Custom, Excise & Service Tax Tribunal
M/S. Kirloskar Ferrous Industries Ltd vs Commissioner Of Central Excise, ... on 11 October, 2017
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: E/21241/2017-SM [Arising out of Order-in-Appeal No. BEL-EXCUS-00-APP-SP-19-17-18 dated 24/05/2017 passed by Commissioner of Central Excise , MYSORE (APPEALS) ] M/s. Kirloskar Ferrous Industries Ltd Bevinahalli Village Hitnal Post KOPPAL - 583234 KARNATAKA Appellant(s) Versus Commissioner of Central Excise, Customs and Service Tax Belgaum NO. 71, CLUB ROAD, CENTRAL EXCISE BUILDING, BELGAUM, - 590001 KARNATAKA Respondent(s)
Appearance:
Mr. M.S. NAGARAJA, ADV M/S. T.RAJESWARA SASTRY & ASSOCIATES, NO.48, 11TH MAIN ROAD, BANASHANKARI II STAGE, BANGALORE 560070 For the Appellant Mr. Parasivamurthy, AR For the Respondent Date of Hearing: 11/10/2017 Date of Decision: 11/10/2017 CORAM:
HON'BLE SHRI S.S GARG, JUDICIAL MEMBER Final Order No. 22423 / 2017 Per : S.S GARG The present appeal is directed against the impugned order dated 19.5.2017/24.5.2017 passed by the Commissioner (A), whereby the Commissioner (A) has rejected the appeal of the appellant.
2. Briefly the facts of the present case are that the appellants are engaged in the manufacture of pig iron and unmachined castings falling under Chapter 72 and 73 of the First Schedule to the Central Excise Tariff Act, 1985. They are availing the CENVAT credit on capital goods, inputs and input services under the provisions of the CENVAT Credit Rules, 2004. It was noticed during the course of scrutiny of ER-1 returns and verification of the documents that the appellants have availed CENVAT credit on MS angles, channels, joists, beams, etc., during the period from 02/2009 to 07/2009 and these items were used for manufacture of capital goods, viz., fabrication / manufacture of hot blast stoves. It appeared that the credit availed on the said items is irregular inasmuch as these items are neither inputs nor capital goods. As the appellants did not reverse the irregular credit, show-cause notice was issued proposing to deny the credit, demand of interest on irregular credit and proposal to impose penalty. Accordingly, the lower authority referring to the decision in the case of M/s. Bajaj Hindustan Ltd. vs. CCE, Meerut: 2012 (284) ELT 565, M/s. U.G. Sugar and Industries Ltd. vs. CCE: 2011 (206) ELT 339 and Explanation 2 to Rule 2(k) of CENVAT Credit Rules, 2004 has held that the credit availed on the said items is irregular and ordered for recovery of same besides demanding interest and imposition of penalty on the appellant. Aggrieved by the Order-in-Original, appellant filed appeal before the Commissioner (A) on the ground that the MS angles, channels, joists, beams were used for fabrication of hot blast stove used within the factory. After considering the submissions of both the parties, the Commissioner (A) has rejected the appeal of the appellant and hence, the present appeal.
3. Heard both the parties and perused the records.
4. Learned counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed beyond the show-cause notice and also contrary to the binding judicial precedent. He further submitted that in the show-cause notice, the Department has admitted that these items MS angles, plates, channels, joists, beams were used for fabrication of hot blast stove and therefore the appellants are entitled to the CENVAT credit on the same. He further submitted that the Revenue at this stage cannot raise the objection that the said material was not used for fabrication of hot blast stove and the Commissioner (A) has wrongly invoked the user test evolved by the Supreme Court in the case of Jawahar Mills Ltd.: 2011 (132) ELT 3(SC). He also submitted that the show-cause notice has specifically stated that the assessee had used MS angles, plates, joists, channels, beams for fabrication of hot blast stove and the assessee in their reply has submitted that the hot blast stove are classifiable under Chapter Heading 8414 5930 of CETA, 1985 which has not been controverted by the Revenue. He further submitted that the inputs used for fabrication / manufacture of capital goods which are further used in the factory are eligible for CENVAT credit in terms of Explanation 2 to Rule 2(k) of CENVAT Credit Rules, 2004 during the relevant period. He also submitted that hot blast stoves have a separate identity anterior they being fixed to the earth and assimilated in the complex interconnected plant and machineries in the steel industry in order to ensure stable, safe and wobble free operation. The embedding the plant and machinery is a functional and safety requirement and do not render all such plants and machinery as immovable property. The plant and machineries fixed to earth for operations are goods and not immovable property. In support of his submission that the plants and machineries fixed to earth are goods and not immovable property. He relied upon the following decisions:
* Sirpur Paper Mills Ltd. vs. CCE, Hyderabad: 1998 (97) ELT 3 (SC) * CCE, Ahmedabad vs. Solid & Correct Engineering Works: 2010 (252) ELT 481 * Mahindra & Mahindra Ltd. vs. CCE: 2005 (190) ELT 301 (Tri.-LB)
5.1 He further submitted that the inputs used for fabrication of capital goods eligible for CENVAT credit even if the resultant goods are fixed to earth and for this submission, he relied upon the decision of the Karnataka High Court in the case of CCE vs. SLR Steels Ltd.: 2012 (280) ELT 176 (Kar.) and Mahalakshmi Glass Works Ltd. vs. CCE, Mumbai reported in 1999 (113) ELT 558. The learned counsel also submitted that the Division Bench of this Tribunal in the case of JSW Steel Ltd. decided on 13.2.2017 where the issue was identical has observed in para 8 to 10 as under:
8. To decide the issue whether these manufacturing facilities are to be considered as immovable property or as capital goods, it is useful to refer to the clarification issued by CBEC vide order No.53/2/98-CX dated 2.4.1998 in which the excisability of plant and machinery assembled at site has been clarified. The Board has referred to the decision of the Honble Supreme Court in the case of Sirpur Paper Mills Ltd. [1998 (97) ELT 3 (SC)] and has prescribed the following broad criteria to be satisfied for considering the plant and machinery assembled and erected at site as excisable.
