Custom, Excise & Service Tax Tribunal
Simbhaoli Sugar Ltd vs Ce & Cgst Noida on 11 October, 2023
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Excise Appeal No.70069 of 2020
(Arising out of Order-in-Appeal No.NOI-EXCUS-001-APP-1129-2019-20 dated
29/11/2019 passed by Commissioner (Appeals) Central Goods & Services
Tax, Noida)
M/s Simbhaoli Sugar Ltd., ....Appellant
(Simbhaoli, Distt. Hapur)
VERSUS
Commissioner of Central Excise, Noida ....Respondent
(Asstt. Comm. Central GST Division-Hapur)
APPEARANCE:
Shri Kartikeya Narain, Advocate for the Appellant
Shri Manish Raj, Authorised Representative for the Respondent
CORAM: HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.70116/2023
DATE OF HEARING : 22 September, 2023
DATE OF PRONOUNCEMENT : 11 October, 2023
SANJIV SRIVASTAVA:
This appeal is directed against Order-in-Appeal No.NOI-
EXCUS-001-APP-1129-2019-20 dated 29/11/2019 passed by
Commissioner (Appeals) Central Goods & Services Tax, Noida.
By the impugned order Commissioner (Appeals) has held as
follows:-
"B. I proceed to the second issue regarding CENVAT credit
on purchase of cartridge and on capital goods (printers)
used in office and in one case taken without having
original/duplicate invoices. The definition of capital goods
during the relevant period ie 2015-16 is as under;
RULE 2. "(a) "capital goods" means:-
2
Customs Appeal No.70066 of 2020
....
B1 The definition of capital goods under Rule 2(a)(A) indicates that the capital goods used by a manufacturer of final product will not include any equipment or appliance used in an office. I find that this item was excluded from the definition of capital goods at the material time. Further, the said goods also do not fall within the ambit of definition of inputs. I find that in view of the specific exclusion of "office equipments/appliances" from the coverage of 'capital goods' defined under Rule 2(a)(A) during the relevant period CENVAT credit on printers and cartridges is not admissible to the appellant. Further, it has been contended by the appellant that in the SCN, no evidences are placed on record to show that the said goods have been used directly or indirectly in the manufacture of final product. In this regard I find that Rule 9(5) of the CENVAT credit Rules 2004 provide that "the burden of proof regarding the admissibility of the CENVAT credit shall lie upon the manufacturer or provider of output service taking such credit." In view of the discussions supra, I have no substantive reason to interfere in the decision of the adjudicating authority in this issue.
C. Regarding third issue. CENVAT credit on corrugated boxes which were delivered at Lawrence Road, Delhi instead of their factory premises amounting to Rs 41,078/-
C1. The provisions of Rule 3 of CENVAT credit Rules 2004, clearly provide that the credit is admissible in respect of duty paid on inputs received in the factory of the manufacture of final product. The relevant portion of the said rule is placed hereunder:
"RULE 3. CENVAT credit. - (l) A manufacturer or producer of final products or a [provider of output service] shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of-3
Customs Appeal No.70066 of 2020
(i) the duty of excise specified in the First Schedule to the Excise Tariff Act, leviable under the Excise Act:
paid on -
(i) any input or capital goods received in the factory of manufacture of final product or [by] the provider of output service on or after the 10th day of September, 2004;"
C2 In the instant case the fact is not disputed that the inputs/goods in question were delivered at Lawrence Road, Delhi and not in the factory premises of the appellant. Further, there are no evidences to show that the same have been used for the manufacture of the final products. Therefore no CENVAT credit is admissible on the same, as rightly denied by the adjudicating authority."
2.1 A Show cause notice was issued to the appellant demanding wrongly availed Cenvat credit amounting to Rs.11,44,443/-.
2.2 Adjudicating Authority by his order allowed the credit of Rs.2,51,277/- and disallowed the credit of Rs.9,33,166/- along with interest and imposed penalty equivalent to the amount of credit disallowed.
2.3 On appeal Commissioner (Appeals) vide the impugned order allowed the credit of Rs.8,39,137/- and upheld the impugned order to the extent of Rs.94,029/- in respect of the goods as referred in para 1 above.
3.1 I have heard Shri Kartikeya Narain learned Counsel appearing for the appellant and Shri Manish Raj learned Authorized Representative appearing for the Revenue. 3.2 Arguing for the appellant learned Counsel submits that The issue involved in the present case for the denial of Cenvat Credit in respect of printers used in the office and corrugated boxes that were delivered to the warehouses outside the factory premises. He submits that Hon'ble Allahabad High Court in the case of M/s Kores (India) Ltd.
