Custom, Excise & Service Tax Tribunal
Polycab Wires Pvt Limited vs Vadodara-Ii on 11 September, 2023
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench at Ahmedabad
REGIONAL BENCH- COURT NO. 3
Excise Appeal No. 14099 of 2013 - DB
(Arising out of OIO-VAD-EXCUS-002-COM-007-13-14 dated 15/10/2013 passed by
Commissioner of Central Excise, Customs and Service Tax-VADODARA-II)
Polycab Wires Pvt Limited ........Appellant
(Unit-IV) Plot No. 67-69, 71-72, 105, 106 at Nanpura, Taluka-Halol,
Halol-Vadodara Road, Panchmahal,
Gujarat
VERSUS
C.C.E. & S.T.-Vadodara-ii .......Respondent
1st Floor... Room No.101, New Central Excise Building, Vadodara, Gujarat - 390023 WITH Excise Appeal No. 10480 of 2014 - DB (Arising out of OIO-DMN-EXCUS-000-COM-009-13-14 dated 27/09/2013 passed by Commissioner (Appeals ) Commissioner of Central Excise, Customs and Service Tax-SURAT-
I) Polycab Wires Pvt Limited ........Appellant
Plot No. 96/1 to 7 & 100/2- 6, Daman Industrial Estate, Village- Kadaiya, Daman Daman, Gujarat VERSUS C.C.E. & S.T.-DAMAN .......Respondent 3rd Floor...Adarsh Dham Building, Vapi-Daman Road, Vapi Opp.Vapi Town Police Station, Vapi, Gujarat - 396191 AND Excise Appeal No. 12481 of 2019 - DB (Arising out of OIA-CCESA-SRT-APPEALS-PS-306-2019-20 dated 22/08/2019 passed by Commissioner ( Appeals ) Commissioner of Central Excise, Customs and Service Tax-SURAT-
I) Polycab Wires Pvt Limited ........Appellant
Plot No. 96/1 to 7 & 100/2 To 6, Daman Industrial Estate, Village- Kadaiya, Daman Daman, Gujarat VERSUS C.C.E. & S.T.-DAMAN .......Respondent 3rd Floor...Adarsh Dham Building, Vapi-Daman Road, Vapi Opp.Vapi Town Police Station, Vapi, Gujarat - 396191 APPEARANCE:
Shri Jigar Shah & Shri Amber Kumrawat, Advocates for the Appellant Shri Anoop Kumar Mudvel, Superintendent (AR) for the Respondent
2|Page E/14099/2013, E/10480/2014, E/12481/2019-DB CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. C.L. MAHAR Final Order No. A/ 11921 -11923/2023 DATE OF HEARING: 08.08.2023 DATE OF DECISION: 11.09.2023 RAMESH NAIR The appellant were engaged in the manufacture of electric wires, cables, copper conductors etc. falling under chapter 74 & 84 of the Central Excise Tariff Act, 1985. The appellant were also availing cenvat credit of duty paid on inputs, capital goods and input service in terms of Cenvat Credit Rules, 2004.
The appellant have availed cenvat credit on capital goods such as MS channel, MS Angles, MS drums, MS Pipe, HR Sheets, CR Sheets, MS Fabricated support etc. It is claim of the appellant that the aforesaid goods have been used in the manufacture of processed drums and packing drums which were manufactured in the factory of the appellant by the Contractors M/S Lalita Engineering Contractor who had also raised invoices for conducting the said activity within the factory. The appellant also maintained the RG-1 register for details of the fabricated goods and the generation and clearance of the waste which arose during the making of such MS Drums.
1.2 The case of the department is that the steel goods used for fabrication of drums are neither capital goods nor components or accessories of any capital goods as defined in Rule 2(a) (A) of Cenvat Credit Rules, 2004.
Accordingly, the Show cause notices dated 27.12.2011, 13.09.2013, 21.10.2013 and 02.08.2018 were issued proposing denial of cenvat credit and recovery of the same in terms of Section 11 A (5) of Central Excise Act, 1944 read with Rule 14 of the Cenvat Credit Rules, 2004 along with interest under Section 11AA of the Act read with Rule 14 of the Rules and penalty under Section 11AC read with Rule 15 of the Rules. The Show cause notices dated 27.12.2011, 13.09.2013 and 21.10.2013 were adjudicated by learned
3|Page E/14099/2013, E/10480/2014, E/12481/2019-DB commissioner vide Order-In-Original dated 04.10.2013 and 15.10.2013. In case of Show cause notice dated 02.08.2018 the Adjudicating Authority passed the Order-In-Original dated 05.02.2019 against which the appellant filed appeal before Commissioner (Appeals) who has rejected the appeal vide Order-In-Appeal dated 22.08.2019. Therefore, the present appeals were filed by the appellant against impugned orders dated 04.10.2013 and 15.10.2013 and also filed appeal No. E/12841/2019 against impugned order-in - appeal dated 22.08.2019. Since all the appeals involve common issue, they are taken up together for disposal.
2. Shri Jigar Shah, Learned Counsel along with Shri Amber Kumrawat, Learned Advocate appearing on behalf of the appellant submits that the Adjudicating Authority denied the cenvat credit on the goods such as MS Channel, MS Angle, MS Drums, MS Pipes, HR Sheets, CR Sheets, MS Fabricated support etc. on the ground that these are neither capital goods nor inputs, therefore, credit is not admissible. He submits that firstly these goods were issued for making processed drums/reels, MS Bobbins etc. for use in the manufacturing process of cables and wires therefore these goods are clearly covered as parts or accessories for manufacture of processed drums/reels, MS Bobbins which in turn used in the manufacture of wire and cable in the factory of the appellant, the credit is admissible in terms of Rule 2 (a) (A) (iii) of the Cenvat Credit Rules, 2004. In support he placed reliance on the following judgments:-
HIL Ltd - Final Order No. A/10497/2023 dated 22.03.2023 Sanghi Industries Ltd - 2022 (5) TMI 475 - CESTAT Ahmedabad Rajasthan Spinning and Weaving Mills - 2010 (255) ELT 481 - SC Surya Alloy Industries Ltd - 2014 (305) ELT 47 (Cal.HC) Vandana Global Ltd - 2017 -TIOL-2853-HC- Chattisgarh-CX Navyug Steel Industries - 2017 (9) TMI 342- CESTAT Ahmedabad Singhal Enterprises Pvt Ltd - 2016 (341) ELT 372 (Tri. Del)
4|Page E/14099/2013, E/10480/2014, E/12481/2019-DB 2.1 He further submits that the appellant had submitted the Chartered Engineer Certificate before the Ld. Adjudicating Authority, wherein it was certified that the equipment such MS Drums, MS Bobbins, MS fabricated were fabricated from MS Channels, HR Coil, MS Round, MS Angles etc .The above certificates were issued after verification of the records of the appellant which clearly shows that all the goods on which credit was taken were used in or in relation to the manufacture hence, the credit is admissible.
