Custom, Excise & Service Tax Tribunal
M/S Balaji Steel Tubes & Pipes Ltd vs C.C.E., Kanpur on 27 July, 2009
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R.K.Puram, New Delhi COURT-IV Date of hearing/decision: 27.7.2009 Central Excise Appeal No.1344 of 2007 Arising out of the order in appeal No.626-CE/APPL/KNP/2006 dated 22.12.2006 passed by the Commissioner of Central Excise (Appeals), Kanpur. For Approval and Signature: Honble Mr. M. Veeraiyan, Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes M/s Balaji Steel Tubes & Pipes Ltd. . Appellants Vs. C.C.E., Kanpur . Respondent
Appearance:
Shri R.Santhanam, Advocate for the appellants Shri Iskitkhar Baig, Authorized Departmental Representative (DR) for the Revenue Coram: Honble Mr. M. Veeraiyan, Member (Technical) Oral Order No.____________________ Per M. Veeraiyan:
This is an appeal against the order of the Commissioner (Appeals) No. 626-CE/APPL/KNP/2006 dated 22.12.2006.
2. Heard both sides.
3. The appellants are manufacturers of MS tubes and pipes.The dispute relates to eligibility of Cenvat credit amounting to Rs.54,931/- on three items, namely, Transformers, Electrical Switch Gear and Joists which hav been received by the appellants during the period November 1994 and December 1994.
4.1 Learned Advocate for the appellants submits that the transformer is an equipment or apparatus which are used, though indirectly, in relation to manufacture of their excisable goods. The item electrical switch gear is a part or component of electrical machinery which is also used indirectly in the manufacture of final product. The item joist is also used in shifting of materials from one place to another within the factory and therefore used indirectly in the manufacture of final product. He took me through the decision of the Larger Bench of the Tribunal in the case of Jawahar Mills Ltd. vs. C.C.E., Coimbatore 1999 (108) ELT 47 (Tri.) and also of the Honble Supreme Court in the case of Jawahar Mills Ltd. confirming the decision of the Larger Bench reported in 2001 (132) ELT 3 (SC). He submits that there is a change in the definition of capital goods with effect from 16.3.95 which enlarging the scope of the term capital goods making them eligible for Cenvat credit and it does not in any way curtail the benefit which was available from 1.3.94 till 15.3.95. These three items, according to them, are covered by the definition prevailing prior to amendment on 16.3.95.
4.2 Learned Advocate relies on the decision of the Tribunal in the case of Modern Petrofils reported in 1997 (96) ELT 404 (Tri.) wherein it has been held that transformer is an integral part of machinery and hence is eligible for Cenvat credit under Rule 57Q. He also relies on the decision of the Tribunal in the case of Valley Abrasives Ltd. reported in 1997 (91) ELT 700 to claim that the transformers are covered by the term capital goods prior to amendment dated 16.3.95 and eligible for Cenvat credit.
5. Learned SDR submits that the transformers of capacity of 75 KVA and above have been introduced only with effect from 16.3.95 and the Switch gear fall under Chapter 8535 which is also specifically included only with effect from 16.3.95 and all the three items, transformer, switchgear and joist are not directly used in producing excisable goods. He relies on the decision of the Tribunal in the case of Max G.B.Limited vs. C.C.E., Chandigarh 2003 (159) ELT 203 (Tri-Del.) and Rosa Sugar Works - 1999 (114) ELT 950 (Tri.) in support of his submission that joist cannot be considered as capital goods during the relevant period.
