Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise vs M/S. Flex Chemicals Ltd on 28 June, 2010
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. IV
Excise Appeal No. 2260 of 2007-SM(BR)
[Arising out of Order-in-Appeal No. IND-I/67/2007 dated 16.3.2007 passed by the Commissioner (Appeals I) Customs & Central Excise, Indore (MP)]
For approval and signature:
Hon'ble Mr. M. Veeraiyan, 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?
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Commissioner of Central Excise Appellants
Indore
Vs.
M/s. Flex Chemicals Ltd. Respondent
Appearance:
Shri I. Baig, SDR for the Appellants
Ms. Asmita Nayak, Advocate for the Respondent
Date of Hearing/decision : 28.6.2010
ORAL ORDER NO . ________________________
Per M. Veeraiyan:
This is an appeal filed by the department against the order of the Commissioner (Appeals) No. IND-I/67/2007 dated 16.3.07.
2. Heard both sides.
3. The order of the original authority and the order of the Commissioner (Appeals) relate to admissibility of credit on several items. However, in the present appeal, the dispute is restricted to admissibility of credit on joists used in respect of EOT cranes amounting to Rs.43,261/- which has been allowed by the Commissioner (Appeals) and consequently setting aside of penalty.
4. Learned SDR submits that the joists has a role for movement of EOT cranes which is used for carrying raw material in the plant from one place to another. The joists is basically a supporting structure which supports the movement of EOT cranes. He submits that the issue relating to eligibility of credit on items like angles, beams, bars, joists were specifically considered by the Larger Bench of the Tribunal in the case of Vandana Global Ltd. reported as [2010 (253) ELT 440] and it has been clearly held that materials used for foundation and supporting structures are neither inputs nor components, spares and accessories of machinery and therefore, they are not eligible for credit.
5. Learned Advocate for the respondent submits that the role of joists is to satisfy certain functional requirements. They are independent parts doing functional support to the EOT cranes. They cannot be considered to be part of supporting structures and the decision in the case of M/s. Vandana Global Ltd. cited supra relates to joists used as supporting structure wherein it has been held that such material will not be eligible for credit. She also relies on the decision of the Honble Supreme Court in the case of Birla Corporation Ltd. vs. CCE reported as [ 2005 (186) ELT 266 (SC)] wherein spares of ropeway used for transporting crushed limestone from mines were treated as capital goods eligible for modvat credit in terms of Rule 57Q of erstwhile Central Excise Rules, 1944. She also relies on the decision of the Tribunal in the case of Rathi Ispat Ltd. vs. CCE, Meerut reported as [2000 (116) ELT 50 (Tri)] wherein the steel wire rope which is part of material handling equipment used for movement of raw material has been held eligible for modvat credit under Rule 57 Q of Central Excise Rules, 1944.
6. I have carefully considered the submissions from both the sides. The Larger Bench of the Tribunal in the case of Vandana Global Ltd. considered the following questions:
(a) Whether the term capital goods can include plant, structures embedded to earth?
(b) Whether the goods like angles, joists, beam, channels, bars, flats which go into fabrication of such structures can be treated as inputs in relation to their final products as inputs for capital goods, or none of the above?
(c) Whether the credit can be allowed in respect of goods like angles, joists, beam, channels, bars, flats which go into fabrication of such structures and plant?
Following are the salient features of the decision of the Larger Bench :-
a) It disapproved the decision of the Tribunal in the case of Bhushan Steel and Strips Ltd. vs. CCE, Raigad [2008 (223) ELT 517 (Tri-Mum)] which allowed credit on cement and steel used for providing foundation of machines, structures, tunnels, trenches, cellars and factory building essential for steel rolling mills and also allowed credit on roofing material;
b) It endorsed the decision of the Tribunal in the case of Vikram Cement vs. CCE, Indore [ 2009 (242) ELT 548] wherein it has been held that If the inputs were to include every product under the sun which is somehow related to the premises where the manufacturing process goes on, then there is no need to provide a definition of the term capital goods and, therefore, the acceptance of the contention on behalf of the appellants would render the definition of the term the capital goods to be redundant as well as the provisions relating to extending the benefit of Cenvat credit to the capital goods.
c) It reiterated the need for the nexus between inputs and final products in or in relation to process of manufacture as a condition for eligibility to credit as held by the Honble Supreme Court in the case of Maruti Suzuki Ltd. vs. CCE [2009 (240) ELT 641 SC].
d) It held that amendment to Explanation 2 to Rule 2(k) of Cenvat Credit Rules, 2004 is a clarificatory amendment and that the same is applicable retrospectively.
e) It was also held that the foundation and supporting structures are neither inputs nor components, spares and accessories of machinery, nor have been they listed for such inclusion in the definition of capital goods.
With the above findings and observations, the question referred to the Larger Bench were answered as follows:
49. In the light of the foregoing findings, we answer the questions referred to the Larger Bench as follows:-
(a) The terms capital goods has been defined in the Cenvat Credit Rules, which in turn have been framed under the rule making powers conferred under Section 37(2) of the Act. The said Section refers to credit of duty paid on goods used in, or in relation to the manufacture of excisable goods. Hence, capital goods defined in the Cenvat Credit Rules in the context of providing credit of duty paid, have to be excisable goods. Whether a particular plant or structure embedded to earth can be considered as excisable goods or not has to be determined in the light of the decisions of the Honble Supreme Court on the issue, which is no longer res integra.
(b) Goods like cement and steel items used for laying foundation and for building supporting structures cannot be treated either as inputs for capital goods or as inputs in relation to the final products and therefore, no credit of duty paid on the same can be allowed under the Cenvat Credit Rules for the impugned period.
6. In the present case, the joists is used to support the movement of EOT cranes in different directions. The role of joists is clearly that of a supporting structure. In my considered opinion, the facts of the present case, in so far as it relates to joists are concerned, is substantially the same as considered in the case of Vandana Global cited supra. The decisions relied upon by the learned Advocate for the respondent relates to interpretation of Rule 57 Q of erstwhile Central Excise Rules, 1944 and particularly the use of material away from the factory, and they may not be relevant to the facts of the present case. In view of the above, I hold that the credit allowed on joists by Commissioner (Appeals) is not justified. The order of the Commissioner (Appeals) in so far as it relates to allowing of credit on joist is set aside and the order of the original authority in this regard is restored. However, as there were differing interpretations by the Tribunal and High Courts on this issue, the prayer of the department for restoration of penalty is not justified.
7. The appeal by the Department is partly by setting aside the order of Commissioner (Appeals) allowing credit of Rs.43,261/- and restoring the order of original authority in this regard.
( M. Veeraiyan ) Member(Technical) ss 6