2.2 Without prejudice to his above submission, he further submits that if at all the credit is not admissible under capital goods the goods in question are falling under the category of input also in terms of Explanation 2 to Rule 2(k) of Cenvat Credit Rules, 2004 on the ground that all these goods were admittedly used in the manufacture of capital goods namely processed drums/reels, MS Drums which were used in the factory of the appellant in or in relation to the manufacture of final product namely wires and cables.
Therefore, the iron and steel items under dispute satisfied the definition of input also. For this reason also appellant is entitled for cenvat credit. In support, he placed reliance on following judgments:-
Metrochem Industries - 2013 (292) ELT 578 (Tri.) Rajasthan Spinning and Weaving Mills Ltd - 2010 (255) ELT 481 (SC) Hindustan Zinc Ltd - 2007 (214) ELT A115 (SC) SLR Steels Ltd - 2012 (280) ELT 176 (kar.) L.H Sugar Factories - 2010 (253) ELT 135 (Tri. Del) Sanghi Industries - 2022 (5) TMI 475 Kallakurichi Cooperative Sugar Mills - 2020 (3) TMI 834 Mankapur Chini Mills - 2019 (367) ELT 889 India Cements Ltd - 2015 (321) ELT 209 (Mad.) Mangalam Cement - 2018 (360) ELT 737 (Tri.- LB) Hira Ferro Alloys Ltd - 2016 (342) ELT 434 (Tri.Del)
5|Page E/14099/2013, E/10480/2014, E/12481/2019-DB Topworth Steels (P) Ltd - 2018 (15) GSTL 383 (Tri. Del) Ambuja Cements Ltd - Final Order No. A/87273/2021 2.3 He further submits that the definition of input is of wide import and the expression " used in the manufacture " should not be interpreted to mean directly used in process of production of goods rather it should be considered as used in or in relation to manufacture even if the goods are used in the machinery. However, in the present case all the iron steel items under consideration, satisfy the main definition of input and have a significant role to play in the main stream manufacturing process of finished goods and without the use of same finished product will never come into being.
Therefore, in the present case, the goods in question were admittedly used in or in relation to, directly or indirectly in the manufacture of final product, the credit is admissible under the category of input. In support he placed reliance on the following judgments:-
Sanghi Industries Ltd - 2017 (10) TMI 30 Thiru Arooran Sugars - 2017 (355) ELT 373 (Mad.) Singhal Enterprises Pvt Ltd - 2016 (341) ELT 372 Flometallic India Ltd - 2018 (3) TMI 15 (Tri. Ahm) SKF Technologies (India) Pvt Ltd - 2018 (3) TMI 15 (Tri. Ahm) DSCL Sugar, Rudrapur - 2019 (6) TMI 199 Kesoram Cement - 2018(3) TMI 344 (Tri. Hyd) Dalmia Cements (Bharat) Ltd - 2016 (1) ELT 102 (Mad.) 2.4 Without Prejudice, he further submits that in respect of Show cause notice dated 27.12.2011, 30.10.2013 and 02.08.2018, the partial period is beyond the normal period of limitation, In other words, the department has invoked extended period of limitation by alleging that the appellant have indulged in suppression and wilful mis-statement with an intent to evade duty.
He further submits that the appellant were filing regularly their ER-1 returns wherein the information relating to availment cenvat credit on capital goods
6|Page E/14099/2013, E/10480/2014, E/12481/2019-DB and inputs were disclosed and department was aware about the said availment of cenvat credit, therefore there is no suppression of fact and the extended period cannot be invoked. In support he placed reliance on the following judgments:
Dynamic Industries Ltd - 2014 (307) ELT 0015 (Guj.) Suvikram Plastex Pvt. Ltd - 2008 (225) ELT 282 (T) Rallis India Ltd - 2006 (201) ELT 429 (T) Patton Ltd - 2006 (206) ELT 496 (T) Satguru Engineering & Consultants Pvt Ltd - 2006 (203) ELT 492 (T) Indian Hume Pipes Co. Ltd - 2004 (163) ELT 273 (T) 2.5 He submits that as per the submission with regard to the limitation, the appellant cannot be imposed penalty and demand being not sustainable interest is also not payable.
3. Shri Anoop Kumar Mudvel, Learned Superintendent (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order. He further submits that admittedly the goods on which cenvat credit was taken falls under Chapter 72 & 73 which is not covered under the definition of capital goods. Therefore, the cenvat credit taken by the appellant treating the goods as capital goods is not admissible.
3.1 He further submits that the iron & steel material under dispute is not parts or accessories of the capital goods. For this reason also cenvat credit under capital goods is not available to the appellant.
4. We have carefully considered the submission made by both sides and perused the records. In the present case the issue to be decided is that whether the appellant are eligible for taking cenvat credit on the goods such as MS channel, MS Angles, MS drums, MS Pipe, HR Sheets, CR Sheets, MS Fabricated support etc. which were used in the manufacture of processed drums / reels, packing drums, MS Drums etc. which were used during the
7|Page E/14099/2013, E/10480/2014, E/12481/2019-DB manufacturing process as well as packaging of the final product namely electric wires and cables. The Adjudicating Authority denied the cenvat credit on such goods on the ground that the said goods is not capital goods as it is not prescribed under definition of capital goods. Secondly, the goods in question are not parts or accessories of the capital goods. The appellant made an alternate submission that the goods in question since used in the manufacture of processed drums/ reels, packing drums etc. which are capital goods therefore, the goods on which credit was taken also falls under definition of input. For ease of reference the definition of input under Rule 2(k) of Cenvat Credit Rules, 2004 is reproduced below:-
"2(k) "input" means -
(i) all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production;
(ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service.
Explanation 1. - The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.
Explanation 2. - Input includes goods used in the manufacture of capital goods which are further used in the factory of the manufacturer."
4.1 From the plain reading of the above definition of inputs the following criteria to be satisfied to qualify goods as input.
1. To be used in or in relation to manufacture of final product or for any other purpose
2. Whether directly or indirectly
3. Whether contained in the final product or not
4. Within the factory of production
8|Page E/14099/2013, E/10480/2014, E/12481/2019-DB 4.2 As per the fact of the present case in view of the chartered engineer certificate submitted by the appellant, the use of the goods is not under dispute that the same were used in the manufacture of processed drums/ packing drums/ bobbin. These drums are used in relation to manufacture of final product as per the nature of the final product which is wire and cables.
The wires and cables for purpose of processing in the manufacture are shifted from one process machine to other process machine which is possible only after winding of wires and cables on the drums and also for the purpose of packing by winding of final product. On the basis of this use the goods i.e. iron and steel material are clearly used in or in relation the manufacture, directly or indirectly, whether contained or not in the final product. In view of the very broad definition of input, the iron and steel material ultimately used in or in relation to the manufacture clearly falls under the definition of input.
