Custom, Excise & Service Tax Tribunal
M/S Kesar Enterprises Ltd vs Cce, Meerut Ii on 18 October, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. IV Excise Appeal No. 1674 of 2006 (SM) [Arising out of the Order-in-Appeal No. 36-CE/MRT-II/2006 dated 28/02/2006 passed by The Commissioner (Appeals), Customs & Central Excise, Meerut II.] For Approval and signature : Honble Shri 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 would 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 : Department Authorities? M/s Kesar Enterprises Ltd. Appellant Versus CCE, Meerut II Respondent
Appearance Shri Ashish Vaish, C.A. for the appellant.
Shri Davinder Singh, Authorized Representative (Jt. CDR) - for the Respondent.
CORAM : Honble Shri Rakesh Kumar, Member (Technical) DATE OF HEARING : 18/10/2013.
Final Order No. 58140/2013 Dated : 18/10/2013 Per. Rakesh Kumar :-
The appellant are a sugar mill manufacturing sugar and molasses chargeable to Central Excise duty. The period of dispute in this case is from May 2004 to December 2004. The point of dispute is as to whether during this period, they were eligible for Cenvat credit of excise duty paid on welding electrodes used for repair and maintenance of the plant and machinery and asbestos, jointing sheets, plates, Mill Plates, SS Plates, Shapes and Section, HR Coils etc., which according to the appellant, has been used for repair and maintenance of the plant and machinery. The total Cenvat credit availed on these items is Rs. 12,07,119/-. The department being of the view that these items are not eligible for Cenvat credit either as inputs or as capital goods, issued a show cause notice dated 17/3/05 seeking recovery of the above-mentioned Cenvat credit alongwith interest and imposition of penalty. The show cause notice was adjudicated by the Additional Commissioner vide order-in-original dated 29/11/05 by which the above-mentioned Cenvat credit demand was confirmed alongwith interest and penalty of equal amount was imposed on the appellant. In this order, the Additional Commissioner while observing that the appellants contention is that these items have been used essentially for repair and maintenance of the plant and machinery, discussed various judgments of the Tribunal on this issue and held that the goods used for repair and maintenance of the plant and machinery are not eligible for Cenvat credit. On appeal being filed to Commissioner (Appeals) against this order, the same was dismissed by Commissioner (Appeals) vide order-in-appeal dated 28/02/06 against which this appeal has been filed.
2. Heard both the sides.
3. Shri Ashish Vaish, C.A., the learned Counsel for the appellant, pleaded that the Additional Commissioner in the discussion and findings portion of his order has observed that the welding electrodes, asbestos jointing sheets, plates, Mill Plates, SS Plates, Shapes and Section, HR Coils etc., had been used for repair and maintenance of the plant and machinery, that the issue of eligibility of Cenvat credit of the items used for repair and maintenance of plant and machinery is no longer res-integra, as Honble Rajasthan High Court in the case of Union of India vs. Hindustan Zinc Ltd. reported in 2007 (214) E.L.T. 510 (Raj.), has held that MS/SS plates is used for repair and maintenance of the plant and machinery are eligible for Cenvat credit and civil appeal filed against this judgment has been dismissed by the Apex Court vide judgment reported in 2007 (214) E.L.T. A115 (S.C.), that Honble Rajasthan High Court in the case of Hindustan Zinc Ltd. vs. Union of India reported in 2008 (228) E.L.T. 517 (Raj.) has held that welding electrodes used for repair and maintenance of the plant and machinery are eligible for Cenvat credit, that same view has been taken by Honble Chhattisgarh High Court in the case of Ambuja Cements Eastern Ltd. vs. CCE, Raipur reported in 2010 (256) E.L.T. 690 (Chhattisgarh), and Honble Karnataka High Court in the case of CCE, Bangalore I vs. Alfred Herbert (India) Ltd. reported in 2010 (257) E.L.T. 29 (Kar.), and that in view of this, the impugned order upholding the Cenvat credit demand alongwith interest and imposition of penalty is not sustainable.
4. Shri Davinder Singh, the learned Jt. CDR, defended the impugned order by reiterating the findings of the Commissioner (Appeals) and pleaded that Cenvat credit in respect of welding electrodes used for repair and maintenance of the plant and machinery is not admissible in view of judgment of Larger Bench of the Tribunal in the case of Jay Pee Rewa Plant vs. CCE reported in 2003 (57) R.L.T. 739 (CESTAT LB), that as regards Asbestos Jointing Sheets, the same, as observed by the Commissioner (Appeals) in the impugned order, have been used to seal the leakage in tubes and pipes, that this use has no nexus with manufacture of final product and, hence, Cenvat credit in respect of this item has been correctly denied, that as regards the Plates, Mill Plates, SS Plates, Shapes and Sections, HR Coils etc., these items of steel have been used for making Shades and supporting structures which are neither capital goods nor part thereof, that the Apex Court in the case of Saraswati Sugar Mills vs. CCE, Delhi III reported in 2011 TIOL 73 SC CX has held that iron and steel structures manufactured by the sugar factory for serving as supporting structure for the capital goods are neither capital goods part components thereof, that in view of this, Cenvat credit in respect of Plates, Mill Plates, SS Plates, Shape and Sections, HR Coils etc., would not be admissible and, therefore, there is no infirmity in the impugned order.
