Custom, Excise & Service Tax Tribunal
Shri Bajrang Power & Ispat Ltd vs C.C.E. Raipur on 19 December, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI PRINCIPAL BENCH, COURT NO. I Appeal No. E/3490/2010-EX [DB] [Arising out of the common Order-In-Appeal No.Comm./RPR/47-48/2010 Dated 10.06.2010 passed by Com. Central Excise, Central Excise Building, Dhamtari Road, Raipur-492001] Shri Bajrang Power & Ispat Ltd. Appellant Vs. C.C.E. Raipur Respondent
Appearance:
Sh. Amit Jain, Ld. Advocate for the appellant Sh. Yogesh Agarwal, Ld. AR for the respondent CORAM:
Honble Justice Mr. Dr. Satish Chandra, President Honble Mr. Ashok K. Arya, Member (Technical) Date of Hearing.01.11.2016 Date of decision._________ Final Order No. 55894 /2016 Per Ashok K. Arya:
1. The appellant, Shri Bajrang Power & Ispat Ltd. is in appeal against Commissioner Raipurs order dated 24.06.2010 whereunder Cenvat amount totaling to Rs. 2,28,32,558/- (Rs. Two crore twenty eight lakhs thirty two thousand five hundred fifty eight) has been disallowed. The period involved is April 2004 to July 2009. The equivalent penalty has also been imposed on the appellant.
2. The matter concerns with the admissibility of Cenvat credit on steel items used in fabrication/manufacture of various capital goods and technological structures for supporting the capital goods.
3. The appellant has been represented by Ld. Advocate, Sh. Amit Jain and the Revenue has been represented by Ld. AR, Sh. Yogesh Agarwal.
4. Brief facts are that the appellant is engaged in the manufacture, inter alia, of various iron and steel products falling under Chapter 72 of the First Schedule to the Central Excise Tariff Act, 1985. Appellant purchased various steel items (like MS channels, Beams, Joist, Round, Sheets, Angles, Plates etc.) for fabrication and erection of various capital goods, like Laddle for casting, Material Handling equipment, Cooling Tower, Roller Table, Concast Machine, Furnace Shell, Electrode Equipment, Clamping Device, Raw Material Feeding System, Trolley for material transfer, Kiln Discharge head, etc. and also some technological structures for support these capital goods. These technological structures were intended to provide support to the various capital goods installed in factory, to hold them firmly, and were essential for the functioning of these machines, thus, becoming integral parts of the capital goods.
4.1 Appellant got these capital goods and the technological structures fabricated through contractors using the aforesaid iron and steel items. The appellant has availed Cenvat Credit in respect of quantity of iron and steel products used in various projects in the factory.
4.2 The appellant was issued two Show Cause Notices (SCNs) proposing recovery of Cenvat credit availed on various iron and steel items and denial of exemption under Notification No. 67/95-CE on goods manufactured and captively consumed. Extended period of limitation was invoked in the first SCN, alleging suppression of material facts.
4.3 The Commissioner vide the impugned order dated 24.06.2010 sustained the subject Show Cause Notices, disallowing the Cenvat Credit and confirming the recovery accordingly.
5. Based on the appeal memorandum and written submissions the ld. Advocate for the appellant inter alia submits as follows:
i. The Cenvat credit has been correctly availed on the impugned iron and steel items as inputs used for manufacture of parts/ components/ accessories of specified capital goods falling under Chapter 82, 84 and 85 of First Schedule to Central Excise Tariff Act, 1985 inasmuch as without these technological support structures, erection, installation and operation of huge machinery would not be possible. These technological structures, therefore, qualify to be considered as parts/ components/ accessories of the capital goods.
ii. As per Explanation 2 to Rule 2(k) of Credit Rules, input includes goods used in the manufacture of capital goods which are further used in the factory of manufacture. Since the impugned goods have been used to manufacture part/ components/ accessories of various capital goods which are used within the factory of the Appellant, in terms of the said Explanation, Cenvat credit would be admissible on the iron and steel items used in fabrication of the capital goods and the technological support structures in the present case.