Therefore, even if it is assumed that the goods in question do not fall under the definition of capital goods, but it clearly falls under the definition of input.
4.3 Our above view is supported by the following judgments:-
Rajasthan Spinning and Weaving Mills - 2010 (255) ELT 481 - SC "7. The short question arising for determination is whether the assessee was right in availing MODVAT credit in respect of the afore-stated items by treating them as "capital goods" in terms of Rule 57Q?
8. Rule 57Q was substituted by Notification No. 6/97-C.E. (N.T.), dated 1st March, 1997. It enables the manufacturers of specified goods to claim modvat credit of duty paid on capital goods used by them in the factory for manufacture of final product. The Rule, insofar as it is relevant for this case, reads as under :
"RULE 57Q. Applicability. - (1) The provisions of this section shall apply to goods (hereafter in this section, referred to as the "final products") described in column (3) of the Table given below and to the goods (hereafter, in this section, referred to as "capital goods"), described in the corresponding entry in column (2) of the said Table, used in the factory of the manufacturer of final products.
TABLE
S.No Description of Descriptio
capital goods falling n of final
within the schedule products
to the Central Excise
Tariff Act, 1985 (5 of
1986) and used in
the factory of the
manufacturer
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(1) (2) (3)
1 .................................. ............
.. ...
2 .......................
3. All goods falling under
chapter 85 (other than
those falling under
heading Nos. 85.09 to
85.13, 85.16 to 85.31,
85.39 and 85.40);
4. ......................
5. components, spares and
accessories of the goods
specified against S. Nos.
1 to 4 above;"
9. The language of Rule 57Q is clear and unambiguous. It applies to the final products described in column (3) of the Table under the Rule as also to other goods, referred to as "capital goods", described in the corresponding entry in column (2) of the said Table, used in the factory of the manufacturer of final product. The parties are ad idem that diesel generating set falls under Chapter 85 under Heading No. 85.02, as described at Serial No. 3 of the afore-extracted Table. Similarly there is no dispute that chimney attached with the generating set is covered by the items described in Serial No. 5 thereof. However, the controversy centres around the question whether the steel plates and M.S. channels used in the fabrication of chimney would fall within the purview of Serial No. 5 of the Table below Rule 57Q.
10. Having examined the question in the light of the language employed in Rule 57Q and the case law on the point, we are of the opinion that the appeal is devoid of any merit.
11. In Jawahar Mills Ltd. (supra), heavily relied upon by the learned counsel for the assessee, the question which came up for consideration was whether the claim of modvat credit by some manufacturers in respect of certain items by treating them as capital goods in terms of Rule 57Q was in order. Some of the items under consideration were power cables, capacitors, control panels, cable distribution boards, air compressors, etc. The Court examined the question in the light of the definition of capital goods given in Explanation to Rule 57Q, which read as follows :
"capital goods" means--
(a) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products;
(b) components, spare parts and accessories of the aforesaid machines, machinery, plant, equipment, apparatus, tools or appliances used for aforesaid purpose; and
(c) moulds and dies, generating sets and weighbridges used in the factory of the manufacturer."
12. Inter alia observing that capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances if any of these goods is used for producing or processing of any goods or for bringing about any change in the substance for the manufacture of final product, although this view was expressed in the light of the afore-noted definition of "capital goods" in the said Rule, which is not there in Rule 57Q, as applicable in the instant case, yet the "user test" evolved in the judgment, which is required to be satisfied to find out whether or not particular goods could be said to be capital goods, would apply on all fours to the facts of the present case, 10 | P a g e E/14099/2013, E/10480/2014, E/12481/2019-DB in fact, in para 6 of the said judgment, the court noted the stand of the learned Additional Solicitor General, appearing for the Revenue, to the effect that the question whether an item falls within the purview of "capital goods" would depend upon the user it is put to.
13. Applying the "user test" on the facts in hand, we have no hesitation in holding that the steel plates and M.S. channels, used in the fabrication of chimney would fall within the ambit of "capital goods" as contemplated in Rule 57Q. it is not the case of the Revenue that both these items are not required to be used in the fabrication of chimney, which is an integral part of the diesel generating set, particularly when the Pollution Control laws make it mandatory that all plants which emit effluents should be so equipped with apparatus which can reduce or get rid of the effluent gases. Therefore, any equipment used for the said purpose has to be treated as an accessory in terms of Serial No. 5 of the goods described in column (2) of the Table below Rule 57Q.
14. We are, therefore, of the opinion that the Tribunal was correct in law in holding that the assessee was entitled to avail of modvat credit in respect of the subject items viz. steel plates and M.S. channels used in the fabrication of chimney for the diesel generating set, by treating these items as capital goods in terms of Rule 57Q of the Rules.
15. For the foregoing reasons, we find no substance in the appeal preferred by the Revenue. The same is dismissed accordingly. Parties are left to bear their own costs."
Vandana Global Ltd - 2017 -TIOL-2853-HC- Chattisgarh-CX "This bunch of matters are before us by reason of an order delivered by three member Bench of Customs, Excise and Service Tax Appellate Tribunal; for short the 'Tribunal', which is challenged in Tax Case No. 59 of 2011.
2. By the order dated 17-6-2008 the Principal Bench of the Tribunal referred the following issues for consideration to the Larger Bench :
"(a) Whether the term "capital goods" can include plant, structures, embedded to earth?
(b) Whether the goods like angles, joists, beam, channels, bars, flats which go into fabrication of such structures can be treated as 'inputs' in relation to their final products as inputs for capital goods, or none of the above?
(c) Whether the credit can be allowed in respect of goods like angles, joists, beam, channels, bars, flats which go into fabrication of such structures and plant?"
3. Through the impugned order dated 4-5-2010 [2010 (253) E.L.T. 440 (Tri. - LB)], the Principal Bench of the Tribunal presided by the President and the two Members answered the reference by holding as follows :
"(a) The terms 'capital goods' has been defined in the CENVAT Credit Rules, which in turn have been framed under the rule making powers conferred under Section 37(2) of the Act. The said section refers to credit of duty paid on goods used in, or in relation to the manufacture of excisable goods. Hence, 'capital goods' defined in the CENVAT Credit Rules in the context of providing credit of duty paid, have to be excisable goods. Whether a particular plant or structure embedded to earth can be considered as excisable goods or not has to be determined in the 11 | P a g e E/14099/2013, E/10480/2014, E/12481/2019-DB light of the decisions of the Hon'ble Supreme Court on the issue, which is no longer res integra.
(b) Goods like cement and steel items used for laying 'foundation' and for building 'supporting structures' cannot be treated either as inputs for capital goods or as inputs in relation to the final products and therefore, no credit of duty paid on the same can be allowed under the CENVAT Credit Rules for the impugned period."