4Customs Appeal No.70066 of 2020 Vs Commissioner of Trade Tax, UP 2020-VIL-64-ALH has held that Printer, toner and cartridge would be considered as a part of printer without which printer cannot function. He further submits that definition of capital goods is quite enough to include components, spares and accessories of goods of Chapter 82, 84, 85 and 90 of the Central Excise Tariff Act. Computer printer classifiable under Chapter 84 so its parts i.e. cartridge being components accessories or printers also is to be treated as capital goods. He refers to CBEC Circular No.943/04/2011-CX dated 29.04.2011. He further submits that credit of capital goods used in the factory is to be allowed without any relationship with the process of manufacture of the finalized products. In any case these printers are used for maintaining the essential documents, generation of invoices for the clearance of the goods and hence are used in or in relation to the manufacture of the finished products. The packing materials which is delivered to the warehouses at Lawrence Road, Delhi were used for packing the finished goods i.e. sugar initially cleared by them in small packets packed in corrugated boxes. Hon'ble Supreme Court has in case of Vikram Cement Vs CCE, Indore 2006 (194) ELT 3 (SC) held that explosives for blasting mines to produce limestone for use in the manufacture of cement/clinkers in the premises situated at some distance from the mines are eligible for credit in the factory of cement manufacturer. In the case of Hawkins Cookers Ltd. Vs CCE, Mumbai-III-2014 (299) ELT 103 (Tri.-Mum) credit has been allowed on packing material purchased and used by the assessee at the depot. 3.3 Learned Authorised Representative appearing for the revenue submits that-
During the relevant period the cartridge and printers used in the office were not included in the definition of capital Goods, and were specifically excluded;
5Customs Appeal No.70066 of 2020 Further there is no evidence that these goods were directly or indirectly used in the manufacture of final product;
As per Rule 9 (5) of CENVAT Credit Rules, 2004 the onus to establish the admissibility of CENVAT Credit has been cast on the manufacturer or the provider of output service taking the credit;
Undisputedly the corrugated boxes were not received in the factory premises of the appellant and no evidence has been produced to show that the same were used in manufacture of finished goods;
For the reasons as stated above the impugned order cannot be faulted and the appeal be dismissed.
4.1 I have considered the impugned order along with the submissions made in the appeal and during the course of arguments.
4.2 Commissioner (Appeals) in his order relied on the exclusion clause under Rule 2(a)(A)(i) to deny the Cenvat credit in respect of the printer and cartridges.
4.3 Adjudicating Authority in his order has observed as follows:-
"5.6 The party has stated that at the time of audit they could not produce original copy of invoices. However, later on they traced out almost all the invoices. In this regard, .... During the course of verification it was observed that the aprty has purchased corrugated boxes vide six bills and taken credit of Rs 41,078/- but the materials were delivered at Lawrence Road, Delhi instead of the factory. Similarly the aprty has purchased cartridge under six invoices for office use and taken credit of Rs 23,610/- but since these are not used in or in relation tpo manufacturing activity, credit has been wrongly availed by the party. Thus the total credit of Rs 64,688/- is not admissible to the party."
6Customs Appeal No.70066 of 2020 4.4 It seems that Original Authority has not rendered any finding in respect of the printers on which credit has been denied amounting to Rs.29,341/-.
4.5 Challenging the findings recorded in the impugned order for denial of the credit in respect of printers and cartridge counsel for appellant submits that these goods were essential for the production of the finished goods. Further these are part and accessories of the goods classifiable under Chapter 84 of the Central Excise Tariff Act, 1985 and hence the credit in respect of these goods is admissible. He relied on the clarification given by the board at Sr. No.3. The same is reproduced bellow:-
S.No. Issue Clarification
1 ......................... .........................
2 .................... .........................
3 How is the "no Credit of all goods used in the factory is
relationship allowed except in so far as it is specifically
whatsoever with denied. The expression "no relationship
the manufacture of whatsoever with the manufacture of a final
a final product" to product" must be interpreted and applied
be determined? 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.
4.6 Rule 2 (a) of the Cenvat Credit Rules, 2004 read as follows:
RULE 2. "(a) "capital goods" means:-7
Customs Appeal No.70066 of 2020 (A) the following goods, namely:-
(i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading 6805. grinding wheels and the like, and parts thereof falling under heading 6804 and wagons of sub-heading 860692 of the First Schedule to the Excise Tariff Act;
(ii) ....
