Customs, Excise and Gold Tribunal - Mumbai
Essar Steel Ltd. vs Commissioner Of Customs And Central ... on 17 March, 2004
ORDER Moheb Ali M., Member (T)
1. The appellants are engaged in the manufacture of Hot Rolled Coil and Hot Briqqetted Iron falling under Chapter 72 of CETA, 1985. From time to time appellants have been filing declarations under Rule 57T of the Central Excise Rules 1944, for the purpose of availing modvat credit on capital goods under Rule 57Q, During the period 27.10.94 to 3.5.95 the appellants filed 38 declarations under Rule 57T. The original authority disallowed modvat credit to the extent of Rs. 99,05,118/- and imposed a penalty of Rs. 1,59,90,912/- on the ground that modvat credit claimed on inputs cannot be considered as capital goods, documents on which credit claimed are not duty paying documents and some of the declarations were filed beyond stipulated period. Aggrieved by this order the appellants filed an appeal to the Commissioner (Appeals), the Commissioner partly allowed the appeal. The appellant is aggrieved by this order of the Commissioner and hence these appeals.
2. The Commissioner categorised the input on which credit is claimed as capital goods into eight categories. He disallowed the credit on categories 'I to IV', and allowed credit on the inputs in categories 'V to VII' and did not deal with the items mentioned in category VIII. He gave details of inputs categorized under each of these inputs in the impugned order.
3. In so far as a category 'I' is concerned his observation is that the inputs are in the nature of office stationary materials or storage materials, light fittings, manuals etc., which are not taking part in any production process. He found that the lower authority has correctly denied the credit on these goods. The Ld. Advocate for the appellants before us admitted that out of the items mentioned in category 'I' they do not press the claim for modvat credit as capital goods on (a) ADF Photoreceptor (b) Flash Key Phone (c) Lavelling Blocks, (d) Manuals and(e) Sorter/Stand. In regard to the rest of the items mentioned in category 'I' the appellant argued that these items are installed in the production plant itself and therefore cannot be called as office stationary material or storage materials. These items are covered under Clause (a) of the explanation to Rule 57 Q and are required for producing or processing of the goods in their plant. The further plea is that these items are covered by Clause (b) of the explanation to Rule 57Q which covers capital goods of "Components Spare Parts and Accessories". In as much as the items in category 'I' or an integral part of the appellants plant they ought to have been held as eligible for modvat credit under Clause (b) of Rule 57Q. In deciding the eligibility of these items it was not necessary for the department to examine the function of each and every component of the plant. It was further argued that since the Commissioner (Appeal) has not disputed the appellants' contention before him that the category 'I' item are integral parts of the plant he ought not to have disallowed the credit. The applicability of Clause (b) to Rule 57Q has been urged before him but he failed to give any finding except stating that the goods under category 'I' are of the nature of stationary.
4. The Ld. Advocate pointed out that the Commissioner at page 12 of his order has summarily disallowed the credit on goods mentioned in category 'I' by making a bland statement that the goods are in the nature of office stationary and storage materials. He failed to examine the contentions raised before him in this regard.
5. In respect of items mentioned in his order in category 'II' he observed that the goods consist of mere fasteners and are used for assembling various components and parts to make the entire plant. He observed that by no stretch of imagination these items can be regarded as capital goods within the meaning of Rule 57Q of Central Excise Rules. The appellants argued that this observation of the Commissioner is sweeping and devoid of proper reasoning. He has not dealt with the submissions made before him in respect of these goods.
6. In regard to items mentioned in category 'III' the Commissioner's observation is that these goods are in the nature of construction materials and are not covered in the definition of capital goods. He therefore confirmed the denial of credit by the adjudicating authority. The contention of the appellant is that the Commissioner has brushed aside the claim without examining the various contentions raised before him regarding the admissibility for credit under Rule 57Q.
7. The Commissioner dealt with the goods mentioned in category 'IV' in a similar manner.
8. We observe that the Commissioner has not given any finding on the goods mentioned in category 'VIII'. The appellants contend that in respect of these goods they have cited before him the decision of the Tribunal in Kalayani Steel v. Commissioner of Central Excise [1998 (98) ELT 288 ] . The Commissioner however did not deal with this submission.
9. The appellant further contended that the Commissioner (Appeals) did not give any reason as to why switch bracket, toolings, cutting tools, T.C. Insert End Mills etc. and Hydraulic Pellet Trolley are not eligible for modvat credit as capital goods. The Commissioner himself held that these items fell under categories V, VI and VII which have been held as admissible for modvat credit. The appellants contends that all the items in question are components of the appellants plant and are therefore eligible for the modvat credit under Sub-clause (b) of the explanation to Rule 57Q.
10. In the impugned order the Commissioner disallowed modvat credit in respect of goods contained in declarations filed beyond three months for the goods received prior to 1.6.94 but allowed credit on capital goods received during 1.6.94 to 31.12.94 even when the declarations are filed beyond the period of three months from the date of receipt of inputs. The appellant contends that filing a declaration before the receipt of capital goods in the factory was inserted in Rule 57T only in the year 1997. As such, for the period prior to 1997 there was no requirement in Rule 57T of filing a declaration before the receipt of capital goods in to the factory. The Commissioner has however not dealt with this submission and assumed that there had been a delay in filing a declaration and thereafter disallowed modvat credit on items where declarations were filed beyond three months for goods received prior to 1.6.94.
11. Heard both sides and perused the records.
12. We observe that the Commissioners' order is not a speaking order. He has not examined the issues before him with reference to either Clause (a) or (b) to the explanation under Rule 57Q of the Central Excise Rules. He has further not taken into consideration that the requirement of filing a declaration before the receipt of capital goods in the factory which was inserted in Rule 57T only in the year 1997 while denying credit on the ground that the declaration were not filed in time. For these reasons the matter needs to be examined a fresh. While doing so the appellants' admission before us that they are not pressing their claim for the goods mentioned in paragraph 3 should be taken into consideration by the Commissioner.
13 The order of the Commissioner is set aside ands is remanded for fresh consideration on the above terms. He is directed to decide the issue taking into consideration the ratio laid down by the Hon'ble Supreme Court in the case of Jawahar Mills Ltd. [2001 (132) ELT 3 (S.C.)]. He shall accord opportunity to the appellants of being heard before deciding the appeal.
14. The appeal is thus allowed by of remand.
(Pronounced in Court)