Custom, Excise & Service Tax Tribunal
Principal Commissioner Of Central ... vs M/S. Suryadev Alloys & Power (P) Ltd on 7 March, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
Appeal No. E/489/2008
(Arising out of Order-in-Original No. 2/2008 dated 21.8.2008 passed by the Commissioner of Central Excise, Chennai II)
Principal Commissioner of Central Excise,
Chennai I Appellant
Vs.
M/s. Suryadev Alloys & Power (P) Ltd. Respondent
E/Misc./451/2009 & E/504/2008
M/s. Suryadev Alloys & Power (P) Ltd. Appellant
Vs.
Principal Commissioner of Central Excise,
Chennai I Respondent
Appeal Nos. E/439 to 443/2011
(Arising out of Order-in-Original No. 7 to 11/2011 dated 30.5.2011 passed by the Commissioner of Central Excise, Chennai II)
M/s. Suryadev Alloys & Power (P) Ltd. Appellant
Vs.
Principal Commissioner of Central Excise,
Chennai I Respondent
Appearance
Shri G. Natarajan, Advocate for the Assessee
Shri S. Govindarajan, AC (AR) for the Department
CORAM
Honble Ms. Sulekha Beevi C.S., Member (Judicial)
Honble Shri Madhu Mohan Damodhar, Member (Technical)
Date of Hearing / Decision: 07.03.2018
Final Order Nos. 40601-40607 / 2018
Per Bench
The issues involved in all these appeals being same, they were heard together and are disposed by this common order.
2. The parties herein are referred to as assessee and department for sake of convenience.
3. The assessee is engaged in manufacture of MS Billets and TMT bars and is registered with the Central Excise Department. They are availing CENVAT credit of duty paid on their inputs and capital goods. On verification of ER-1 returns, for the period October 2006 to August 2007, it was noticed that the assessee had wrongly availed CENVAT credit under the category of capital goods on items like TMT/CTD bars, HR Plates/sheets, MS channels and MS angles etc. falling under Chapter 72 and 73 of CETA, 1985 which were used in fabricating structures of capital goods. The department was of the view that credit is not eligible on such items and hence show cause Notice No. 134/2007 dated 3.12.2007 was issued for the period October 2006 to August 2007, alleging wrong availment of CENVAT credit on capital goods. After adjudication, the original authority vide Order-in-Original No.2/2008 dated 21.8.2008 disallowed the credit to the tune of Rs.94,530/- in respect of goods falling under Tariff sub-heading 8708 and held that credit is admissible on MS plates, channels, HR plates/sheets etc. falling under Chapter 72 and 73. He also imposed equal penalty to the tune of Rs.90,000/- on the disallowed credit under Rule 15 of CENVAT Credit Rules, 2004. Although the Commissioner held that the assessee is eligible for credit on MS Channels, MS angles etc., he directed the assessee to file utilisation certificate to the Range Superintendent directing the Superintendent to arrive at the quantum of credit admissible. Aggrieved by such direction of the Commissioner to the Range Superintendent to verify the credit admissible, Department has filed Appeal No.E/489/2008. Against the same order, aggrieved by the imposition of penalty, the assessee has filed appeal No. E/504/2008.
4. On behalf of the assessee, ld. Counsel Shri G. Natarajan submitted that the show cause notice was issued when the assessee had filed ER-1 Returns reflecting the credit availed by them. Thus, it was much before the proposed use of the MS items etc. in fabricating the capital goods and support structures. Therefore, the assessee was directed to submit utilisation certificate of the materials used in the manufacture of specific capital goods and support structures item-wise to the Range Superintendent so as to verify the genuineness and usage of such items in order to arrive on the quantum of credit admissible. The assessee had in fact submitted such utilisation certificate dated 20.11.2008 before Range Superintendent. However, due to pendency of the appeal, the matter has not so far attained finality. He argued that the MS items etc. were used as support structures for the capital goods and therefore are eligible for credit as per the decision of the Honble High Court of Madras laid down in the case of India Cements Ltd. reported in 2015 (321) ELT 208 (Mad.). The ld. Counsel submitted that immediately after being pointed out, the assessee had reversed the credit availed on items falling under Chapter Heading 87. That therefore, the penalty imposed may be set aside.
5. Against this, the ld. AR Shri S. Govindarajan reiterated the grounds in the appeal filed by the department. He submitted that the Commissioner ought to have decided the issue of eligibility of credit instead of relegating the said duty to the Range Superintendent. He therefore prayed that the Commissioner himself may be directed to decide the admissibility of CENVAT credit.
6. Heard both sides.
7. After hearing both sides, it is seen that the departmental appeal is only on the ground that the remand direction to the Range Superintendent is not sustainable in law for the reason that Commissioner himself ought to have examined the eligibility of CENVAT credit. In para 12 of the impugned order, we find that on merits, the Commissioner has held that the subject (MS Items, HR Plates etc.) are used for the purpose of fabrication of capital goods and erection of structure supports and are eligible for credit under the category of inputs. The ratio laid down in the decision of India Cements (supra) as well as Thiru Arooran Sugars reported in 2017 (355) ELT 373 (Mad.) lays down that the MS items used for erection of support structures of capital goods is eligible for credit. The Commissioner, however, has delegated the duty to factually verify the utilisation of such items by the Range Superintendent, which we find is not in conformity with the law. We therefore direct that the Commissioner himself shall verify the utilisation certificate and decide the admissibility of credit on this issue.
