Custom, Excise & Service Tax Tribunal
Steel Authority Of India Ltd, vs Commissioner Of Cgst & Cx on 24 July, 2023
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO.1
Excise Appeal No.703 of 2010
(Arising out of Order-in-Original No.40/Commr./Bol/2010 dated 10.08.2010 passed
by Commissioner of Central Excise, Bolpur.)
M/s. Steel Authority of India Limited
(Durgapur Steel Plant, Durgapur-713203.)
...Appellant
VERSUS
Commissioner of CGST & CX, Bolpur Commissionerate
.....Respondent
(Nanoor Chandidas Road, Sian, Bolpur, Dist: Birbhum, West Bengal.) WITH Excise Appeal No.906 of 2011 (Arising out of Order-in-Original No.57/Commr./Bol/2011 dated 20.07.2011 passed by Commissioner of Central Excise, Bolpur.) M/s. Steel Authority of India Limited (Durgapur Steel Plant, Durgapur-713203.) ...Appellant VERSUS Commissioner of CGST & CX, Bolpur Commissionerate .....Respondent (Nanoor Chandidas Road, Sian, Bolpur, Dist: Birbhum, West Bengal.) AND Excise Appeal No.342 of 2012 (Arising out of Order-in-Original No.11/Commr./Bol/2012 dated 05.03.2012 passed by Commissioner of Central Excise, Bolpur.) M/s. Steel Authority of India Limited (Durgapur Steel Plant, Durgapur-713203.) ...Appellant VERSUS Commissioner of CGST & CX, Bolpur Commissionerate .....Respondent (Nanoor Chandidas Road, Sian, Bolpur, Dist: Birbhum, West Bengal.) APPEARANCE Dr. Samir Chakraborty, Senior Advocate & Shri Abhijit Biswas, Advocate for the Appellant (s) 2 Excise Appeal Nos.703 of 2010, 906 of 2011 AND 342 of 2012 Shri Mihir Ranjan, Special Counsel for the Revenue CORAM: HON'BLE SHRI ASHOK JINDAL, MEMBER(JUDICIAL) HON'BLE SHRI K. ANPAZHAKAN, MEMBER(TECHNICAL) FINAL ORDER NO. 76223-76225/2023 DATE OF HEARING : 24 July 2023 DATE OF DECISION : 24 July 2023 Per : ASHOK JINDAL :
All the appeals are having common issue of disallowance of Cenvat credit, therefore are dealt by a common order.
2. The facts of the case are that the appellant is having several units and each one of the unit is having integrated steel plant, carry on various iron, steel and allied products falling under Chapters 72, 73, 74, 86, 23 and 28 of the First Schedule of the Central Excise Tariff Act, 1985. One of the said integrated steel plants of the appellant is situated at Durgapur in West Bengal, known as Durgapur Steel Plant (in short 'DSP'). As all the units are having separate registration for carrying out their manufacturing activity, but that is not in dispute. One of the primary raw materials required for manufacture of iron and steel products is iron ore. In order to assure supply of the said essential raw material to DSP, Bolani Ores Ltd. was incorporated as the private limited company in June 1957. However, by the Bolani Ores Ltd. and Miscellaneous Provision Act, 1978, the Central Government considering the fact that the Bolani Ores Ltd. was the main source of supply of iron ores to DSP and that without further substantial investments by way of capital outlay and otherwise the supply of iron ore to the said plant cannot be maintained, acquired the entire share capital of the said Bolani Ores Ltd., to vest in the Central Government. By Sections 5(1) and 6 of the said Act of 1978, however, the said shares acquired by the Central Government immediately stood transferred to and vested in the appellant on 1st January 1979. Pursuant to such acquisition of the said Bolani Ores Ltd., the said Mines situated in the state of Orissa became 3 Excise Appeal Nos.703 of 2010, 906 of 2011 AND 342 of 2012 the property of the appellant and has been since then an unit of the appellant. Thereafter on 12th November 1981, under a supplementary lease deed the Government of Orissa, in accordance with Minerals Concession Rules, 1960, granted the appellant a mining lease for iron ores contained in the said Bolani Mines for a period of 20 years w.e.f. 14.11.1962 and permitted the appellant to include iron ore in the subsisting mining lease for manganese ore in the said area. The said lease has been renewed from time to time and is in force. All the material point of time the overwhelming quantities of iron ore extracted from Bolani Mines were dispatched to DSP (approximately 89% in the year 2008-09, as certified by the Central Excise authorities at Barbil, Orissa to the Deputy Commissioner of Central Excise and Service Tax, Durgapur-III Division on 05.08.2009. The remaining quantities were dispatched to the other three units of the appellant, being Bokaro Steel Plant, Rourkela Steel Plant and IISCO Steel Plant, Burnpur. In the said Bolani Mines, for the purpose of extraction of iron ore, the appellant used explosives, lubricants, oxygen, nitrogen etc. as inputs and also different mechanical items as capital goods during the material period.