4. In the light of the contents of the impugned order of the Tribunal and submissions of the assessee and the Revenue following substantial questions of law are formulated for consideration :
(A) Whether the terms 'capital goods' excludes the structures embedded to earth?
(B) Whether the goods like angles, joists, beams, bars, plates, which go into fabrication of such structures are not to be treated as 'input' used in relation to their final products as inputs for capital goods, or none of the above?
(C) Is the amendment brought in CENVAT Credit Rules, 2004 as per Rule 2 of the CENVAT (Amendment) Rules, 2009 retrospective in nature considering is it clarificatory to be applied to all matters which arise before 7-7-2009, the date of commencement of the CENVAT (Amendment) Rules, 2009 : hereinafter referred to as 'Amendment Rules'.
5. The impugned order of the Tribunal had come up for consideration before different High Courts either cited as precedent or as relied upon by the Tribunal in different other matters. The Gujarat High Court in Mundra Ports & Special Economic Zone Ltd. - 2015 (39) S.T.R. 726 (Guj.) referred to the contents of the amendment, to the extent it is relevant for the purpose of this case and held as follows :
"We do not find that amendment made in the Cenvat Credit Rules, 2004 which come into force on 7-7-2009 was clarificatory amendment as there is nothing to suggest in the Amending Act that amendment made in Explanation 2 was clarificatory in nature. Wherever the Legislature wants to clarify the provision, it clearly mentions intention in the notification itself and seeks to clarify existing provision. Even, if the new provision is added then it will be new amendment and cannot be treated to be clarification on particular thing or goods and/or input and as such, the amendment could operate only prospectively."
6. That view has been quoted with approval by the Madras High Court in M/s. Thiruarooran Sugars v. Customs, Excise and Service Tax Appellate Tribunal (CMA 3814/2014 and connections) decided on 10-7- 2017 [2017 (355) E.L.T. 373 (Mad.)] to conclude that the said amendment cannot be treated as clarificatory. M/s. Thiruarooran Sugars also considered the issue as to the effect and fundamental value of the evidentiary statement made by the Finance Minister dealing with an amendment in the budget speech.
7. Section 37 of the Central Excise Act, 1944; for short, 'the Act', is a rule making power. Section 37(2)(xvia) provide for the credit of duty paid or deemed to have been paid on the goods used in, or in relation to, the manufacture of excisable goods. Section 37(2A) of the Act - The power to make rules conferred by clause (xvi) of sub-section (2) shall include the power to give retrospective effect to rebate of duties on inputs used in the export goods from a date not earlier than the changes in the rates of duty on such inputs. Though the power to make rules include the power to give retrospective effect, while doing so the provision under consideration is neither made retrospective nor could it be treated as one.
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8. We are in complete agreement with the ratio of Mundra Ports (supra) and M/s. Thiruarooran Sugars (supra) on all fours.
9. Resultantly, we answer the questions formulated in these appeals in favour of the assessees and against the Revenue.
10. In the result, the appeals of the assessees are allowed setting aside the Tribunal's decision impugned in each of those appeals. The appeals filed by the Revenue are dismissed. However, no order as to costs."
Navyug Steel Industries - 2017 (9) TMI 342- CESTAT Ahmedabad "This is an appeal filed against order-in-appeal No. BHV-EXCUS-000- APP-197-16-17 dated 23.11.2016 passed by Commissioner (Appeals- III) Rajkot.
2. Briefly stated the facts of the case are that the appellant had availed CENVAT credit on MS Channel, Angle, Beam, Structural Steel Round, Square Bars, MS Bright Bars, MS Ingots etc. used in fabrication of capital goods within the factory. Alleging that these items are not eligible to credit, Show Cause Notice was issued to them for recovery of Rs. 2,03,111/- for the period 13.09.2009 to 06.04.2013. On adjudication, the demand was confirmed alongwith interest and equal amount of penalty. On appeal, the Ld. Commissioner (Appeals) upheld the order of the Adjudicating Authority and rejected their appeal. Hence, the present appeal.
3. The Ld. Advocate Shri Rahul Gajera for the appellant submits that all these items were used as structure to hold capital goods viz furnace, hence, eligible to credit as per the definition of 'input' prescribed under Rule 2(k) of CCR, 2004. He submits that the credit for fabrication of the capital goods is admissible to the appellant in view of the judgement of the Principal Bench At Delhi in the case of Singhal Enterprises Pvt. Ltd. vs. C.Cus. & C. Ex., Raipur ' 2016 (341) ELT 372 (Tri-Del.).He further submits that there is no dispute of the fact that these items are used for the purpose mentioned above. However, he fairly accepts that Chartered Engineer's Certificate in this regard has not been placed by the Appellant.
4. Ld. AR for the Revenue on the other hand submits that the claim of the Appellant is not supported by any evidence including Chartered Engineer's Certificate, therefore, the matter may be remanded to the adjudicating authority for verification of the said claim of the Appellant.
5. I find that the Principal Bench at Delhi in Singhal Enterprises Pvt. Ltd's (supra) in laying down the principle on the eligibility of credit on similar items observed as follows:-
"13. Now we turn to the question, whether credit is admissible on various structural steel items, such as, MS Angles, Sections, Channels, TMT Bar, etc., which have been used by the appellants in the fabrication of support structures on which various capital goods are placed? The same stands denied by the lower authority. The learned DR has sought disallowance of the same by citing the decision of the Larger Bench in the case of Vandana Global Ltd. (supra) and other judgments. Further, he has brought to our notice and emphasized the amendment carried out in Explanation-II to Rule 2(a) which defines the term 'Input' w.e.f.
7-7-2009. It has further been pleaded that the Cenvat credit claimed for the period prior to this will be covered within the decision of the Larger Bench in the case of Vandana Global Ltd. (supra).
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14. The Larger Bench decision in Vandana Global Ltd.'s case (supra) laid down that even if the iron and articles were used as supporting structures, they would not be eligible for the credit. Considering the amendment made w.e.f. 7-7-2009 as a clarification amendment and hence to be considered retrospectively. However, we find that the said decision of the Larger Bench was considered by the Hon'ble Gujarat High Court in the case of Mundra Ports & Special Economic Zone Ltd., 2015 (04) LCX0197 - 2015 (39) S.T.R. 726 (Guj.), wherein it was observed that the amendment made on 7-7-2009 cannot be held to be clarificatory and as such would be applicable only prospectively.
