Custom, Excise & Service Tax Tribunal
M/S Shree Cement Limited vs Cce, Jaipur on 27 December, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. Principal Bench, New Delhi COURT NO. I DATE OF HEARING : 06/21.10.2016. DATE OF DECISION : 27/12/2016. Excise Appeals No. 820, 860 of 2012 and 60114 of 2013 [Arising out of the Order-in-Original No. 142/2011/C.Ex./JPR-II-COMM. dated 24/11/2011, No. 143/2011/C.Ex./JPR-II-COMM. dated 20/12/2011 and No. 52/2013/CE/JPR-II dated 24/07/2013 passed by The Commissioner (Appeals II), Central Excise, Jaipur.] M/s Shree Cement Limited Appellant Versus CCE, Jaipur Respondent
Appearance S/Shri B.L. Narasimhan, Advocate (for Excise Appeals No. 820, 860/2012) Bipin Garg, Advocate (for Excise Appeal No. 60114 of 2013) for the appellant.
S/Shri Yogesh Agarwal and Amresh Jain, Authorized Representative (DRs) for the Respondent.
CORAM : Honble Shri Justice Dr. Satish Chandra, President Honble Shri B. Ravichandran, Member (Technical) Final Order No. 56193-56195/2016 Dated : 27/12/2016 Per. B. Ravichandran :-
There are three appeals by the appellant dealing with their eligibility for Cenvat credit of duty in respect of cement and TOR steel used for construction of plant and machinery in their factory premises. As the issue involved is similar and overlapping, all these appeals are taken up together for disposal.
2. The appellants are engaged in the manufacture of cement and clinker liable to Central Excise duty. For expansion of capacity, the appellants installed new plants. They procured duty paid steel items for the purpose and also captively consumed some quantity of cement on payment of duty. The dispute in the present appeals relates to their eligibility for credit of duty paid on these items.
Appeal No. EX/820/2012 EX (DB) :
This appeal is against confirmation of denial of credit of Rs. 91,77,265/- by the Original Authority towards duty paid on cement used by the appellant for various purposes with reference to expansion project. The period of dispute is June 2009.
Appeal No. EX/860/2012 EX (DB) :
This appeal deals with denial of credit of Rs. 2,50,02,215/-. The items involved were TOR steel procured by the appellant and used for construction of plant and machinery inside the factory. The period of dispute is June 2009.
Appeal No. EX/60114/2013 EX (DB) :
This appeal is against denial of credit of Rs. 6,40,13,156/-. The items involved were cement (Rs. 2,35,27,036/-) and construction steel items (Rs. 4,04,86,120/-).
3. The learned Counsel for the appellant submitted that cement and TOR steel items were used in erection and fabrication of plant and machinery inside the factory. These were used for manufacture of capital goods falling under Chapter 82, 84 and 85. These were used in making support structures. Erection, installation and operation of huge machinery would not be possible without these supports. These items are to be considered as used in relation to manufacture of final products since without use of these items setting up of plant was not possible for manufacturing activity. Reliance was placed on the decision of Honble Supreme Court in CCE, Jaipur vs. Rajasthan Spinning and Weaving Mills Ltd. reported in 2010 (255) E.L.T. 481 (S.C.). The immovability of capital goods is not relevant to decide the Cenvat credit eligibility on the inputs used. It was further submitted that reliance placed by the Original Authority on the decision of the Tribunal in Vandana Global Ltd. vs. CCE, Raipur reported in 2010 (253) E.L.T. 440 (Tribunal LB) is incorrect as the Honble Gujarat High Court in Mundra Ports & Special Economic Zone Ltd. vs. CCE & CUS reported in 2015 (39) S.T.R. 726 (Guj.) held that no retrospective effect can be given to the Explanation 2 to Rule 2 (k) of Cenvat Credit Rules. The learned Counsel also relied on various decided cases to emphasis that the Steel items used in fabrication of various technological structures which are closely connected with various capital goods as essential accessories and support structures are eligible for Cenvat credit. These were discussed later of this order.
4. The learned AR contested the submissions of the learned Counsel for the appellant. He submitted that cement and TOR steel are construction material for various civil construction and it cannot be said that they are used for fabrication of capital goods. These items together make re-enforced concrete structures which are nothing but various floorings, foundations, pillars and columns in the civil construction of the factory premises. Certain machinery is placed on them and work with their support does not make it that they will become components of such machinery. He further submitted that various case laws relied upon by the appellant are mainly with reference to structural MS Steel items used in specific fabrication with reference to various plant and machinery not with TOR/TMT steel used with cement. None of them deal with eligibility of cement used in construction in a manufacturing unit.