5. I have considered the submissions from both the sides and perused the records.
6. While the show cause notice seeks to deny the Cenvat credit in respect of the welding electrodes, asbestos jointing sheets, plates, Mill Plates, SS Plates, Shapes and Section, HR Coils etc., on the ground that these items are neither inputs nor capital goods, the Additional Commissioner has made an observation that these items have, admittedly, been used for repair and maintenance of the plant and machinery and on this basis only, after discussing various judgments of the Tribunal, he has held that the items used for repair and maintenance of the plant and machinery are neither capital goods eligible for capital goods Cenvat credit nor the same are inputs used in the manufacture of capital goods.
6.1 In the CCE (Appeals)s order also, it has been accepted that the welding electrodes have been used for repair and maintenance of the plant and machinery and asbestos jointing sheets have been used to seal the leakage in tubes and pipes. Thus, even in terms of the Commissioner (Appeals)s order, the welding electrodes and the asbestos jointing sheets have been used for repair and maintenance of the plant and machinery.
6.2 As regards, the use of the plates, Mill Plates, SS Plates, Shape and Section, HR Coils etc. the CCE (Appeals), after observing that these items are given the necessary shapes etc. inside the factory as per the requirement of being fitted in the capital goods, has observed that these items were used for making shades besides stagings/supporting structures. In my view when the Additional Commissioner has given a clear finding that these have essentially been used for repair and maintenance of the plant and machinery and the Commissioner (Appeals) has also accepted that these items are given the necessary shapes inside the factory as per the requirement of being fitted into the capital goods, their use has to be treated as use in repair and maintenance of plant and machinery and not in fabrication of supporting structures. Even in the show cause notice there is no allegation regarding use of steel items in erection of supporting structures. Therefore, use of steel items is also to be treated as for repair and maintenance of plant and machinery.
7. I, therefore, hold that all the items in dispute have been used for repair and maintenance of the plant and machinery. Once this is the factual position, the Cenvat credit in respect of these items would be admissible in view of the judgments of Honble Rajasthan High Court in the case of Hindustan Zinc Ltd. vs. UOI reported in 2008 (228) E.L.T. 517 (Raj.) and in the case of UOI vs. Hindustan Zinc Ltd. reported in 2007 (214) E.L.T. 510 (Raj.), the judgment of Honble Chhattisgarh High Court in the case of Ambuja Cements Eastern Ltd. vs. CCE, Raipur reported in 2010 (256) E.L.T. 690 (Chhattisgarh) and judgment of Honble Karnataka High Court in the case of CCE, Bangalore I vs. Alfred Herbert (India) Ltd. reported in 2010 (257) E.L.T. 29 (Kar.).
8. In the impugned order, there is emphasise that the items used for repair and maintenance have no nexus with manufacture and hence the same cannot be treated as inputs. In this regard, the Apex Court in the case of J.K. Cotton Spinning and Weaving Mills Co. Ltd. vs. Sales Tax Officer reported in 1997 (91) E.L.T. 34 (S.C.) while interpreting the scope of the expression used in the manufacture in Section 8 (3) (b) of the Central Sales Tax Act, 1956 has held that if a process or activity is so integrally related to the ultimate manufacture of good so that without that process or activity, manufacture may, even if theoretically possible, be commercially inexpedient, goods intended for use in that process or activity would qualify for special treatment i.e. for being treated as used in manufacture of goods. Thus, when the Apex Court in the above judgment has interpreted the expression used in the manufacture in the above manner, the scope of the expression used in or in relation to the manufacture of final product whether directly or indirectly in the definition of input in the Cenvat Credit Rules, 2004 would be much more wider and any goods used in any process or an activity having nexus with manufacture of final product would be covered by the definition of input and the goods used in any activity without which the manufacturing operation, though theoretically possible but commercially inexpedient, have to be treated as having nexus with the manufacture and would be eligible for Cenvat credit as input. It is nobodys case that smooth manufacturing operations are possible with malfunctioning machines or leaking pipes, tubes and tanks. Repair and maintenance is, therefore, an activity having nexus with manufacture. In view of this, I hold that the inputs used for repair and maintenance of the plant and machinery would be eligible for Cenvat credit and as such the impugned order is not correct. The same is set aside. The appeal is allowed.
(Pronounced in the open court.) (Rakesh Kumar) Member (Technical) PK ??
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