The appellant at its Durgapur Steel Plant availed cenvat credit of the duty paid on the said inputs and capital goods following the decisions of the Apex in the case of Vikram Cement v. Commissioner of Central Excise [2006 (194) ELT 3 (SC) and 2006 (197) ELT 145 (SC)]. On 26.08.2009 and 03.02.1010, the two show cause notices were issued wherein it was alleged that during the periods August 2008 to January 2009 and February 2009 to November 2009 the appellant has allegedly availed and utilized irregular cenvat credit on central excise duty against the explosives, lubricants, oxygen, nitrogen etc. as inputs and different mechanical items as capital goods. It was alleged that the said inputs and capital goods were not received and used by DSP in its registered premises and hence were not used in the manufacture of excisable goods, therefore, they are not entitled to cenvat credit. Another show cause notice was issued on 20.12.2010 for the period 4 Excise Appeal Nos.703 of 2010, 906 of 2011 AND 342 of 2012 December 2009 to October 2010. Further a show cause notice was issued on 19.10.2012 for the period November 2010 to July 2011. The show cause notices were adjudicated and cenvat credit was denied to the appellant seeking recovery of the same along with interest and penalties were also imposed on the appellant. Aggrieved from the said order, the appellants are before us.
3. The Ld.Counsel appearing on behalf of the appellant submits that the issue in all these cases is whether credit of input services and capital goods used in captive mine of the appellant, Bolani Mines has been correctly availed by the appellant at its Durgapur Steel Plant and correctly utilized in or in relation to manufacture of dutiable final products and whether the cenvat credit availed and utilized by the appellant against the ISD documents issued by the Bolani Mines was legal and valid. Whether Bolani Mines can be termed as ISD under Rule 2(l) of the Cenvat Credit Ruels, 2004.
4. It is the submission of the Ld.Counsel that in terms of the decision of the Hon'ble Apex Court in the case of Vikram Cement (supra), the appelant is entitled to avail cenvat credit. It is his submission that both DSP and Bolani Mines were legal entities belonged to the appellant and have no separate legal existence except for being units of the appellant. The said two units along with the other units of the appellant are integral unit or entity. Consolidated Balance Sheets and Profit and Loss Accounts of the appellant is drawn in which the individual Profit and Loss Accounts of the said units are merged. Therefore, transfer of iron from Bolani Mines to DSP and the other units amount to transfer of iron ore from one unit of the appellant to another unit of its own. The said mine is a captive mine of the appellant and its units, including Durgapur Steel Plant, producing iron & steel and products therefrom utilizing the said iron ore. From the show cause notices, it would be seen that it is an undisputed fact that the entire iron ore from the said captive Bolani Mines were sent overwhelmingly to DSP and the balance to the other three iron & steel manufacturing 5 Excise Appeal Nos.703 of 2010, 906 of 2011 AND 342 of 2012 units of the appellant. There has been no supply or sale thereof to any other company or entity other than the units of the appellant. Therefore, the test laid down by the Hon'ble Apex Court in Vikram Cement (supra) for eligibility of availment of cenvat credit in respect of duty paid on capital goods in the captive mines are duly satisfied in the instant case. Therefore, cenvat credit availed by DSP in respect of the duty paid on the capital goods used in the Bolani Mines is, therefore, legal, valid and correct.