iii. The Appellant submits that steel is to be considered as used in or in relation to manufacture of dutiable final products since without use of such steel, activity of setting up of the plant could not have been completed and without that the manufacture activity could not have been undertaken.
iv. Without prejudice to the above, it is submitted that activities undertaken like cutting, bending, etc. of the iron & steel items, amounts to manufacture and that dutiability of resultant product would be at a stage before its use as part of immovable structure as held by Larger Bench of Honble Tribunal in Mahindra & Mahindra Ltd. Vs. CCE [2005 (190) ELT 301 (Tri.-LB)]. Since the impugned items have been used for fabrication of various parts/components of specified capital goods, their eligibility for credit is to be decided at the stage before they become part of immovable goods and subsequent use with capital goods which are embedded to earth would be of no consequence.
v. The Honble Supreme Court in the case of CCE Vs. Rajasthan Spinning & Weaving Mills Ltd. 2010 ELT 481 (S.C), by applying the user test, held that credit availed on steel items for fabrication of Chimney was admissible. Following the same, in several cases, Cenvat credit on the steel items used for fabrication of capital goods and support structures has been allowed, apploying the user test. Some of these cases are as under:
* CCE Vs. Indore Cemnts Ltd.- 2012 (285) ELT 341 (Mad.) * India Cements Ltd. Vs. CCE- 2015 (321) ELT 209 (Mad.) * UOI Vs. Associated Cement Company Ltd.- 2011 (267) ELT 55 (Chhattisgarh) * Singhal Enterprise Pvt. Ltd. Vs. CCE - 2016-TOIL-2451-CESTAT-DEL.
* CCE Vs. Jindal Steel & Power Ltd.- 2015 (330) ELT 708 (Tri.-Del.) * Jayaswal Neco Ltd. Vs. CCE- 2015 (319) ELT 247 (SC) * Ispat Industries Ltd. Vs. CCE- 2006 (195) ELT 164 (Tri.-Mum.)
6. Ld. AR for the Revenue reiterates the findings given in the impugned order.
7. After careful consideration the facts on record, the submissions of both the sides, and the case laws cited, it appears that the subject matter is covered by Honble Madras High Court decisions in the cases of India Cement Ltd. Vs. CESTAT, Chennai-2015 (321) ELT 209 (Mad.) and Com. of E. Ex., Tiruchirapalli Vs. India Cements Ltd-2012 (285) ELT 341 (Mad.). In both these decisions Honble Madras High Court refers to Honble Supreme Courts decision in the case of Commissioner Vs. Rajasthan Spinning & Weaving Mills Ltd. 2010(255) ELT 481 (S.C.). Honble Supreme Court in the case of Rajasthan Spinning & Weaving Mills Ltd. (supra) allows CENVAT credit on steel items (Plates and M.S. Chennels) referring to the user test evolved in the case of Commissioner Vs. Jawahar Mills Ltd. 2010 (132) ELT 3 (S.C.). Honble Supreme Court in the case of Rajasthan Spinning & Weaving Mills Ltd. (supra) inter alia observes as under:
13. Applying the user test on the facts in hand, we have no hesitation in holding that the steel plates and M.S. channels, used in the fabrication of chimney would fall within the ambit of capital goods as contemplated in Rule 57Q it is not the case of the Revenue that both these items are not required to be used in the fabrication of chimney, which is an integral part of the diesel generating set, particularly when the Pollution Control laws make it mandatory that all plants which emit effluents should be so equipped with apparatus which can reduce or get rid of the effluent gases. Therefore, any equipment used for the said purpose has to be treated as an accessory in terms of Serial No. 5 of the goods described in column (2) of the Table below Rule 57Q.
7.1 By following the Honble Supreme Courts decision in the case of Rajasthan Spinning & Weaving Mills Ltd. (supra) and Jawahar Mills Ltd (supra) it is held that the appellant is be entitled to availment of Cenvat credit for the subject items; when it is so the impugned order has got no merit and is hereby set aside.
8. In the result the appeal is allowed with consequential relief to the appellant.
[Pronounced in open Court on 19.12.2016] (Justice (Dr.) Satish Chandra) President (Ashok K. Arya) Member (Technical) NK Page 6 of 8 E/3490/2010-EX [DB]