15. We find that the controversy can be laid to rest by making a reference to the decision of the Apex Court in the case of CCE, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd., 2010 (255) E.L.T. 481 (S.C.), wherein the Hon'ble Supreme Court has considered an identical issue of steel plates and MS channels used in the fabrication of chimney for diesel generating set. The credit stands allowed in the light of Rule 57Q of the erstwhile Central Excise Rules, 1944. In the said judgment, the Apex Court has referred to the 'user test' evolved by the Apex Court in the case of CCE, Coimbatore v. Jawahar Mills Ltd., 2001 (132) E.L.T. 3 (S.C.), which is required to be satisfied to find out whether or not particular goods could be said to be capital goods. When we apply the 'user test' to the case in hand, we find that the structural steel items have been used for the fabrication of support structures for capital goods. The appellants have argued that the various capital goods, such as, kiln, material handling conveyor system, furnace, etc. cannot be suspended in mid-air. They will need to be suitably supported to facilitate smooth functioning of such machines. It is obvious that the structural items have been suitably worked upon for this purpose. Accordingly, the goods fabricated, using such structurals, will have to be considered as parts of the relevant machines. The definition of 'Capital Goods' includes, components, spares and accessories of such capital goods. Accordingly, applying the 'User Test' to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of 'Capital Goods' as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat credit."
5. Also, I find merit in the contention of the Ld. AR for the Revenue that the Appellant should establish the said use by adducing evidences. In the result, the matter is remanded to the adjudicating authority to examine the claim of the appellant on the eligibility of credit on the aforesaid items and the Appellants are free to adduce evidence including the certificate from a Chartered Engineer on its use, and the adjudicating authority is directed to decide the issue in the light of the principle of law settled by this Tribunal in Singhal Enterprises Pvt. Ltd.'s case(supra). All issues are kept open. Appeal is allowed by way of remand."
4.4 In view of the above judgment the credit on the identical goods in the present case has been held to be admissible.
4.5 We further find that as per Explanation 2 of Rule 2 (k) other than the input mentioned at clause (i) and (ii) of Rule 2 (k) the input also includes goods used in the manufacture of capital goods which are further used in the 14 | P a g e E/14099/2013, E/10480/2014, E/12481/2019-DB factory of manufacturer. As per the facts of the present case the goods on which credit was availed was used in the manufacture of processed drums/reel/packing drums/MS drums which are admittedly capital goods and the same are used within the factory of the appellant manufacturer, therefore, the goods in question clearly qualify the term input as provided under Explanation 2 of Rule 2 (k). For this reason also, the appellant are entitled for the cenvat credit.
4.6 Our view is supported by the judgment in the case of Metrochem Industries (Supra), the Tribunal while determining the eligibility of assessee to claim cenvat credit in respect of steel items utilized to fabricate duct, cyclone ducting chambers, chloro tanks and chimneys which were required for manufacture of final product had took into consideration the Chartered Engineer's Certificate certifying the usage of steel items in fabrication of machinery and allowed the claim of cenvat credit in view of the decision of Hon'ble Supreme Court in the case of Rajasthan Spinning - 2010 () ELT 481 (SC) and Hindustan Zinc Ltd - 2007 (214) ELT A115 - SC.
4.7 Our view is further reinforced by the following judgment :
Sanghi industries - 2022 (5) TMI 475 -CESTAT Ahmedabad 4.3 We also find that the Learned Commissioner has denied the cenvat credit of Rs. 9,88,421/- availed on goods which were used in the erection of transmission towers installed from the power plant to the factory for bringing in the electricity. The Ld. Commissioner observed that the primary condition in respect of the goods which may qualify the definition of either 'inputs or 'capital goods' under Cenvat Credit Rules, 2004 is that they have to be used within the factory of manufacture.
This criteria has not been satisfied in this matter. However we find that in the case of Hindalco Industries Ltd.2014 (313) E.L.T. 311 (supra), after considering apex court judgment in Vikram Cements2006 (197) E.L.T. 145 (S.C.) it was observed as under :
6.3We are of the view that the ratio of the above-mentioned judgments of the Apex Court is squarely applicable to the facts of this case, as the Renu-sagar Power Plant, which is a captive power plant of the appellant company, together with the cement factory of the appellant company constitute one integrated unit and it is not disputed that except of small quantity of electricity generated being used in the Renu sagar township, the remaining quantity is used in the appellant's factory for production of aluminium. Therefore, the 15 | P a g e E/14099/2013, E/10480/2014, E/12481/2019-DB Cenvat credit in respect of capital goods and inputs used in the captive power plant located at Renu sagar cannot be denied just because the power plant is located at some distance from the factory. 6.4We also find that the Apex Court in the case of State of U.P. v.
Renu-sagar Power Company reported in (1988) 4 SCC 59 has held that Renusagar Power Plant had no separate and independent existence apart from and independent of Hindalco (the appellant) and therefore the Renu sagar Power Plant has to be treated as captive power plant of Hindalco.
7. However, since, admittedly, some quantity of electricity generated is used in the township and is not used in the factory of the appellant company for manufacture of excisable goods, to that extent, the input duty credit would not be admissible in view of judgment of the Apex Court in the case of CCE v. Solaris Chemtech Ltd. [2007 (214) E.L.T. 481 (S.C.)]. However, for determining the quantum of input duty credit, which would be inadmissible on this ground, the matter would have to be remanded to the original Adjudicating Authority."
Mankapur chini mills - 2019 (367) ELT 889 (All.)
22. We have examined the submissions advanced by the Learned Counsel for the parties and gone through the record.
23. The issue in hand pertains to the period 2005-06 to August, 2008, wherein the respondent-assessee, who is the manufacturer of V.P. Sugar and molasses, had procured Cenvat credit on items such as MS Plates, MS Channels, HR Coils, M.S. Angles, etc. The Revenue issued a show cause notice proposing to disallow the credit on the ground that these items had been used either for repair and maintenance of plant and machinery or modification of their existing plant and machinery. The Original Authority, vide order dated 13-10-2010, disallowed the credit by holding that items used for repair and maintenance or modification of plant and machinery are not eligible for credit. It was also held that items embedded to earth are also not covered in the definition of capital goods and items of Chapters 72 and 73 are not eligible for the credit.
24. Not satisfied with the order dated 13-10-2010, the respondent- assessee had approached the Tribunal by means of Appeal No. E/686/2011-EX(DB). The Tribunal, after hearing the Learned Counsel for the parties, allowed the appeal by means of order dated 15-5-2017, which is impugned in the present appeal. The operative portion of the order dated 15-5-2017 reads as under :
"Having considered the rival contention, I hold that the appellant is entitled to Cenvat credit on items of iron and steel in question as the same have been used for fabrication of capital goods, for repair and maintenance of capital goods, for fabrication of staging structures and supporting structures, etc., as no excisable products can be manufactured without the same. Further, the amended definition of 'inputs' under Cenvat Credit Rules provides for availability of Cenvat credit to a manufacturer on all items utilized by the manufacturer in the factory for or of production.
