Custom, Excise & Service Tax Tribunal
Cce, Visakhapatnam-I vs M/S Rashtriya Ispat Nigam Ltd on 31 August, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Division Bench Court I Appeal No. E/812/2005 & E/960/2005 (Arising out of Order-in-Original No. 71/03-04 (RP) dt. 28.04.2004 passed by CCE, Visakhapatnam-I, Order-in-Original No. 15/04-05 (RP) dt. 15.10.2004 passed by Commissioner (Appeals-I), CCE & C, Visakhapatnam) For approval and signature: Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Honble Sh. Madhu Mohan Damodhar, 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 Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? CCE, Visakhapatnam-I ..Appellant(s) Vs. M/s Rashtriya Ispat Nigam Ltd., ..Respondent(s)
Appearance Sh. P.S. Reddy, Authorised Representative for the Appellant.
Sh. Karan Talwar & G. Prahlad, Advocates for the Respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member (Judicial) Honble Sh. Madhu Mohan Damodhar, Member(Technical) Date of Hearing: 31.08.2016 Date of Decision: 31.08.2016 FINAL ORDER No._______________________ [Order per: Madhu Mohan Damodhar] M/s Rashtriya Ispat Nigam Limited (herein after referred as the assessee), Visakhapatnam, are engaged in the manufacture of Iron and Steel products of Ch. No. 72 and are availing the facility of credit of duty paid on the capital goods and inputs under the CENVAT Credit Rules 2002. On scrutiny of the returns filed under Rule 7 of the CENVAT Credit Rules, for the period from 4/2002 to 3/2003, it appeared to the department that they had:
a) availed CENVAT Credit on certain inputs / capital goods like Checkered Plates, MS Plates, Beams, Flats etc. which were used in their auxiliary shops;
b) removed certain goods Acetylene gas, Coal Tar Pitch, Pig Iron, Steel Scrap, MS Angles, for captive consumption on payment of duty under their Internal Challans called Internal Material Consumption Notes (IMCNs) issued by various stores;
c) taken credit on certain inputs/goods, which were not properly declared, and they were described by their brand name or company name like Nalco;
d) availed credit on Welding Electrodes used in the repairs and maintenance of the machinery and also in civil maintenance/construction;
e) taken CENVAT Credit on High Tensile Steel scrap (7212.30) for use in packing on the strength of invoices issued by M/s. ITW Signode, Rudraram, Medak. The invoices show RINL (Visakhapatnam) as the consignee in the form RINL, Visakhapatnam, A/C ITW Signode India Ltd, Visakhapatnam;
f) availed credit of duty on certain goods like Street Light Fittings, Batteries, Telephone Equipment, Railway Wheels, Tubeless Tyres etc;
g) taken credit on goods, which are removed from one store to another, but their actual usage is not declared and known; and
h) taken credit on Aluminium Wire Rod Coils, which cannot be taken as inputs.
2. Hence 10 show cause notices starting from 05-05-03 to 26-03-04 were issued to them inter alia for denial of credit irregularly taken during the period from 04/2002 to 03/2003 for a total amount of Rs. 5,62,69,602/- under Rule 12, and interest u/s 11AB.
3. On adjudication vide Order-in-Original dated 28-04-2004, the adjudicating authority inter alia held:
a) the credit shall not be admissible on the items used in the auxiliary shops;
b) he has seen the copies of the IMCN issued and found that these are in the form of challans, which contained complete details as regards the description of the goods and the payment details etc. Such documents are taken as proper duty paying documents. The credit, therefore, based on duty paying documents in the form of IMCNs shall be admissible if these inputs are used in relation to the manufacture of final product; Credit on pig iron, coal tar pitch, Anthracene oil and steel scrap is admissible in view of the usage of these items in relation to the manufacturing operations; credit on oxygen gas, argon gas, acetylene gas and MS Plates used in the auxiliary shops or for maintenance purposes, is not admissible;
c) in respect of credit on rounds and rebars, the Commissioner held that the credit is held admissible on such rounds so long as these are used in the manufacture of drilling rods used for t aping the tap hole in the blast furnace.