(iii) components, spares and accessories of the goods specified at (i) and (ii);
to (viii)...
used-
(1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in office or:....".
The items namely printers and the printer cartridges though covered by the definition of capital goods as argued by the appellant have not been used in the manufacturing premises but in the office of the appellant located within the premises of the appellant. Commissioner (Appeals) has referred to the exclusion clause. Exclusion Clause specifically excludes equipment or appliances used in the offices, definitely printer and its cartridges nothing but the equipment of appliance and not the furniture in respect of which board has issued the clarification since these equipments or appliances are used in office, they fall within the exclusion clause of the definition and hence credit in respect of these would not be permissible. Similar view has been expressed by Mumbai Bench in case of Bharti Airtel Ltd [2013 (29) STR 401 (T-Mumbai) observing as follows:
"43. The appellant has also claimed CENVAT credit on printers which are office equipments. The definition of capital goods under Rule 2(a)(A) indicates that the capital goods used by a manufacturer of final product will not include any equipment or appliance used in an office. The learned counsel for the appellant has argued that this 8 Customs Appeal No.70066 of 2020 exclusion does not apply to a provider of output service and, therefore, the printers used by the appellant are liable to be treated as 'capital goods'. The learned JCDR has argued that, though the item is covered by Chapter 84 specified in sub-clause (i) of Rule 2(a)(A), it will not fall within the ambit of the definition of 'capital goods' as there is no direct nexus between this item and the output service provided by the appellant. The appellant has not established sufficient nexus between printers and their output service. There is substance in this submission. The appellant has not proved that the printers were used for the purpose of providing mobile telephone service."
Affirming this decision Hon'ble Bombay High Court held as follows:
"21. A plain reading of the definition of 'capital goods' as defined under Rule 2(a)(A) of the Credit Rules show that all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, Heading No. 6805, grinding wheels and the like, and parts thereof falling under Heading 6804 of the First Schedule to the Central Excise Tariff Act; pollution control equipments; components, spares and accessories of the goods specified at sub-clauses (i) and (ii) which are used either in the factory for manufacture of final products but does not include any equipment or appliance used in the office and those used for providing output service. A combined reading of sub-clause (a)(A)(i) and (iii) and sub- rule (2) indicates that only the category of goods in Rule 2(a)(A) falling under clauses (i) and (iii) used for providing output services can qualify as capital goods and none other.
...
31. In the light of the aforesaid discussion we examine whether on the rules as they stand the appellants would be entitled to the credit of the duty paid on the item in question on the output service namely the cellular service.9
Customs Appeal No.70066 of 2020 We may observe that a plain reading of the definition of 'capital goods' as defined under Rule 2(a)(A) of the Credit Rules show that all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, Heading No. 6805, grinding wheels and the like, and parts thereof falling under Heading 6804 of the First Schedule to the Central Excise Tariff Act; pollution control equipments; components, spares and accessories of the goods specified at sub-clauses (i) and (ii) which are used either in the factory for manufacture of final products but does not include any equipment or appliance used in the office and those used for providing output service. Further in the CKD or SKD condition the tower and parts thereof would fall under the Chapter Heading 7308 of the Central Excise Tariff Act. Heading 7308 is not specified in clause (i) or clause (ii) of Rule 2(a)(A) of the Credit Rules so as to be capital goods. Further the appellants contention that they were entitled for credit of the duty paid as the Base Transreceiver Station (BTS) is a single integrated system consisting of tower, GSM or Microwave Antennas, Prefabricated building, isolation transformers, electrical equipments, generator sets, feeder cables etc. and that these systems are to be treated as "composite system"
classified under Chapter 85.25 of the Tariff Act and be treated as 'capital goods' and credit be allowed, also is not acceptable. It is clear that each of the component had independent functions and hence, they cannot be treated and classified as single unit. It is clear that all capital goods are not eligible for credit and only those relatable to the output services would be eligible for credit. The goods in question in any case cannot be held to be capital goods for the purpose of Cenvat credit as they are neither components, spares and accessories of goods falling under any of the chapters or headings of the Central Excise Tariff Schedule as specified in sub-clause (i) of the definition of capital goods. Hence a combined reading of sub-clauses 10 Customs Appeal No.70066 of 2020
(a)(A) (i) and (iii) and sub-rule (2) indicates that only the category of goods in Rule 2(a)(A) falling under clause (i) and (iii) used for providing output services can only qualify as capital goods and none other. Admittedly the goods in question namely the tower and part thereof, the PFB and the printers do not fall within the definition of capital goods and hence the appellants cannot claim the credit of duty paid on these items. Even applying the ratio of the judgments as relied upon by the appellants as observed above the said goods in the present context cannot be classified as capital goods.
