to 01-04-2000. In the second round of adjudication the adjudicating authority had classified the goods into two groups and disallowed credit as under:-
(i) Credits totalling to Rs. 119502.50 on items at S. Nos. 9, 10, 11, 13, 14, 23, 30, 31, 32, 35, 36, 38, 56, 60, 62, 67, 71, 80, 82, 83, 87, 100, 102 and 103 of the annexure-A to the Show Cause Notice were denied on the ground that these goods received were structural goods used to construct immovable property and materials falling under various headings in the Central Excise Tariff which were not covered by the definition of capital goods under Rule 57Q of Central Excise Rules, 1944.
(ii) Credits totalling to Rs. 54,485/- on items at Sl Nos. 12, 42, 57, 63, 66, 70, 78, 79 and 101 of Annexure-A to the Show Cause Notice were denied on the ground these goods did not appear to be spares, accessories or components of goods of Chapter 82, 84, 85 and 90 as specified in Rule 57Q.
11. From the decisions of Vandana Global Ltd (Supra) and Saraswati Sugar Mills (Supra) what I conclude is that credit should be allowed on items which are parts and accessories of machines used in the factory and also on materials used in fabrication of such items. Credit is not available on goods which are used for erecting the machine or constructing any foundation or supporting structures basically because these items become immovable property. I proceed on such reasoning and also based on the declaration given in appeal papers about the nature of use for each of the disputed items. I take the declarations to be correct for the reasons already recorded and proceed.
11. I give my findings based on information available on record and taking declaration to be correct. This may lead to some inaccuracies but in the facts and circumstances such inaccuracies are inevitable. Such inaccuracies could have been avoided if the lower authorities were willing to inspect the items and record their findings on use each item which was not done. If I remit this matter for de-novo consideration, going by past experience, the authorities below are most likely to keep writing about case laws without verifying actual use and waste the time of the Tribunal again on this matter involving a small amount. So such a course of action is not warranted. The admissibility of the claims are decided having regard to the issue whether the items are used in erecting machinery or are part and accessories of the machinery and the decision in respect of each item as declared by the appellant and indicated in the table below.
Sl. No. Description as per Invoice Tariff Heading Nature of use as declared by appellant Whether credit is to be allowed 9-11 Fixture holder 7308.90 Use as Boiler structure. To erect for generation of steam. No 13 Blow down tank 7309.00 Used as Boiler Machinery part. To blow down excess water of boiler. Yes 14 Boiler structure 7308.90 Used as structure of boiler. To erect Boiler No
23. Syrup extraction receiver 7308.90 Used in Boiling house. To receive syrup from evaporator Yes 30 & 31 Fabricated Structure for IInd cross Bagasse Carrier 8438.90 7308.90 Used in Bagasse Carrier To erect bagasse carrier to carry bagasse. No 32 Foundation Bolt 7318.10 Used in Mill house No 35 & 36 MS Fabricated Rake for bagasse carrier and structure 7308.90 Used in carrying Bagasse, Steel structure for Bagasse Carrier to erect it No 38 Stationary Flange Juice Guard pinion Bottom, Pixer Guard, bracket for P guard etc 7308.90 Structure for cane carrier to carry cane for mealing No 56 MS Fabricated Mill Gear in Bed Plate 7308.90 Gearing base frame, use in Mill house. No 60 Reforted Ladder type Cable Trays, Accessories 7216.39 7213.39 Use in boiling house to erect vacuum filter for filtrate of Muddy juice. No 62 MS Foot Stainer 7308.90 Used in Mill house to erect vacuum filter. No 67 MS Fab. Adjustment of under cane leveller 7308.90 Used in Mill house to erect cane unloader No 71 Steel plates, channels, beams, angles 7308.90 Used in C.F. to erect C.F. Machine for purging Massecuites. No 72 M.S. Fab. Rolling & Support 7308.90 Used in Boiling house to erect C.F. Machine for purging Massecuites. No 80 Under Feed Roller Pinion Guard 7308.10 Used in Mill house to cover of under feed roller pinion. Yes 82 Gear Guard for Bagasse Carrier/Elevator 7308.90 Used in Mill house as Gearing Guard Yes 83 M.S. Fab. Gear Guard for Bagasse Carrier 8438.90 -Do- No 87 M.S. Fab. Railing for Tank 8438.90 Used in crystallizer to erect it. No 100 & 102 Foundation Bolt & Nut 7318.10 Used in Mill house to erect Bagasse Carrier No 103 M.S. Fabricated Supply Frame Bracket & Clamps 7308.90 Used in Boiling house to erect C.F. Machine for purging Massecuites. No
13. In respect of items covered by the second list of goods, (see para 10(ii) above), I find that all items can be considered to be parts and accessories of Machinery for Sugar Manufacture falling under heading 8438.30.
14. Further I hold that the penalty imposed for any amount higher than Rs.1000/- is not sustainable because that was the amount upheld by Commissioner (Appeal) in first round of litigation and Revenue did not agitate about it. Appeal filed by the Appellant in Tribunal cannot ultimately result in a penalty higher than the one which was imposed in earlier proceeding. So the penalty is reduced to Rs. 1000/-.
15. The adjudicating authority may identify the amounts of credits involved in each of the items stated to be disallowed in Table 11 above read with annexure A to the SCN and arrive at the amount to be disallowed.
(Pronounced and dictated in Court) (Mathew John) Member (Technical) RM