d) in respect of Items mentioned as Misc. Inputs, the Commissioner held that there is no allegation that these inputs have been diverted or otherwise not used in the manufacturing factory. In the circumstances of the case, he did not order recovery of the credit on these items. The assessee, however, is directed to place on record the complete write-up on the usage of these items in manufacturing process;
e) in the case of credit on seals and steel straps, he allowed credit as admissible on seals whether these are inputs or capital goods as these are used in the packing of the finished products and there are no valid grounds to deny the credit. Allowed credit on the steel straps stating that these are used in the packing on contract by ITW and there is no infirmity in availing the credit on the basis of invoices issued by ITW, Medak in the name of ITW, Visakhapatnam;
f) entire credit on Welding Electrodes denied on the ground that these were used in repair or auxiliary shops as no duty is paid on used items repaired/remade in the workshop or in the auxiliary shops;
g) Credit held admissible on Aluminium Wire Rods on the ground that they are used in the manufacturing process subject to the condition that the assessee furnished a proper statement of use of inputs/ capital goods to avoid such notices;
Accordingly, the adjudicating authority:
i)Disallowed the inter alia credit of Rs. 3,44,87,475/- as detailed in the Annexure and ordered for recovery of Rs. 3,32,05,284/- after adjusting the amounts already paid, under the provisions of Rule 12 of the CENVAT Credit Rules;
ii) Ordered an amount of credit of Rs. 2,52,81,079/- as admissible and allowed the same;
iii) Demanded Rs. 25,180/- being differential duty payable under Section 11A (1);
iv) Ordered that interest in accordance with the provisions of Section 11AB shall be paid on the amounts disallowed/payable as above;
v) Imposed a cumulative penalty of Rs. 2,00,000/- under Rule 13 of the CENVAT Credit Rules and Rule 25/27 of the Central Excise Rules for all the show cause notice.
Aggrieved department has filed appeal no. E/812/2005.
4. With regard to Appeal E/960/05, certain discrepancies were noticed during scrutiny of the CENVAT returns filed under Rule 7 of CENVAT Credit rules 2002, for the period 4/2003 to 8/2003. Accordingly, show-cause notices dated 30-04-04 & 21-07-04 were issued to the assesses proposing demand of an amount of Rs. 3,59,68,376/- for irregular availment of CENVAT Credit on inputs and capital goods. Commissioner adjudicated all the three Show-cause notices and passed a combined Order-in-Original dated 15.10.2004 and interalia held as follows:
a) The credit shall not be admissible on the items used in the auxiliary shops as the auxiliary shops are shown to be used as a workshop for manufacture/repair of spares/frames etc for the capital goods in the factory and the spares are not leviable to duty and are used in the factory.
b) Credit on items like Oxygen gas, argon gas, acetylene gas and MS plate used in the auxiliary shops or for maintenance purposes is not admissible.
c) Credit is admissible on seals whether they are inputs or capital goods as they are used in the packing of the finished goods and there are no valid grounds to deny the credit.
d) There is no infirmity in availing the credit in respect of the steel straps which are used in the packing on contract by ITW, on the basis of invoices issued by ITW, Medak in the name of ITW Visakhapatnam and therefore credit is allowed.
e) With regard to items mentioned as inputs on which Cenvat is proposed to be denied on the ground that their usage is not known and that some of the inputs are described by their Company/brand name, as there is no allegation that these inputs have been diverted or otherwise not used in the manufacturing factory no recovery of the credit is to be ordered.
f) Credit is to be denied on welding Electrodes as they were used in the repairs and maintenance/ construction
g) Credit on various capital goods items like street light fittings, batteries etc is not admissible as these are not used in or relation to the manufacture of the final products.