32. As regards second contention of the appellants that the tower and part thereof, the PFB and the printers would also falls under the definition of 'input' as defined under Rule 2(k) also cannot be sustained. The definition of inputs as defined under Rule 2(k) includes all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production, and as provided in sub- clause (ii) all goods except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service. Explanation (2) of sub-rule (k) is also which provides that input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. A plain reading of the definition of input indicates that in the present context, clause (i) of Rule 2(k) may not be of relevance as same pertains to 11 Customs Appeal No.70066 of 2020 manufacturing activity and pertains to goods used in relation to manufacture of final product or any other purpose within the factory of production. Sub-clause (ii) has been referred to as relevant by the appellant as the same pertains to goods except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service. Tower and parts thereof are fastened and are fixed to the earth and after their erection become immovable and therefore cannot be goods."
Thus in view of the above decisions of the Hon'ble Bombay High Court I do not find any merits in the arguments advanced by the appellant for challenging the disallowance of CENVAT Credit of Rs 52,951/- in respect of the printer and cartridges. The reference made to the board clarification cannot be justified in view of the specific decision of the Hon'ble High Court referred above. In case of Ratan Melting and Wire Industries [2008 (231) E.L.T. 22 (S.C.)] Hon'ble Supreme Court observed as follows:
"6. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law."
4.7 In respect of the Cenvat credit on the packing material which was delivered at the warehouses located at Lawrence 12 Customs Appeal No.70066 of 2020 Road, Delhi. I do not find much justification in the order, it is settled principle in law till the time it can establish that the inputs were used in or in relation to manufacture and clearance of the finished products. The Cenvat credit in respect of the same cannot be denied. It is also the depot has been considered as the place of the clearance for the excisable goods, warehouse where these boxes were delivered is a depot of the appellant from where sugar was cleared after being repacked in these corrugated boxes, these facts are not in dispute."
4.8 I do not find any merits in denying the credit in respect of the packing materials so used in case of Hawkins Cookers Ltd. Vs CCE Mumbai-III 2014 (299) ELT 103 (Tri-Mum) following has been held:-
"3. The case of the department is that the packing material (extra carton, etc.) was not used in the factory of production and hence Cenvat credit of duty paid on such packing material was not available to the appellant in terms of Cenvat Credit Rules, 2004. In the year 2004, in the course of audit for the period 2001-05, it was pointed out by the department that the Cenvat credit taken on the extra (master or single) cartons would not be allowed as the same was not used in the factory of production, but are used in the depot of the appellant for packing of the cookers. On this objection being raised by the Revenue, the assessee immediately reversed the credit availed under protest totaling Rs. 6,25,561/- (duty of Rs. 4,73,859/- vide Entry No. 956, dated 29-12-2004 for the period from April, 2001 to Sept., 2004 and Rs. 1,51,702/- vide Entry No. 216, dated 16-6-2005 for the period October, 2004 to May, 2005). After such reversal of duty, the department issued two show cause notices, first dated 8-2-2005 for the period April, 2001 to Sept., 2004 for an amount of Rs. 4,73,859/- and the second show cause notice dated 7-11-2005 for the period October, 2004 to May, 2005.13
Customs Appeal No.70066 of 2020 10.1 So far the merits of eligibility of the Cenvat credit of the input material (packing materials) in question is concerned, the issue is settled by this Tribunal in view of the ruling of the Apex Court in the case of Vikram Cement (supra), which has been followed by this Tribunal in the case of Clariant (India) Ltd. v. Commissioner of Central Excise, Thane - 2006 (196) E.L.T. 353..."
4.9 In result, Cenvat credit of Rs.41,078/- taken in respect of these packing materials is held to be admissible and remaining credit of Rs.29,341/- + Rs.23,610/- =Rs.52,951/- is held to be not admissible to the appellant. In the respect of credit disallowed the demand of interest also needs to be upheld. Penalty under Rule 15 (2) read with Section 11AC of the Central Excise Act, 1944 is upheld to the extent of Cenvat credit disallowed.
5.1 Appeal is partially allowed as indicated in para-4.9.
(Pronounced in open court on-11/10/2023) Sd/-
(SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp