Custom, Excise & Service Tax Tribunal
Jsw Ispat Steel Ltd vs Commissioner Of Central Excise-Nagpur on 9 January, 2024
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
WEST ZONAL BENCH
EXCISE APPLICATION (MISC) NO: 85380 & 85466 OF 2023
(on behalf of appellant)
IN
EXCISE APPEAL NO: 86608 OF 2013
[Arising out of Order-in-Appeal No: PVR/23/NGP/2013 dated 18th January 2013
passed by the Commissioner of Central Excise & Customs (Appeals), Nagpur.]
JSW Steel Coated Products Ltd
A-10/1 MIDC Industrial Area, Kalmeshwar
Dist: Nagpur - 441501 ... Appellant
versus
Commissioner of Central Excise
Kendriya Utpad Shulk Bhavan, Telengkhedi Road
Civil Lines, Nagpur - 440 001 ...Respondent
APPEARANCE:
Shri Abhishek Deodhar, Advocate for the appellant Shri P K Acharya, Superintendent (AR) for the respondent CORAM:
HON'BLE MR C J MATHEW, MEMBER (TECHNICAL) HON'BLE MR AJAY SHARMA, MEMBER (JUDICIAL) FINAL ORDER NO: 85014/2024 DATE OF HEARING: 30/08/2023 DATE OF DECISION: 09/01/2024 PER: C J MATHEW Miscellaneous Application no. E/MISC/85466/2023 seeking change of cause title is allowed. Miscellaneous Application no.
E/86608/2013 2 E/MISC/85380/2023 is dismissed as withdrawn.
2. This appeal arises from rejection of the appeal of M/s JSW Steel Coated Products Ltd (formerly N/s JSW Ispat Steel Ltd) and consequent upholding of the confirmation of demand of ₹ 48,49,642/- sought to be recovered, under rule 14 of CENVAT Credit Rules, 2004, on 'steel plates' of various grades utilized by the appellant for repair, maintenance and replacement of 'acid tank', 'annealing furnace' and 'buckets' in the factory of manufacture, along with interest leviable thereon, and imposition of penalty of like amount under section 11AC of Central Excise Act, 1944.
3. The appellant is a manufacturer of 'cold-rolled (CR) sheets/coils', 'galvanized sheets/coils' and 'colour-coated sheets' and the dispute relates to the credit availed on 'steel plates' referred to supra between 1st January 2006 and 31st August 2010. The process of manufacture of finished goods includes 'acid pickling', 'annealing' and 'galvanization' all of which apparently corrodes the pickling tank, annealing furnace as well as buckets used for removal of zinc dross from the galvanizing tank. It would appear that the acid used in pickling damages the steel tank that requires repair replacement. In the process of annealing, it would appear that, owing to deployment of heat, steel undergoes melting and requiring replacement. In galvanizing, the protective zinc coating leaves 'dross' which are E/86608/2013 3 removed regularly using buckets which themselves get affected by the chemical corrosion.
4. The original authority disposed off the notice for recovery of the credit on the ground that activity of repair is not covered by the definition of rule 2(a) of CENVAT Credit Rules, 2004 and thereby, not entitling them to the claim for availment of credit under rule 3 therein in relation to the capital goods. On the claim of the appellant that these could qualify as 'inputs', in terms of rule 2(k) of CENVAT Credit Rules, 2004, the original authority concluded that failure on the part of the assessee to claim such in the regular returns and inability to prove that these were 'inputs' deprived them of the benefit of that plea.
5. Learned Counsel for appellant submitted that the impugned order has solely relied upon the decision of the Larger Bench of the Tribunal in Jaypee Rewa Plant v. Commissioner of Central Excise, Raipur [2003 (159) ELT 553 (Tri.-LB)], holding that repairs and maintenance of machinery are not normally to be considered as process of manufacture and consequently ineligible for credit, to draw attention to the decisions of the Hon'ble High Court of Bombay in ACC Ltd v. Commissioner of Central Excise, Pune - II [2018 (361) ELT 343 (Bom.)], of the Hon'ble High Court of Rajasthan in Hindustan Zinc Ltd v. Union of India [2008 (228) ELT 517 (Raj.)] and E/86608/2013 4 of the Hon'ble High Court of Chhattisgarh in Ambuja Cements Eastern Ltd v. Commissioner of Central Excise, Raipur [2010 (256) ELT 690 (Chhattisgarh)] holding that the Larger Bench of the Tribunal had not considered the ratio of the decision of the Hon'ble Supreme Court in J K Cotton Spinning & Weaving Mills Co Ltd v. Sales tax Officer, Kanpur [1997 (91) ELT 34 (SC)] and, hence, unacceptable as precedent.
6. Learned Authorised Representative placed reliance on the decision of the Hon'ble Supreme Court in Sarswati Sugar Mills v. Commissioner of Central Excise, Delhi-III [2011 (270) ELT 465 (SC)] which held that '24. In Simbhaoli Sugar Mills Ltd. v. Commissioner of Central Excise, Meerut, 2001 (135) E.L.T. 1239 (Tri.-Del.), the appellant is a manufacturer of sugar and availed a MODVAT credit on the joints, channels, angles and MS Beams used in fabricating supporting structures for installation of equipments such as vacuum pan, crystallizers, sugar grader, elevator, etc., HR plates (black steel) are used in boiler of sugar plant to keep temperature high, MS bars, shapes and sections are used for erection of new cooling tower, chequred plates and ITR plates are used to construct the platforms, the cane carrier chain and spares are used to transfer the raw material/semi processed material from stage to other, as the capital goods in the terms of Rule 57Q, treating these items as the parts and components of the plant. The question which arose before the Tribunal was that whether these items used for fabricating structures to support E/86608/2013 5 and install various machineries of the sugar plant are capital goods in terms of the Rule 57Q. The Tribunal while allowing the MODVAT credit found that these items, except MS sections and shapes, used for raising structure to support the various machines, parts of machineries of the plant would be covered by the explanation to Rule 57Q as a capital goods. The Tribunal referred to its own decision in Malvika Steel Limited's case [1998 (97) E.L.T. 530 (Tribunal)] and without semblance of any discussion, has partly allowed the assessee's appeal. In view of our findings and the conclusion in the earlier part of the judgment, we cannot agree with the reasoning of the Tribunal.' to contend that sections and shapes are not 'capital goods'. He also placed reliance on the decision of the Hon'ble High Court of Andhra Pradesh Sree Rayalaseema Hi-Strength Hypo Ltd v. Commissioner of Customs & Central Excise, Tirupati [2012 (278) ELT 167 (AP)] setting out that repairs and maintenance are different from manufacture and hence claim for coverage under rule 2(k) of CENVAT Credit Rules, 2004 would not apply.
7. On examination of the records, as well as perusal of the submissions, we find that the availment of credit of duty paid on steel plates of various grades on the finding that the definition of 'capital goods' in rule 2(a) of CENVAT Credit Rules, 2004 was not allowed for non-conformity with that and that their alternative plea for consideration of eligibility as 'inputs' in terms of rule 2(k) of CENVAT Credit Rules, 2004 was not to be entertained by recourse to E/86608/2013 6 procedural lacuna indicated in the order. On the other hand, the first appellate authority had rejected the appeal solely by relying upon the decision of the Larger Bench of the Tribunal on the ground that the said decision covered the issue in dispute.
8. Learned Counsel has pointed out that the Hon'ble High Court of Bombay, in re ACC Ltd, had held that '11. In the case of Jaypee Rewa Plant (supra), it was held that the welding electrodes which are used for carrying out repairs to the plant and machinery are not used co- extensively for the purpose of the manufacture of final product. In the case of Hindustan Zinc Ltd. v. Union of India (supra), a Division Bench of Rajasthan High Court dealt with the decision of Jaypee Rewa Plant (supra). In paragraph 11, the Rajasthan High Court observed that in the case of Jaypee Rewa Plant (supra), only a portion of relevant paragraph of the decision of the Apex Court in the case of J.K. Cotton Spinning and Weaving Mills Company Limited was reproduced and the material portion which lays down that the goods need not be ingredients or commodities used in the process, nor must they be directly and actually needed for "turning out or the creation of goods" was not considered. The Rajasthan High Court therefore, proceeded to hold that the decision of the Larger Bench of the Appellate Tribunal is no longer a good law. The same issue arose for consideration of Chhattisgarh High Court in the case of Ambuja Cement (supra). Ultimately it was held that the decision in the case of Jaypee Rewa Plant (supra) is not a good law.
12. Now, coming back to the impugned order, the Appellate Tribunal has proceeded on the footing that the E/86608/2013 7 decision of its Larger Bench in the case of Jaypee Rewa Plant (supra). After having perused the decision of the Apex Court in the case J.K. Cotton Spinning and Weaving Mills Co. Limited (supra), we agree with the view expressed by Rajasthan and Chhattisgarh High Courts that the said decision of the Larger Bench of the Appellate Tribunal in the case of Jaypee Rewa Plant is based on incorrect reading of the law laid down by the Apex Court in the said decision.' It would, therefore, appear that the first appellate authority had not considered the law, as settled, before disposing off the appeal of the appellant herein.
9. The decision cited by the Learned Authorised Representative does not pertain to deployment steel plates for the purpose of keeping the machinery already installed in operation but, admittedly, required as 'capital goods' for undertaking manufacture. In re J K Cotton Spinning & Weaving Mills Co Ltd, the eligibility of welding electrodes, which are used for repairs and capital goods but do not, of themselves, find use in 'capital goods' let alone in the finished goods manufactured by the appellant therein, was the issue in dispute. It is common ground, that the 'steel plates', on which credit had been taken by the appellant herein, are necessary for keeping the machinery in operation. Insofar as the decision of the Hon'ble Supreme Court in re Saraswati Sugar Mills is concerned, the issue for consideration was the duty liability on steel structures used for installation of capital good covered by rule 57Q of erstwhile Central Excise Rules, 1944 E/86608/2013 8 enabling availment of MODVAT credit on such capital goods and in the context of notification no. 67/95-CE dated 16th March 1995 granting exemption to capital goods that fell within the enumeration in rule 57Q of Central Excise Rules, 1944. The Hon'ble Supreme Court held that such steel structures are not components which conformed to the definition of rule 57Q of Central Excise Rules, 1944 and, consequently, liable to duty in view of non-eligibility for the cited exemption.
10. The Hon'ble Supreme Court was considering duty liability and reference to rule 57Q of Central Excise Rules, 1944, which could be considered as predecessor provision of rule 3 of CENVAT Credit Rules, 2004 as far as capital goods are concerned, was only in the context of the reference to that rule for the purpose of exemption from duties of central excise under section 3 of Central Excise Act, 1944 on goods manufactured and consumed captively. That complex situation does not arise herein.
11. We are concerned in this dispute with the entitlement for credit of duties paid on 'steel plates' used for keeping the 'capital goods' in operation for the manufacture of goods which is not in dispute herein. The original authority had declined to consider the coverage of the said 'steel plates' within the meaning of 'inputs' in rule 2(k) of CENVAT Credit Rules, 2004 and the first appellate authority had E/86608/2013 9 rendered a decision entirely on the basis of Larger Bench of the Tribunal which had been held to be incorrect law by the Hon'ble High Court of Bombay in re ACC Ltd.
12. On a perusal of rule 2(k) of CENVAT Credit Rules, 2004, we find that the definition therein is intended for such goods as are entitled to availment of credit in terms of rule 3 of CENVAT Credit Rules, 2004; 'steel plates' do not come within that definition and, consequently, are not 'capital goods' but, nonetheless, the installation of 'capital goods' within the factory of manufacture by or on behalf of assessee is permissible towards availment of CENVAT credit on the parts deployed therein to qualify as 'inputs' under rule 2(k) of CENVAT Credit Rules, 2004. That claim of the appellant herein has been discarded by the original authority on procedural grounds and had not been considered by the first appellate authority at all. The order of the first appellate authority, in view of the decision of the Hon'ble High Court of Bombay in re ACC Ltd, does not sustain and is set aside.
13. The first appellate authority has failed to subject the order of the original authority, on the discarding of claim for coverage as 'inputs' for availment of CENVAT credit on the part of the appellant, to scrutiny. This is an aspect that requires consideration by the original authority. To enable this, we set aside the impugned order E/86608/2013 10 and remand the matter back to the original authority to determine the claim of the appellant for coverage of credit within the meaning of rule 2(k) of CENVAT Credit Rules, 2004.
(Order pronounced in the open court on 09/01/2024) (AJAY SHARMA) (C J MATHEW) Member (Judicial) Member (Technical) */as