Accordingly, the Commissioner vide the said O-I-O has ordered that in respect of:
i. Show Cause Notice dated 30.04.04 proposing to deny credit of an amount of Rs. 2,40,21,732/-, an amount of Rs. 59,99,249/- has been allowed, ii. Show Cause Notice dated 25.05.04 proposing to deny credit of an amount of Rs.1,04,92,533/-, an amount of Rs.40,79,128/- has been allowed.
iii. Show Cause Notice dated 21.07.04 proposing to deny credit of an amount of Rs.14,54,311/-, an amount of Rs. 91,011/- has been allowed.
iv. Imposed a cumulative penalty of Rs.10,00,000/- under Rule 13 of Cenvat Credit rules, 2002 and Rule 25/27 of CER, 2002, along with interest in accordance with the provisions of Section 11AB, in respect of all the 3 Show-Cause Notices.
Aggrieved, the department has preferred appeal no. E/960/2005.
5. The grounds raised by department are as follows:
I) In the Show Cause Notices dated 30.04.04 and 25.05.04, credit was sought to be denied on the inputs silicon Carbide Grains on various grounds including the ones that the assessee has not furnished the details of hte capital goods/spares etc., which were purported to have been manufactured out of these items, the tariff head under which these manufactured goods fall, to determine whether they fall within the definition of capital goods. The Commissioner has allowed the credit but has not given any reasons for allowing the same. The Commissioner has stated at para 8 that he has discussed the eligibility of credit in the Order-in-Original No.71/03-04(RP) dated 28.04.04 but it is seen that there is no such discussion in that order.
II) Credit on all items of Annexure C of the show Cause Notices dated 30.04.04 and 25.05.04 was also sought to be denied on the ground that they are referred to with brand names, their usage being not known etc. The commissioner, in his order, has stated the following:
(a) There is no allegation that the inputs have been diverted/not used in the manufacturing factory.
(b) In the circumstances he does not order for recovery of credit and
(c) He has directed the assessee to place on record the complete write-up on the usage of these items in the manufacturing process.
III) The show cause notices dated 30.04.04 and 25.05.04 allege that, the assessee have taken CENVAT Credit in respect of High Tensile Steel Strap that were received by M/s. ITW Signode India Limited, Visakhapatnam, on stock transfer basis from their factory in Rudraram without paying sales tax. The show cause notices also allege that the goods were not received into the factory of the assessee as verified from the Goods Acceptance/Rejection Notes (GARN) maintained by the assessee.
Rule 3 and Rule 4 of the Cenvat credit Rules 2002 very clearly imply that credit can be availed only in respect of inputs/capital goods received into the factory of the manufacture. The Commissioner however, in his order has merely held that, the assessee is entitled for credit on steel straps since these are used in the packing. The Commissioner has given no findings on whether the goods have been received in the factory of manufacture.
IV) The Show Cause Notices dated 30.04.04 and 25.05.04 allege that the capital goods as detailed in Annexure F are not capital goods as per their chapter heading nos.. The Show Cause Notices also allege that the usage of these capital goods is not known. The commissioner has allowed the credit on some items but has not discussed the allegations of the show Cause Notices before allowing the credit. No discussion was made even in the Order-in-Original No.71/03-04.
V) The Show Cause Notice dated 30.04.04 proposed denial of the balance 50% credit on the capital gods on which the first 50% credit was taken during the year 2003-04 and which was proposed to be denied in earlier Show Cause Notices. Out of the total amount the Commissioner has allowed credit of an amount of Rs.35,04,297/- but has not discussed the same in the order. Even in the Order-in-Original no.71/03-04, there was no discussion on this matter.
VI) The Show Cause Notice dated 21.07.04 has proposed denial of credit on various capital goods as detailed in Annexure B to the notice on the ground that the goods do not satisfy the definition of capital gods as per Rule 2(b) of the Cenvat Credit rules, 2002. The Commissioner has allowed credit of an amount of Rs.91,011/- but has not made a discussion about how the goods are eligible for credit. The Order-in-Original no.71/03-04 has also not discussed this point. Similar grounds have been made in respect of appeal no. 812/2005.
6. On behalf of Revenue/ Appellant the Ld. AR Sh. P.S. Reddy reiterated the grounds of appeal.
7. On behalf of respondent Sh. Karan Talwar adverted our attention to the fact that against the order impugned herein, the respondent/assessee had approached the CESTAT vide appeal no. E/68/2005 in respect of Rs.2,57,99,188/- which was disallowed by the adjudicating authority; the Tribunal vide Final Orde No. 396/2007 dated 26.03.2007 had allowed credit of the entire amount.