Accordingly, I allow this appeal and set aside the impugned order. The appellant will be entitled to consequential benefit in accordance with law"
25. Feeling aggrieved by the aforesaid order of the Tribunal, the Revenue has filed the present appeal inter alia stating that the Board has issued clarification vide Circular dated 18-5-2012, in respect of its 16 | P a g e E/14099/2013, E/10480/2014, E/12481/2019-DB Circular [dated] 2-4-2012, wherein it was reiterated that in terms of Rule 2(k) of the Cenvat Credit Rules, 2004, while Cenvat credit is available in respect of parts of Boiler, the same is not admissible in respect of structural components used for laying of foundation or making of structures for support of capital goods/Boiler, therefore, the Tribunal has erred in not considering the issue in its correct prospective. Furthermore, the Tribunal has erred in not applying the decision of Bajaj Hindustan Ltd. (supra), wherein this Court has held that Cenvat credit is not admissible on the inputs which were not used for manufacture of capital goods.
26. Refuting the submissions of the Learned Counsel for the Revenue, the stand of the Learned Counsel for the respondent-assessee is that the Tribunal has rightly passed the order and there is no illegality in the impugned order inasmuch as there is no dispute on the use of steel items in their factory and during the relevant period, the capacity of the plant had been extended and the said goods have been used as structural support for capital goods.
27. In order to consider rival submissions, first of all we would like to refer Rule 2(k) of Cenvat Credit Rules, 2004 which defines "input". This Rule as framed initially in 2004, read as under :
"2(k) "input" means all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not, and includes lubricating oils, greases, cutting oils coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used for manufacture of final products or for any other purpose, within the factory of production.
Explanation 1. - The high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.
Explanation 2. - Inputs include goods used in the manufacture of capital goods, which are further used in the factory of the manufacturer."
(emphasis supplied)
28. Definition of "input" under Rule 2(k) was amended vide notification dated 7-7-2009. Amended provision inserted following clause in Explanation 2 by Cenvat Credit (Amendment) Rules, 2009 with effect from 7-7-2009:
"but shall not include cement, angles, channels, Centrally Twisted Deform bar (CTD) or Thermo Mechanically Treated bar (TMT) and other items used for construction of factory shed, in building or laying of foundation or making of structures for support of capital goods"
29. Consequently, w.e.f. 7-7-2009, Explanation 2 to Rule 2(k), as a whole, reads as under :
"Explanation 2. - 'Input' include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer but shall not include cement, angles, channels, Centrally Wasted Deform bar (CTD) or Thermo Mechanically Treated bar (TMT) and other items used for construction of factory, shed, building or laying of foundation or making of structures for support of capital goods."
(emphasis supplied)
30. It may be noted that the Rule 2(k) was further substituted by Notification [No.] 3/2011-C.E. (N.T.), dated 1-3-2011 and a specific exclusion was provided for goods used for laying of foundation or 17 | P a g e E/14099/2013, E/10480/2014, E/12481/2019-DB making of structures for support of capital goods. Rule 2(k) as substituted w.e.f. 1-3-2011 reads as under :
"2(k) "input" means, -
(a) all goods used in the factory by the manufacturer of the final product; or
(b) any goods including accessories, cleared along with the final product, the value of which is included in the value of the final product and goods used for providing free warranty for final products; or
(c) all goods used for generation of electricity or steam (or pumping of water) for captive use; or
(d) all goods used for providing any (output service); or
(e) all capital goods which have a value up to ten thousand rupees per piece, but excludes -
(A) light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol;
(B) any goods used for-
(a) construction or execution of works contract of a building or a civil
structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods, except for the provision of service portion in the execution of a works contract or construction service as listed under clause (b) of Section 66E of the Act;
(C) capital goods, except when,-
(i) used as parts or components in the manufacture of a final product; or
(ii) the value of such capital goods is up to ten thousand rupees per piece;
(D) motor vehicles;
(E) any goods, such as food items, goods used in a guesthouse, residential colony, club or a recreation facility and clinical establishment, when such goods are used primarily for personal use or consumption of any employee; and (F) any goods which have no relationship whatsoever with the manufacture of a final product.
Explanation. - For the purpose of this clause, "free warranty" means a warranty provided by the manufacturer, the value of which is included in the piece of the final product and is not charged separately from the customer."
31. From perusal of the circulars dated 2-4-2012 and 18-5-2012, it comes out that these circulars have been issued in the changed context of the definition of [Rule] 2(k) of Cenvat Credit Rules, 2004 and both circulars have no concern for the period in issue. Thus, we find that the reliance placed by the Revenue in this regard has no substance.
32. On going through the record, we find that the Revenue has relied upon the Larger Bench decision of the Tribunal in the case of Vandana Global (supra), wherein it was held that the Explanation added to the definition of capital goods w.e.f. 7-7-2009 has to be held as explanatory and thus retrospective in nature. The said decision of the Tribunal was considered by the Hon'ble Gujarat High Court in the case of Mundra Ports & Special Economic Zone Ltd. (supra), wherein the said decision was not approved by the Hon'ble High Court and observed that the amendment made on 7-7-2009 cannot be held to be clarificatory and as such would be applicable only prospectively.
18 | P a g e E/14099/2013, E/10480/2014, E/12481/2019-DB
33. The Madras High Court in India Cement (supra) noticed Vandana Global (supra) but relied upon the Apex Court judgment in Rajasthan Spinning & Weaving Mills Ltd. (supra), wherein the Apex Court has considered an issue of steel plates and MS channels used in the fabrication of chimney for diesel generating set and after considering it, the Apex Court allowed the Cenvet credit on MS Rod, sheets, MS Channel, MS Plate, etc., used for fabrication of structures to support various machines/capital goods.
34. In Thiru Arooran Sugars (supra), a Division Bench of the Madras High Court specifically considered as to whether MS structural, (which support plant and machinery), cement and steel (which are used in erecting foundations to hold plant and machinery) are integral part of capital goods eligible for Cenvat credit under the Cenvat Credit Rules, 2004 prior to the amendment of Explanation 2 to Rule 2(k) by notification dated 7-7-2009. The Madras High Court has held that irrespective or whether 'user test' is test applied, or the test that they are in the integral part of the capital goods is applied, all such items fell within the scope and ambit of both Rule 2(a)(A) and 2(k) and, therefore, Cenvat credit was to be allowed on such goods.
35. In view of above settled position of law, since items used by the respondent-assessee were used as structure to hold the capital goods, hence, it is wrong to say that respondents are not eligible to Cenvat credit. Therefore, in our considered opinion, the Tribunal has rightly allowed the appeal and the reasoning given by the Tribunal cannot be said to be not cogent or correct appreciation of evidence on record.
36. Insofar as the assertions of the Revenue that while passing the impugned order, the Tribunal has ignored to consider the judgment rendered in Bajaj Hindustan Ltd. (supra) is concerned, we find that the Bajaj Hindustan Ltd. (supra) was a case where the assessee had failed to demonstrate the usage of the material itself and the Court, therefore, found that there was no substantive question of law involved but it was only a question of fact that the assessee was raising before it. In the case in hand, the respondent-assessee has specifically stated that during the relevant period, the said items were used as structural support of capital goods. Moreso, Bajaj Hindustan Ltd. (supra) does not lay down law for the items Cenvat is not available and there is no question of law formulated and answered. Thus, we are of the view that ratio laid down by the Bajaj Hindustan Ltd. (supra) is not at all applicable under the facts and circumstances of the case.
37. In view of above discussion and after giving careful consideration to the submissions, we have no manner of doubt that the Tribunal has rightly held respondent-assessee is entitled to Cenvat credit in respect of items used as structural support for capital goods.
38. In the result, we answer the questions formulated above against the Revenue and in favour of assessee.
39. The appeal lacks merits. Dismissed without there being any order as to costs.
Mangalam Cement ltd - 2018 (360) ELT 737 (Tri.LB) "4. Before deciding the issue involved in this case, we deem it appropriate to extract the definitions of 'capital goods' and 'input', as 19 | P a g e E/14099/2013, E/10480/2014, E/12481/2019-DB contained in Rule 2(a)(A) and Rule 2(k) respectively, in the CCR, 2004, which are extracted herein below :-
2(a) "capital goods" means :-
(A) the following goods, namely :-
(i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, Heading No. 6805 grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Central Excise Tariff Act;
(ii) pollution control equipment;
(iii) components, spares and accessories of the goods specified at (i) and (ii);
(iv) ..........................;
(v) ....................; and
(vi) ...........................,
used-
(1) in the factory of the manufacturer of the final products, but does
not include any equipment or appliance used in an office; or (2) for providing output service;
2(k) "input" means -
(i) all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production;
(ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service.
Explanation 1. - The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.
Explanation 2. - Input includes goods used in the manufacture of capital goods which are further used in the factory of the manufacturer."
5. From the perusal of the above definition of 'capital goods', it makes the position clear that such goods, which fall under Chapters 82, 84, 85 and 90, answer to the definition of capital goods. Further, components, spares and accessories of the goods of above Chapters also qualify for the purpose of definition of capital goods. On reading of the above definition, it reveals that no Chapter of the Central Excise Tariff Act, 1985 (CETA) has been prescribed for the components, spares and accessories for consideration as capital goods. Thus, it is evident that irrespective of the classification of components, spares and accessories, when those are fitted to the machines/machineries of the above eligible 20 | P a g e E/14099/2013, E/10480/2014, E/12481/2019-DB Chapters, the same should also be considered as capital goods for availment of Cenvat credit of Central Excise duty paid thereon.
6. In this case, the appellant contended that the Power Plant installed by it within its factory premises consists of the machines/machineries namely, Stack (Chimney), Air Cooled Condenser, AFCB Boiler, Turbine Generator House, ESP System, Raw Water Storage and RO Plant, Coal Crusher and Screening, Coal Storage, Fly Ash Handling System, Coal Handling System, Ash/Bed Material Silo, etc., classifiable under Chapter 85 of the CETA. Thus, the submission of the appellant is that the disputed goods namely, Cement and Steel Bar should qualify as 'components' for consideration as capital goods. It is an undisputed fact that the impugned goods were used by the appellant for fabrication and erection of structural to support various machines installed in its Power Plant. Without the structural, the machines could not be erected and will not be functional. Hence, manufacture of the finished goods will not be commercially viable. The expression 'accessories', as per the dictionary meaning, normally understood as a thing, which could be added for something else, in order to make the former more useful, versatile or attractive. Since, the disputed goods were used for fabrication of support structure for smooth erection of the machines, the same in our view should be considered as 'accessories' of the capital goods.
7. For ascertaining as to whether a particular item would fall under the definition of 'capital goods' or not, the 'user test' has to be applied to find out that in absence of use of that particular goods, what will be ultimate effect on the goods manufactured by the assessee. It is no doubt a fact that the above machineries without its proper installation, will not be functional to the satisfaction level, in order to achieve the desired objective. Thus, applying the 'user test', the Hon'ble Supreme Court in the case of Rajasthan Spinning & Weaving Mills Ltd. - 2010 (255) E.L.T. 481 (S.C.) held that even though steel plates and M.S. Channels are used in fabrication of Chimney, would fall within the ambit of 'capital goods'. The relevant paragraphs in the said judgment are extracted herein below :
12. Inter alia observing that capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances if any of these goods is used for producing or processing of any goods or for bringing about any change in the substance for the manufacture of final product, although this view was expressed in the light of the afore-noted definition of "capital goods" in the said Rule, which is not there in Rule 57Q, as applicable in the instant case, yet the "user test" evolved in the judgment, which is required to be satisfied to find out whether or not particular goods could be said to be capital goods, would apply on all fours to the facts of the present case, in fact, in para 6 of the said judgment, the Court noted the stand of the Learned Additional Solicitor General, appearing for the Revenue, to the effect that the question whether an item falls within the purview of "capital goods" would depend upon the use it is put to.
13. Applying the "user test" on the facts in hand, we have no hesitation in holding that the steel plates and M.S. channels, used in the fabrication of chimney would fall within the ambit of "capital goods" as contemplated in Rule 57Q. It is not the case of the Revenue that both these items are not required to be used in the fabrication of chimney, which is an integral part of the diesel generating set, particularly when the Pollution Control laws make it mandatory that all plants which emit effluents should be so equipped with apparatus which can reduce or get rid of the effluent gases. Therefore, any equipment used for the said purpose has to be treated as an accessory in terms of Serial No. 5 of the goods described in column (2) of the Table below Rule 57Q. 21 | P a g e E/14099/2013, E/10480/2014, E/12481/2019-DB
8. Applying the user test of 'capital goods' as enunciated by the Hon'ble Supreme Court in the case of Rajasthan Spinning & Weaving Mills (supra), the Hon'ble Madras High Court in the case of India Cements Ltd., reported in 2012 (285) E.L.T. 341 (Mad.), 2014 (305) E.L.T. 558 (Mad.), 2014 (310) E.L.T. 636 (Mad.) and 2015 (321) E.L.T. 209 (Mad.) has extended the Modvat benefit on Cement and steel items, considering the same as 'capital goods' under Rule 57Q of the erstwhile Central Excise Rules, 1944. Since, said rule is pari materia with the present Rule 2(a) of the CCR, 2004, the disputed goods, in the present case, should be considered as 'capital goods' for the purpose of the Cenvat benefit.