6.1 I have carefully considered the submissions from both sides. The issue involved is limited to the period prior to 16.3.95. With reference to the same period, the Larger Bench of the Tribunal in the case of Jawahar Mills Ltd. considered the issue of eligibility of Cenvat credit on capital goods and held as follows:
34.In the light of the above, let us consider the? contentions raised by the Revenue. The main contention is that clause 1(a) to Rule 57Q relates to production machinery used for bringing about any change in any substance for the manufacture of the final product. This is contrary to the plain language of clause 1(a). The first part of clause 1(a) does not confine itself to machinery. Apart from machinery, it refers to machine, plant, tools or appliances etc. Secondly, the second leg of clause 1(a) refers to three distinct expressions viz. (i) used for producing of goods for the manufacture of the final product (ii) used for processing of any goods for the manufacture of the final product and (iii) used for bringing about any change in any substance for the manufacture of the final product. When these three different and distinct expressions are used, it will not be possible and correct to construe the expression `used for producing of any goods for the manufacture of the final product as synonymous with `used for bringing about any change in any substance for the manufacture of the final product. Similarly, it would not be correct to construe the expression `used for processing of any goods for the manufacture of the final product as synonymous with `used for bringing about any change in any substance for the manufacture of the final product. The contention of the Revenue that clause 1(a) would confine itself to production machinery used for bringing about any change in any substance for the manufacture of the final product will also imply that the Supreme Courts decision in Indian Farmers Fertilizer Coop. Ltd. and J.K. Cotton Spg. & Wvg. Mills Co. Pvt. Ltd. case extending the coverage of Section 8(3)(b) to items such as motor vehicles and locomotives, cane baskets, laboratory fittings, electricals humidifier exhaust fan and similar equipments, would be wrong, but this obviously is not permissible. In fact, precisely this contention was raised by the Revenue in Gujarat High Court in the Industrial Machinery Manufacturers Pvt. Ltd. case and was rejected by the High Court.
37.It has been contended by the Revenue that for an? item to be eligible for credit, and to qualify as capital goods, it has to pass two tests. Firstly, the item should be a machine, machinery, plant, equipment, apparatus, tool or appliance. Secondly, it should be used for producing or processing of any goods or for bringing about any change in any substance for manufacture of the final product. There is no quarrel with this proposition. The question is - what is the true meaning of the two stage expression employed.
38.It has been contended by the Revenue that in? terms of Explanation 1(a), the item must have a direct nexus with the final product being produced. This contention is contrary to the decision of the Supreme Court in the Indian Copper Corporation case and J.K. Cotton Spg. & Wvg. Mills Co. Pvt. Ltd. case cited supra.
6.2 The Honble Supreme Court which upheld the decision of the Larger Bench in Jawahar Mills Ltd. case has held as under:
6. The contention of learned Additional Solicitor? General that the aforesaid decision and other decisions referred by the Tribunal in the impugned order were cases involving sales tax and income tax and, therefore, the Tribunal should not have relied on those decisions is without any substance because the real question is that of the principle laid down by a decision. In view of the liberal language of the provision; Mr. Rohtagi fairly and very rightly did not seriously dispute that if any of the items enumerated in explanation 1(a) is used for any purpose mentioned therein for the manufacture of final products, it would satisfy the test of Capital goods. The main contention of Mr. Rohtagi, however, is that the question whether an item falls within the definition of Capital goods would depend upon the user it is put to. The submission is that parts of the items in respect whereof availing of Modvat credit has been allowed by the Tribunal could not be treated as Capital goods as the manufacturer could not establish that the entire item was used in the manufacture of final product. To illustrate his point, Mr. Rohtagi submitted that part of a cable may go into the machine used by the manufacturer and, thus, may qualify the requirement of clause 1(a) and, at the same time, another part of the cable which is used only for lights and fans would not so qualify. We have no difficulty in accepting the contention of the learned Additional Solicitor General that, under these circumstances, user will determine whether an item qualifies or not the requirement of clause 1(a). However, in the present cases this aspect has no relevance. It was not the case of the revenue at any stage before the authorities that an item does not satisfy the requirement of Capital goods within the meaning of the Rule on the ground of its user as it now sought to be urged by the learned counsel. The case of the revenue has all through been that the items in question per se are not Capital goods within the meaning of the expression as defined in Explanation 1(a). In respect of the cables of which Mr. Rohtagi gave example, the stand of the revenue before the Tribunal was that the cables per se cannot be treated as Capital goods. The stand of the revenue was not as has been projected now by Mr. Rohtagi. In this view, the question of directing remand of these matters for fresh decision by the Tribunal does not arise. On the facts and circumstances of these cases, therefore, the stand that the items in question are not used for manufacture of final product cannot be accepted for the reasons aforestated.
7. In the light of the ratio laid down by the Honble Supreme Court interpreting the definition of capital goods under Rule 57Q and in the light of the decisions relied upon by the learned Advocate relating to transformer, I hold that these three items are to be considered as capital goods during the disputed period and the appellant is entitled to Cenvat credit.
8. The appeal is allowed with consequential relief.
(M. Veeraiyan) Member (Technical) scd/ 5