Custom, Excise & Service Tax Tribunal
Cce, Lucknow vs M/S Oudh Sugar Mills Ltd on 25 March, 2013
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No.2, R. K. Puram, New Delhi. Court No. 1 Date of hearing/decision: 25.03.2013 Honble Sh. Rakesh Kumar, 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 Lordships wish to see the fair copy of the Order? 4 Whether Order is to be circulated to the Departmental authorities? Excise Appeal No. 128 of 2008 with Cross/174 of 2008-SM (Arising out of order in appeal No. 115-CE/07 dated 27.09.2007 passed by the Commissioner (Appeals), Central Excise & Service Tax, Lucknow) CCE, Lucknow Appellants Vs. M/s Oudh Sugar Mills Ltd. Respondent
Present Ms. Shweta Bector, Advocate for the appellant.
Present Sh. Rajesh Chhibber, Advocate for the respondent.
Coram: Honble Sh. Rakesh Kumar, Member (Technical) Final Order No. 55894 / 2013 Per: Rakesh Kumar:
The respondent are manufacturer of sugar chargeable to central excise duty. They availed cenvat credit of central excise duty on inputs and capital goods. The point of dispute in this appeal is as to whether they would be eligible for cenvat credit in respect of welding electrodes, M.S. Angles, Channels, H.R. Sheets etc. used for repair and maintenance of plant and machinery. The department being of the view that these items are neither inputs nor capital goods, issued a show cause notice for recovery of allegedly wrongly taken cenvat credit amounting to Rs. 2,70,773/- in respect of these items during the period from January, 2005 to March 2005 alongwith interest and also for imposition of penalty. The show cause notice was adjudicated by the jurisdictional Assistant Commissioner who vide order-in-original dated 30.11.2006 denied the cenvat credit in respect of above items and confirmed cenvat credit demand of Rs. 2,70,774/- alongwith interest and imposed penalty of equal amount on the respondent. However, on appeal filed by the respondent, the Commissioner (Appeals) vide impugned order-in-appeal dated 27.09.2007 allowed the appeal on the grounds that
(a) Welding electrodes undisputedly have been used for fabrication of various parts of the plant and machinery the cause of repair and maintenance and hence the same would be eligible for cenvat credit;
(b) Steel plates, undisputedly, have been used in the fabrication of structure of sugar mill machinery i.e. boiler ducting machines, C/F machines, semikestner, juice heater etc and the H.R. sheet have been used in the manufacture and erection of semikestner juice heater, clarifier etc; and
(c) The above uses of welding electrodes and various steel items shows that the same have been used either in repair and maintenance of plant and machinery or fabrication of the various components of the machinery which are also capital goods.
With regard to jointing gasket sheet the Commissioner (Appeals) observed that the same undisputedly have been used for packing of slide glass frame of pan kestner, juicer, heater, pump & pipeline etc. to prevent the leakage of juice, exhaust steam and liquids.
1.1 Against the above order of the Commissioner (Appeals), this appeal has been filed by the Revenue and in respect of Revenues appeal, the respondent have filed cross objection. Earlier this appeal and Cross-objection had been decided ex-parte vide final order No. 81/2012-SM (Br.) dated 27.01.2012 on restoration application being filed by the Respondent, the Tribunal vide Misc. order No. 165/2012-SM (Br.) dt. 01.06.2012 recalled the final order dated 27.01.2012 and restored the appeal and cross-objection.
2. Heard both sides.
3. Ms. Shweta Bector, ld. DR assailed the impugned order and reiterating the grounds of appeal, emphasised that while some quantity of welding electrodes and steel items have been used for repair and maintenance, the bulk of the quantity have been used for supporting structures which are not eligible for cenvat credit in view of the larger Bench judgment of the Tribunal in the case of Vandana Global Ltd. vs. CCE, Raipur reported in 2010 (253) ELT 440 (Tri. LB) and hence the impugned order permitting the cenvat credit in respect of welding electrodes and steel items used and erection of supporting structure for machinery is not correct. With regard to eligibility of the items and for repair and maintenance of plant and machinery she refer the judgment of Honble A.P. High Court in the case of Sree Rayalseema Hi-Strength Hypo Ltd. vs. CC&CE, Tirupati reported as 2012 (278) ELT 167 (A.P.).
4. Ms. Rashi Sureka, Advocate, ld. Counsel defended the impugned order and reiterating the finding of the Commissioner (Appeals) pleaded that even in the grounds of appeal, the uses of various items welding electrodes, steel plates, M.S. Angles and H.R. sheet has not been disputed and Commissioner (Appeals) has given a clear finding that all these items have been either used in repair and maintenance or for fabrication of plant and machinery and that jointing gasket sheets have been used to prevent the leakage of liquids without which the manufacturing operation are not possible; that the inputs used for fabrication of the capital goods are covered by the definition of inputs and, hence, are eligible for cenvat credit and that the inputs used for repair and maintenance of the existing plant and machinery are also eligible for cenvat credit in view of judgment of Chhattisgarh High Court in the case of Ambuja Cements Eastern Ltd. vs. CCE, Raipur reported in 2010 (256) ELT 690 (Chhatt.), that in terms of the Commissioner (Appeals)s, order, the welding electrodes and other steel items have been used for fabrication of various parts of the plant and also for repair and maintenance of existing plant and machinery and this fact has not been disputed in the ground of appeal, rather the grounds of appeal state that these items have been used for repair and maintenance, ands if this is so, the issue stands decided against the revenue and that as regards the jointing gasket sheet, according to the Commissioner (Appeals)s finding the same are necessary to prevent the leakage of steam and canejuice, though the appeal filed by the revenue does not mention this item, and that in view of the above submissions, there is no infirmity in the impugned order.
5. I have considered submissions from both the sides and perused the records. Though Honble A.P. High Court in the case of Sree Rayalaseem Hi-Strength Hypo Ltd. vs. CC&CE, Tirupari reported in 2012 (278) ELT 167 (A.P.) has taken a contrary view in respect of welding electrodes used for repair and maintenance of mill holding that the cenvat credit is not admissible in respect of this item, as repair and maintenance is an activity distinct from manufacture, in my view, since three different High Court Honble Chhattishgarh High Court in the case of Ambuja Cements (supra), Honble Rajasthan High Court in the case of Hindustan Zinc Ltd. (supra) and Honble Karnataka High Court in the case of Alfred Herbert (India) Ltd. have held that the goods used for repair and maintenance are eligible for cenvat credit, it is these judgments which have to be followed. Moreover for permitting cenvat credit in respect of an item what is relevant is as to whether the use of that item has nexus with manufacture and not whether use of that item is part of the manufacture. Nexus has to be determined on the basis as to whether without use of that item manufacture is commercially feasible. Since repair & maintenance of plant and machinery is necessary for smooth manufacturing operation, the cenvat credit be eligible for credit would be admissible in respect of inputs used in repair and maintenance of plant and machinery.
6. In view of above discussion, I do not find any infirmity in the impugned order. The Revenues appeal is dismissed. The cross-objection also stands disposed of accordingly.
(Rakesh Kumar) Member (Technical) Pant