i. The final product is distinct and apart from the components that have gone into its production.
ii. It is specified in the Central Excise Tariff as excisable goods.
iii. It is goods and to merit to be called goods, it must be movable and saleable. Whatever is embedded in earth, unless it is like a building or tree or similar things, must not be necessarily treated as immovable property, if the whole purpose behind attaching to a concrete base is to secure maximum operational efficiency and safety.
iv. It can be sold in the market. It would be treated as marketable even though it may have to be removed from its base and dismantled, before being sold.
9. The claim of the appellant which has been explained in the above paragraph is that these manufacturing facilities find place specifically in the Central Excise Tariff. Both blast furnace and coke oven batteries are, without doubt, huge structures whose size is required to cater to the size of operation in a steel plant. The sheer size also indicates that these manufacturing facilities cannot be suspended in mid-air and will need to be adequately supported by means of civil foundation and other civil structures. Consequently, we have to conclude that both these facilities get supported and embedded to the ground for the purposes of safety and smooth operational efficiency. When, we refer to the decision of the Honble Supreme Court cited supra, we find that the apex court has excluded only things of the type such as building or tree which get fixed to the earth. We find that both blast furnace and coke oven batteries cannot be considered to be in the same category as building or tree. In view of the above discussions, it emerges that both manufacturing facilities are to be considered as capital goods.
10. We may look at the situation from another perspective. We are not deciding the excisability and chargeability to excise duty of blast furnace and coke oven batteries. There is no doubt that the structural steel items, which are duty paid, have been used in the fabrication of these two structures. Rule 2(a) of CCR, 2004 defines capital goods. It includes all goods falling under Chapter 82, 84, 85, 90, etc. The definition of capital goods also includes components, spares and accessories of goods above. There is no dispute that the structural steel items are components and have been used in the fabrication and assembly at site of the manufacturing facilities. Consequently, we take the view that even if the blast furnace as well as coke oven batteries are made immovable by attaching them to the foundation for trouble free function, the eligibility for availment of CENVAT credit cannot be denied. 5.2 He further submitted that the impugned order is beyond the show-cause notice and the same is not sustainable. In support of this submission, he relied upon the following decisions:
* CCE vs. Gas Authority of India Ltd.: 2008 (232) ELT 7 (SC) * Hindustan Polymers Co. Ltd. vs. CCE, Guntur: 1999 (106) ELT 12(SC) * CC, Mumbai vs. Toyo Engineering India Ltd.: 2006 (201) ELT 513 (SC) 5.3 He also submitted that the facts which are admitted in the show-cause notice need not be proved by the appellant and for this, he relied upon the decision of Honble Supreme Court in the case of CCE, Madras vs. Systems & Components Pvt. Ltd.: 2004 (165) ELT 136 (SC).
5.4 He also submitted that in the appellants own case for an earlier period, the Commissioner (A) vide Order-in-Appeal No.566/2012 dated 18.10.2012 allowed the appeal of the assessee and against the said order, the Revenue filed appeal before this Tribunal and this Tribunal vide Final Order No.20913-20914/2017 dated 16.2.2017 dismissed the appeal of the Revenue. He further submitted that the issue involved in the present appeal is the same as was involved in the earlier appeal filed by the Revenue, which was dismissed.
6. On the other hand, the learned AR defended the impugned order and submitted that the disputed items were used for fabrication of support structure for plant and machinery which are embedded to the earth and becomes immovable property and therefore, not admissible for CENVAT credit and the assessee has wrongly availed the CENVAT credit on these items which was detected during the course of audit. He further submitted that the assessee has failed to prove that he has used these items for fabrication of hot blast stove. He also submitted that in the absence of any actual proof of use of these items, the user test is not complied with and therefore, the appellants are not entitled to the CENVAT credit.
7. After considering the submissions of both the parties and perusal of the material on record and the various judgments relied upon by the appellant cited supra, I am of the view that the issue in the present appeal is covered by the decision in the case of CCE vs. SLR Steels Ltd. decided by the Honble Karnataka High Court cited supra. Further, I also find that on the same issue, this Tribunal for the earlier period has already decided in favour of the assessee by holding that the assessee is entitled to the CENVAT credit on these items which are used for fabrication of hot blast stove. Therefore, by following the ratio of the above said decision, I am of the view that the impugned order is not sustainable in law and therefore, the same is set aside by allowing the appeal of the appellant.
(Operative portion of the Order was pronounced in Open Court on 11/10/2017) S.S GARG JUDICIAL MEMBER rv 8