5. He further submitted that the fact that the Bolani Mines is a captive mine of the appellant and its integrated steel plant units, including DSP, is further evident from the 1978 Act under which acquisition of Bolani Ores Limited, along with its assets, including Bolani Mines were acquired by the Central Government and the shares and undertakings thereof were transferred to and vested in the appellant. The Preamble of the said Act also makes it clear that the Bolani Mines is the main source of supply of iron ore to DSP and the acquisition was made for ensuring continuous supply of iron ore to DSP. The 1978 Act also, in clear and unambiguous terms, confirms the fact that DSP is a unit of the appellant and by the said acquisition Bolani Mines also becomes a unit of the appellant and that they, along with other units of the appellant, together form an integrated entity as required under the decision of the Hon'ble Apex Court in Vikram Cement case (supra). The fact that DSP is a unit of the appellant is recognized by the revenue themselves, which would be evident from, inter alia, the show cause notices and the impugned orders themselves. He also relied on the following decisions:-
(i) Indian Cement Ltd. v. CCE [2010 (261) ELT 603(T)]
(ii) Maihar Cement Unit-II v. CCE [2013 (293) ELT 239 (T)]
(iii) Maihar Cements v. CCE [2013 (296) ELT 209 (T)]
(iv) K.D. Mistry & Company v. Hari Narayan Gole [1983 (II) LLN 946 (Bom), Paragraph 5] 6 Excise Appeal Nos.703 of 2010, 906 of 2011 AND 342 of 2012
6. He further submitted that there is no dispute that the iron ore produced in the Bolani Mines which were transferred to DSP was used therein as raw material in or in relation to the manufacture of dutiable finished products, in terms of the decision of the Hon'ble Apex Court in the case of Vikram Cement (supra), therefore, the appellant is entitled to avail cenvat credit of duty paid on the inputs used int eh Bolani Mines and utilized the same in DSP. The Ld.Counsel relied on the decision of Hon'ble Apex Court in the case of Madras Cements Ltd. v. CCE [2010 (257) ELT 321 (SC). It is the submission that as per the decision of the Hon'ble Apex Court, there is no requirement that the said inputs and capital goods had to be received and used in DSP's premises only. Receipt and utilizing the same in the mines from which the primary raw material, iron ore, is extracted and brought to DSP's factory and used therein in or in relation to the manufacture of dutiable final products, which is an undisputed fact in the instant case borne out from the relevant materials on record itself, would also satisfy the requirement of the Cenvat Credit Rules. No material has been disclosed in the impugned orders or in the show cause notice to establish that the iron ore in question received in DSP from the Bolani Mines were not used in or in relation to the manufacture of dutiable final products.
7. The finding that the activity of Bolani Mines was not related to manufacturing activity of the appellant at DSP is misconceived and exfacie untenable. The materials on record conclusively establishes the undisputed fact that the overwhelming quantity of the iron ore from the said Bolani Mines were transferred to DSP and utilized therein in or in relation to the manufacture of dutiable final products. Further, no material has been disclosed in the impugned orders or in the show cause notices support of this patently incorrect finding. He further submitted that the adjudicating authority has erred in holding that although the invoices were for periods ranging from 2000 to 2009, the credit availed were irregular since it cannot be said that such credit was availed within a reasonable time gap considering the word 'immediately' 7 Excise Appeal Nos.703 of 2010, 906 of 2011 AND 342 of 2012 in Rule 4(1) of the Cenvat Credit Rules. It is his submission that the said issue has been decided by this Tribunal in the following cases:-
(i) Steel Authority of India Ltd. v. CCE [2013 (287) ELT 321 (T)]
(ii) SGS India Private Limited v. CCE [2011 (270) ELT 118 (T)]
(iii) Coromandel Fertilizers Ltd. v. CCE(A) [2009 (239) ELT 99 (T)]
(iv) Shree Valsar S.K.Udyog Mandali Ltd. v CCE & C [2008 (228) ELT 561 (T)]
(v) Essel Propack Ltd. v. CCE & ST [2022 (379) ELT 123 (T)]
8. He further submitted that the said issue was settled in the case of Vikram Cement case (supra).
9. He further submits that Bolani Mines legally and validly got itself registered as an ISD and duly distributed the credit to the appellant in accordance with the provisions of the Rule 7 of the Cenvat Credit Rules.
He further submits that Rule 3(1) of the rules while providing for cenvat credit of duty paid on input service, uses the expression 'received by the manufacturer of final product' without any locational restriction or condition. On the other hand, while providing for credit of duties paid on inputs, the said Rule uses the expression 'received in the factory of manufacture of final products'. Thus, the locational restriction has been deliberately not put while providing for credit of service tax on input service whereas in the case of credit of duties on inputs, the locational restriction was put by using the expression 'received in the factory of manufacture'. In spite of this, the Hon'ble Apex Court was pleased to hold in respect of the credit of duties paid on inputs that such credit was allowable even though inputs were received and used at the captive mines situated away from the factory. To support this contention, he relied upon the following decisions:-
(i) CCE v. Ultratech Cement Ltd.
[2010 (220) ELT 577 (Bom.)]
(ii) CCE v. Stranzen Toyotetsu India (P) Ltd.
[2011 (23) STR 444 (Kar.)]
(iii) Ultratech Cement Ltd. v. CCE 8 Excise Appeal Nos.703 of 2010, 906 of 2011 AND 342 of 2012 [2009 (243) ELT 575 (T)]
(iv) CCE v. Hindustan Copper Ltd.
[2016 (342) ELT 282 (T)]
10. On the other hand, the ld.AR for the department submits that DSP although an integrated unit of the appellant, but input received at Bolani Mines was nowhere connected with the DSP who has taken the cenvat credit, therefore, the authorities below has rightly denied the cenvat credit to the appellant.
11. Heard the parties.
12. On consideration of the submissions of both the sides, we find that the issue emerges that whether the appellant is entitled to avail cenvat credit of inputs, capital goods and input services used by the captive mines located away from the factory or not?
13. We find that the said issue has been settled by the Hon'ble Apex Court in the case of Vikram Cement (supra), wherein the Hon'ble Apex Court has held as under:-
"3. In all these cases, the only issue before this Court is with regard to the eligibility of Modvat/Cenvat credit on inputs and capital goods used in mines.
4. In so far as the Modvat/Cenvat credit on inputs (explosives, lubricating oils etc.) is concerned, the matter is squarely covered by the decision of this Court in the case of Vikram Cement v. CCE reported in 2006 (194) E.L.T. 3. Therefore, the appeals where credit on inputs is concerned, are allowed.
5. As regards the Modvat/Cenvat credit on capital goods, if the mines are captive mines so that they constitute one integrated unit together with the concerned cement factory, Modvat/Cenvat credit on capital goods will be available to the assessee. On the other hand, if the mines are not captive mines but they supply to various other cement companies of different assessees, Modvat/Cenvat credit on capital goods used in such mines will not be available to the concerned assessee under the appropriate Modvat/Cenvat Rules. The matters are 9 Excise Appeal Nos.703 of 2010, 906 of 2011 AND 342 of 2012 remanded to the respective original authorities for decision only on the above issue."
14. Further, in the case of Madras Cements Ltd. (supra), the Hon'ble Apex Court has occasion to deal the issue i.e. with regard to eligibility of Modvat Credit/Cenvat Credit on input and capital goods used in mines and the Hon'ble Apex Court observed as under:-
"2. In so far as the Modvat/Cenvat credit on inputs (explosives, lubricating oils etc.) is concerned, the issue is squarely covered by the decision of this Court in the case of Vikram Cement v. CCE reported in 2006 (194) E.L.T. 3 (S.C.). Therefore, the appeals, where credit on inputs is concerned, are allowed.
3. As regards the Modvat/Cenvat credit on capital, goods, if the mines are captive mines so that they constitute one integrated unit together with the concerned cement factory, Modvat/Cenvat credit on capital goods will be available to the assessee. On the other hand, if the mines are not captive mines but they supply to various other cement companies of different assessees, and it is found that the said goods were being used in the lime stone mines outside the factory of the assessee, Modvat/Cenvat credit on capital goods used in such mines will not be available to the concerned assessee under the appropriate Modvat/Cenvat Rules. In order to get a clear finding on the issue, all the matters are remanded to the respective original authorities for decision only on the above issue."
15. As the issue has already been decided by the Apex Court, that capital goods, inputs or input services used in captive mines of the appellant, the appellant is entitled to take Cenvat Credit of the same.
16. In this case, the appellant is having an integrated unit comprising three units and DSP also and availed cenvat credit on input, capital goods and input services used in captive mines by procurement of iron ore to be used in manufacture of final product by 10 Excise Appeal Nos.703 of 2010, 906 of 2011 AND 342 of 2012 the units of the appellant, the appellant is entitled to avail cenvat credit.
In view of this, we do not find any merits in the impugned orders and the same are set aside and the appeals are allowed with consequential relief, if any.
(Operative part of the order was pronounced in the open Court.) Sd/ (ASHOK JINDAL) MEMBER (JUDICIAL) Sd/ (K. ANPAZHAKAN) MEMBER (TECHNICAL) sm