8. In respect of departmental appeal E/960/2005, Ld. Counsel submits that concerned items are used in manufacture of other items which is in turn used in the process of manufacture and hence eligible for credit; that adjudicating authority has allowed credit after satisfying himself that these items are not diverted for any use; that Commissioner has correctly allowed credit on materials used for packing since definition of inputs specifically includes the term packing; that capital goods on which credit was allowed by Commissioner were actually used in relation to manufacturing activity and that even for balance disallowed amount relief has been provided by Tribunals Order No. 396/2007 dated 26.03.2007; that the matter is no longer resintegra and squarely covered by a number of case laws, eg; Madras Cements Ltd., V CCE [2005(192) ELT 902 (Tri- Chennai)], which was affirmed by Honble Supreme Court at [2010 (254) ELT 3 (S.C)].
9. In respect of department appeal E/812/2005 the Ld. Counsel for respondent submits as follows:
i) CO2 gas is used for calibration of equipment and not for filling fire extinguishers, hence eligible for credit. Relies on Kesoram Spun Pipes & Foundaries V CCE, Kolkatta [2002 (149) ELT 963 (Tri-Kol)].
ii) with reference to Ballast Copper wound, Choke, etc., these items fall within definition of capital goods, hence eligible for credit, also allowed by Tribunal in CCE Vs Satwahana Ispat Ltd., [2007 (219) ELT 975 (Tri-Bang)].
iii) with reference to credit on basis of internal material consumption notes (IMCN), the said credit is actually taken on internal delivery challan wherein all details required in invoice are available.
iv) with reference to credit on inputs used in Auxiliary shops eg; coal tar pitch, O2 gas, Argon gas etc it is well settled that credit is available on inputs used in intermediate exempt product which are captively consumed on manufacture of dutiable final products. Further in their own case RINL Vs CCE [2006 (205) ELT 811 (Tri- Bang)] it has been held that goods like Anthracine oil, Oxygen, Acetylene, Argon, Iron and Steel goods used as inputs in Auxiliary shops are eligible for credit.
v) with reference to Steel straps/seals, Commissioner has correctly held that there is no infirmity in availing credit since steel straps are used in packing
vi) with reference to inputs with brand name Commissioner has allowed credit after reasoning that there is no allegation that the inputs have been diverted or otherwise not used in manufacturing factory.
vii) with reference to Aluminium wire rod coils, Commissioner has correctly allowed credit after appreciating that said input is directly used in the steel making process.
viii) with reference to capital goods Commissioner has allowed credit after considering submissions made by them.
11. Heard both sides. The eligibility of various inputs and capital goods for the purpose of availment of CENVAT Credit has become more broader over the years pursuant to various judgments of Tribunals and other higher courts including the Honble Apex Court. On going through the impugned orders it is seen that the adjudicating authority has gone into each disputed issue in detail and arrived at well reasoned finding in respect of the amounts of credit allowed by him. We do not find any infirmities in respect of the credits allowed by adjudicating authority in the impugned orders. In any case, even in respect of credits disallowed by adjudicating authority in order impugned in Appeal 812/2005, the Tribunal, on earlier appeal no. E/68/2005 by the respondent herein, has allowed credit of the entire amount vide Final Order No. 396/07 dated 26.03.2007.We also note that the issues are fairly covered by the case laws cited by the Ld. Counsel for respondent.
12. From the foregoing discussions, we do not find any merit in the appeals filed by Revenue. Appeals E/812/2005 and E/960/2005 therefore requires to be dismissed in toto, which we hereby do.
13. Revenue Appeals are dismissed.
(Operative part of this order was pronounced in court
on conclusion of the hearing)
(MADHU MOHAN DAMODHAR) (SULEKHA BEEVI C.S.)
MEMBER(TECHNICAL) MEMBER(JUDICIAL)
Jaya.
15