9. On perusal of definition of 'input' extracted above, it would reveal that all the goods (excepting light diesel oil/high speed diesel oil and motor spirit) are considered to fall under such definition, when 'used in or in relation to manufacture of final products', whether directly or indirectly, and whether contained in the final product or not. The only condition required to be fulfilled is that the goods must be used within the factory of production. Further, Explanation 2 appended to such definition clause provides that 'input' includes goods, which are used in the manufacture of capital goods for further use in the factory of the manufacturer. On a conjoined reading of the definition of input and Explanation 2 appended thereto, it makes the position clear that inputs are not only goods, which are used in the manufacture of final products, but also those which are 'used in or in relation to' the manufacture of the final product. The relationship between those goods and the final product could be either direct or indirect and may include or may not include their presence in the final products. Goods used in the manufacture of capital goods, which are installed for manufacture of the capital goods should also be considered for availment of Cenvat credit. In the case in hand, the cement and steel bars used to erect foundations for installing different machines in the power plant should also merit consideration as 'input' for the purpose of cenvat benefit. Analyzing and interpreting scope of the definitions of 'input' and 'capital goods', the Hon'ble Madras High Court in the case of M/s. Thiru Arooran Sugars & Ors. (Civil Misc. Appeal Nos. 3814/2011 and 2695 and 2696/2012) has held that steel and cement used for laying of foundation for erection of capital goods should be eligible for the cenvat benefit under the present set of rules. The relevant paragraph in the said order is extracted herein below :-
"44. In the facts of this case, we have to conclude that MS structural, which support the plant and machinery, which are, in turn, used in the manufacture of sugar and molasses are an integral part of such plant and machinery. The assessee has clearly demonstrated that structural as well as foundations, which are erected by using steel and cement are integral part of the capital goods (i.e., plant and machinery), as they hold in position the plant and machinery, which manufactures the final product. Therefore, in our opinion, whether the "user test" is applied, or the test that they are the integral part of the capital goods is applied, the assessees, in these cases, should get the benefit of Cenvat credit, as they fall within the scope and ambit of both Rules 2(a)(A) and 2(k) of the 2004 Rules."
10. In view of above analysis, we are of the considered opinion that the eligibility to duty credit of the disputed goods cannot be denied. Such eligibility either as 'capital goods' (accessories) or as 'inputs' has been examined and upheld by various decisions of the Hon'ble Apex Court and the Hon'ble High Courts as above. Accordingly, we answer the reference in favour of the appellant. The appeal file is returned to the referral Bench for a decision on merit."
22 | P a g e E/14099/2013, E/10480/2014, E/12481/2019-DB 4.8 In view of the above judgments, it is settled that if any goods used in the manufacture/fabrication of capital goods and such manufactured/fabricated goods used within the factory of the assessee, cenvat credit is admissible. Accordingly, on merit we are of the view that the appellant have rightly availed cenvat credit on iron and steel materials used for manufacture of processed drums/reels/packing drums etc. which were further used in the factory of the appellant manufacturer.
4.9 As regard the submission on limitation, we find that firstly, on this identical issue there were so many judgments having conflicting views but subsequently the larger bench of the Tribunal and various High Courts and Supreme Court consistently expressed the view that the cenvat credit on the goods in question is admissible. We are of the view that when issue involve is of interpretation of cenvat credit rules, no mala fide can be attributed to the appellant. Further, the appellant have been declaring the availment of cenvat credit which is in dispute in their ER- 1 return, therefore, there is no suppression and wilful mis-statement with intent to evade duty on the part of the appellant. Accordingly, the demand for the extended period is not sustainable also on limitation in the light of the judgment of jurisdictional High Court of Gujarat in case of Dynamic Industries Ltd. The similar view as regard limitation was taken in the following judgments: -
Suvikram Plastex Pvt. Ltd - 2008 (225) ELT 282 (T)
"5.6 We do not find that there is any strong reason for holding that they had an intention to evade Central Excise duty especially when it is on record that they had manufactured the goods on job work basis and sent the same to the principal manufacturer. In this connection, we had gone through the agreement between the appellant and the two raw material suppliers. Nowhere in the agreement, it is stated that the job worker will be clearing the goods on payment of duty. In our view, there is no justification for extending the longer period, because the period of dispute is from 1-4-2001 to 31-3-2003. The officers visited the unit and carried out search operations on 26-3-2003. However, the show cause notice was issued only on 30-6-2005. There is an enormous delay. Of course, the longer period can be invoked, provided there is suppression of facts with an intention to evade duty. In this case, the appellants have submitted periodical declarations. They have been availing SSI 23 | P a g e E/14099/2013, E/10480/2014, E/12481/2019-DB exemption. The audit parties also have visited them several times. So in these circumstances, we cannot accept that they had suppressed the facts with an intention to evade duty. So the longer period is not applicable."
Rallis India Ltd - 2006 (201) ELT 429 (T) "5. As regards the limitation the demand is clearly time barred. Once the assessee has filed the necessary declaration in November, 1995 and declared their price in RT-12 return and once this difference in price was noticed by the audit and explanation given by the assessee vide their letter dated 26-12-1995 the department cannot say that there was any suppression of facts on the part of the appellant. The matter cannot be under correspondence for 4 years and show cause notice is clearly time barred."
Patton Ltd - 2006 (206) ELT 496 (T) "This appeal is directed against the Order-in-Appeal dated 22-9-2004, which upholds the Order-in-Original, wherein the duty-demand has been confirmed and penalty imposed along with the interest to be recovered from the appellants.
2. Considered the submissions made at length by both sides and perused the records. I find that the appellants are challenging the Order- in-Appeal only on the ground of limitation. The appellants were working under the benefit of Notification No. 15/94 and manufactured and cleared plastic tanks upto the capacity of 300 litres without payment of Central Excise Duty. The conditions laid down in the Notification No. 15/94, requires the appellants not to take avail Modvat credit on the inputs used for the manufacture of such plastic tanks. The appellants had availed the Modvat credit of the inputs on tanks cleared availing exemption under Notification No. 15/94. The records of the appellants were audited by the Central Excise Department and the Audit Department pointed out the error to the appellants. On being pointed out by the Audit Party, the appellants reversed the amount of Modvat involved in the inputs, which were used for the clearance of the finished goods availing exemption under Notification No. 15/94. The said reversal was done by the appellants on 27-11-95. The Department was aware of the reversal done by the appellants on 27-11-95, but still they did not issue the show cause notice to the appellants till 4-5-98, demanding the duty. The Department's inaction in not issuing the show cause notice immediately on being pointed out by the Audit Party is unexplainable. In the absence of any cogent reason, particularly when the Audit Party from the Department itself, had visited the appellants' works, the Department cannot allege that there was a misdeclaration and suppression.
3. In view of the facts and circumstances as mentioned above, the total demand confirmed against the appellants, hopelessly fails having been barred by limitation. The appeal is allowed only on the point of limitation."
24 | P a g e E/14099/2013, E/10480/2014, E/12481/2019-DB 4.10 From the above settled position we are of the view that in the present case also the demand for the extended period is not sustainable on limitation also.
5. As per our above discussion and finding the impugned order are not sustainable, hence the same are set aside. Appeals are allowed.
(Pronounced in the open court on 11.09.2023 ) RAMESH NAIR MEMBER (JUDICIAL) C.L.MAHAR MEMBER (TECHNICAL) Geeta