5. We have heard both the sides and perused the appeal records. At the outset we note that there are two categories of items in dispute for their eligibility of Cenvat credit. The first one is the cement used by the appellant in the construction activity. It is apparent that the cement is used in conjunction with second set of items TOR steel to make re-enforced concrete structures by the appellants while putting up the expansion project. The submission of the appellant that the cement and TOR steel are used in various parts of the plant and machinery like conveyor belting, main crusher, raw mill, coal mill, collar, cement silo etc. The raw material passes through these various sections for manufacture of final product. The appellant submitted that the cement and TOR steel were essential in putting up the new plant and machinery as they serve various functions of support structures, base etc. In this connection, we have perused the impugned orders with reference to appeal Nos. E/820/2012 and E/60114/2013. We note that the usage of TOR steel and cement to create various RCC structures, foundations, pillars, columns and civil structures have been verified by the Jurisdictional officers. The appellants claim that these are not civil constructions like buildings etc. is mis-leading. It is clear that cement alongwith TOR steel with water, sand and other additions are used for creation of permanent civil assets like buildings, floors, columns, pillars etc. Certain machinery is placed on these structures does not make these civil structures as components or accessories of said machinery. Similarly, using RCC various structures are created by the appellants for passage of raw material and storage of intermediate product. The usage of these civil structures in these process by itself will not make them parts and machinery for the purpose of identifying the cement and TOR steel as inputs used in the manufacture of capital goods. Such claim by the appellant is factually and legally unsustainable.
6. We note TOR steel is nothing but Cold Twisted Defermed (CTD) steel bars. CTD and Thermo Mechanically Treated (TMT) bars are basically used in civil construction work with cement for creation of permanent structures. The reliance placed by the appellant regarding non-applicability of the decision of the Tribunal in Vandana Global Ltd. (supra) is not relevant to the present case to decide the eligibility of cement and TOR steel for credit. When the usage of cement and TOR steel is admittedly for creation of various permanent civil structures, not to be considered as components and accessories of identified capital goods, the question of extending credit on such construction raw material does not arise. We also note that the reliance placed on various case laws by the appellant are more appropriate to consider the credit eligibility of MS Steel items which are used in the fabrication of various technologies structures/accessories and other support structures in connection with the functional need of various capital goods in a manufacturing process.
7. We also note that the report given by the Jurisdictional Central Excise officer regarding the usage of cement as available in the impugned order dated 04/01/2012 is revealing. The cement is mainly used in the construction of kiln piers raft/footing, columns, slabs for foundation, foundation for raw mill hoper below the ground, columns in the hoper building, RCC columns, retaining wall in cold dump, columns and wall in cooler building etc. As can be seen all these are civil constructions, though with reference to the overall expansion of production capacity by the appellant. Use of cement in these structures cannot be considered as used cenvatable inputs in the fabrication or manufacture of any capital goods. The same reasoning applies to TOR Steel which is used alongwith cement in creating these structures. Accordingly, we hold that the credit on cement and TOR steel availed by the appellant is not justifiable under Cenvat Credit Rules, 2004.
8. We note that reliance placed by the appellant on the decision of Honble Supreme Court in Rajasthan Spinning & Weaving Mills Ltd. (supra) is not appropriate for cement and TOR Steel. The Honble Supreme Court applied user test to decide on the eligibility of MS Plates and Channels used in fabrication of chimney for generator. Here in the present case, we note that the cement and TOR steel, which are basically construction raw materials, were essentially used in creation of RCC structures like floor, columns, rafts, retaining walls etc. which are nothing but RCC civil structures. They have a role and required in overall expansion of plant and machinery by itself will not make the cement and TOR Steel as cenvatable inputs which are to be used in the manufacture/fabrication of identifiable capital goods. Though the lower Authority adopted the reasoning followed decision of the Tribunal in Vandana Global Ltd. (supra), we find that even without reference to the same, the eligibility of credit for cement and TOR steel can be examined on the basis of their application and the legal requirement for eligible input in terms of Cenvat Credit Rules, 2004. On careful analysis of the facts of the case in the impugned order, we find that cement and TOR steel cannot be considered as inputs which are used in the fabrication or manufacture of capital goods in the present case. Accordingly, we find the appeals are without merit and are accordingly rejected.
(Order pronounced in open court on 27/12/2016.) (Justice Dr. Satish Chandra) President (B. Ravichandran) Member (Technical) PK ??
??
??
??
8EX/820 of 2012