8. The appeal filed by the assessee is with regard to the credit availed on items falling under Chapter 87 which has been disallowed to the tune of Rs.94,530/-. The assessee does not challenge the disallowance of credit and is confining the contest to the penalty of Rs.90,000/- imposed on this account. It is pleaded that they have reversed the credit immediately. It is also argued that the assessee had availed the credit on bona fide belief that credit is admissible. Since the assessee has revered the credit immediately on being pointed out, we are of the considered opinion that the penalty imposed is unwarranted. Therefore, following the decision of the Honble High Court of Madras in the case of Commissioner of Central Excise, Madurai Vs. Strategic Engineering (P)Ltd. 2014 (310) ELT 509 (Mad.), we hold that the penalty requires to be set aside, which we hereby do. The appeal filed by the assessee is partly allowed in the above terms and the appeal filed by the department is disposed directing the adjudicating authority to verify the admissibility of credit.
Appeal Nos. E/439 to 443/2011
9. The issue arising for consideration in other appeals E/439 to 443/2011 being same, the details of the period involved, the duty demand etc. are given as under:-
SCN
OIO
Period
Amount in dispute in Rs.
Demand dropped in Rs.
Penalty in Rs.
Appeal No.
81/2008 dt. 4.9.08
7/2011 dt. 30.5.2011
9/07 to 3/08
53,57,484
10,719
2,00,000
E/439/11
35/2009 dt.25.3.09
8/2011 dt. 30.5.2011
4/2008
1,07,98,252
10,719
4,00,000
E/440/11
IV/09/99/09 dt. 6.10.99
9/2011 dt. 30.5.2011
9/08 to 3/09
77,549
-
5,000 E/441/11 34/2010 dt. 29.4.10 10/2011 dt. 30.5.2011 4/09 to 3/10 10,03,133
-
10,000 E/442/11 71/10 dt. 14.10.10 11/2011 dt. 30.5.2011 4/08 to 8/08 9,85,996 6,590 10,000 E/443/11
10. Show cause notice has been issued to the assessee proposing to deny CENVAT credit availed under the category of capital goods alleging that credit is not admissible on MS items which are used as support structures of capital goods for the reason that after such fabrication, they become embedded to the earth and are in the nature of immovable property. Relying upon the decision in the case of Vandana Global Ltd. reported in 2010 (253) ELT 440 (Tri. LB), the department has denied the credit availed.
11. On behalf of the assessee, ld. Counsel submitted that the period involved in all the appeals except E/442/2011 is prior to 7.7.2009. The amendment to the definition of inputs was brought forth by adding an Explanation to the said definition only with effect from 7.7.2009. That therefore the credit availed on such items which were used for fabrication of support structures is admissible. He submitted that the decision in the case of Vandana Global Ltd. (supra) has been held to be bad law. The later decision in the case of Rajasthan Spinning and Weaving Mills Ltd. reported in 2010(255) ELT 481 (SC) has held that the credit on MS items used for structural supports of capital goods is eligible for credit. He explained that during the impugned period, the disputed items on which the assessee has availed credit would be eligible for credit either under capital goods or as inputs. The assessee had used the MS items for fabrication in the overhead cranes, re-heating furnace, ductings and chimneys, conveys and structures for cooling towers etc. these items fall within the definition of capital goods.
12. The ld. Counsel pointed out that in the case of Appeal No.E/442/2011, though period involved is after 7.7.2009, the items / goods were received in the factory prior to 7.7.2009. The assessee had availed 50% of the credit prior to 7.7.2009 and the balance 50% was availed after the said date. Since the date of receipt of goods into the factory has to be considered for the eligibility of credit, the credit so availed on MS items would be eligible as the goods have been received in the factory prior to 7.7.2009. He therefore pleaded that the appeals may be allowed.
13. Against this, the ld. AR Shri S. Govindarajan reiterated the findings in the impugned order.
14. Heard both sides.
15. The issue involved in all these appeals is whether credit is admissible on the MS items etc. used for fabrication and erection of structural support of capital goods. The demand has been confirmed mainly relying upon the decision in the case of Vandana Global Ltd. (supra). The said decision was rendered without referring to the decision of the Honble Apex Court in the case of Rajasthan Spinning & Weaving Mills Ltd. (supra). In a later decision, the jurisdictional High Court in the case of India Cements (supra) as well as in the case of thiru Arooran Sugars Ltd. has held that credit is admissible on MS items, HR sheets etc. used for fabrication of capital goods / structural supports of capital goods.
16. Another issue is whether the credit is admissible on welding electrodes and tubes and pipes. The very same issue was considered by the Honble Apex Court in Ramala Sahkari Chini Mills Ltd. Vs. Commissioner of Central Excise, Meerut 2010 (260) ELT 321 (SC), wherein the meaning of the word includes was analysed by the Honble Larger Bench of the Supreme Court and held that the said words used in the definition of inputs does not have restricted meaning. The period involved in all these appeals except E/442/2011 is prior to 7.7.2009. The amendment in the definition of inputs restricting the use of MS items for structural support of capital goods was inserted only on 7.7.2009. In Appeal E/442/2011, the goods on which credit is availed was received in the factory prior to 7.7.2009. On the date of receipt of goods the restriction brought forth by the amendment dated 7.7.2009 was not in existence. Taking into consideration these facts and applying the decision in the case of India Cements (supra) and Thiru Arooran Sugars (supra), we are of the considered opinion that the disallowance of credit is unjustified. The demand raised in these appeals cannot sustain and requires to be set aside, which we hereby do. The appeals are allowed with consequential relief if any.
(Operative portion of the order was
pronounced in open court)
(Madhu Mohan Damodhar) (Sulekha Beevi C.S.)
Member (Technical) Member (Judicial)
Rex
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