Custom, Excise & Service Tax Tribunal
Him Teknoforge Ltd vs Ujjain on 18 February, 2019
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL,
WEST BLOCK NO.2, R.K. PURAM, NEW DELHI-110066
BENCH-SM
COURT - IV
Excise Appeal No. E/53181-53182/2018 [SM]
[Arising out of Order-in-Appeal No. IND-EXCUS-000-APP-121-141-
17-18 dated 05/09/2017 passed by the Commissioner of CGST &
Central Excise, Ujjain]
HIM Teknoforge Ltd ...Appellant
Vs.
C.G.S.T. & C.E., Ujjain ...Respondent
Present for the Appellant : Ms. Priyanka Goel, Advocate Present for the Respondent: Mr. P.R. Gupta, DR Coram: HON'BLE MRS. RACHNA GUPTA, MEMBER (JUDICIAL) Date of Hearing/Decision: 18.02.2019 FINAL ORDER No. 50268-50269/2019 PER: RACHNA GUPTA Present Order disposes of two Appeals, issue involved being common to both the Appeals and the Order of Commissioner(Appeals) being common to both the Appeals. The requisite details for both the Appeals are tabulated as follows:
Appeal No. SCN Dated O-I-O No. & O-I-A No. & Articles in Date Date question E/53181/2018 28.07.11 29 dated 121 dated Grinding 21.02.12 13.06.2016 05.09.2017 wheels, 10.12.12 cutting tools 09.10.13 and inserts 11.11.14 24.03.15 28.09.15 E/53182/2018 17.09.10 45 dated 121 dated Refractory 28.11.2016 05.09.2017 items 1.1 The relevant factual matrix for the impugned adjudication is that the appellants are engaged in manufacture of rough forging and forging articles of steel etc. They are availing and utilising cenvat credit facility on inputs, capital goods and service tax under Cenvat Credit Rules, 2004. The Department during the course of scrutiny of 2 E/53181-53182/2018 [SM] records and accounts maintained by the appellant noticed that they have received the grinding wheels, cutting tools and inserts in Appeal No. E/53181/2018 and refractory items in Appeal No. E/53182/2018 treating those as inputs. Department formed an opinion that those goods rather satisfy the definition of capital goods as such the appellant was not entitled to avail 100% credit of the cenvat during the same financial year as has been availed by them.
Resultantly, the aforesaid respective SCNs were issued to the appellants proposing the aforementioned respective demands to be recovered alongwith the interest at the appropriate rate and the proportionate penalties. The said proposals have been confirmed initially by the aforementioned respective Orders-in-Original. The Appeal thereof has been rejected upholding the said Order vide the order under challenge, as mentioned above respectively. Being aggrieved the appellants are before this Tribunal.
2. I have heard Ms. Priyanka Goel, Ld. Advocate for the appellant and Mr. P.R. Gupta, Ld. DR for the Department.
3. It is submitted on behalf of the appellant that the articles as that of grinding wheels, cutting tools, inserts, etc. have been used by the appellant actually as inputs in the process of manufacture. Therefore, these goods qualify the definition of input rather qualifying the definition of capital goods. Hence, the 100% credit in the same financial year has been availed and utilised by the appellant. The Order under challenge is therefore prayed to be set aside. It is further submitted that there have been the decision of this Tribunal in appellant's own case however for the previous period. Commissioner(Appeals) has committed a judicial indiscipline while ignoring said decisions. The case laws as that of Lubi Industries LLP Vs. Union of India 2016 (337) E.L.T. 179 3 E/53181-53182/2018 [SM] (Gujarat High Court) and Topland Engines Pvt. Ltd. Vs. Union of India 2006 (119) E.L.T. 209 Gujarat have been impressed upon. IN addition, the appellant has relied upon, as far as merits are concerned, on the decision of M/s Essar Steel Ltd. Vs. C.C.E., Raipur 2017 (11) TMI 109 (Tri.-Del.). However, w.r.t. Appeal No. E/53182/2018 wherein Refractory and Refractory Material are in question, Ld. Counsel has conceded for these goods to be capital goods imposition of penalty is being challenged in the said which has been confirmed vide Order under challenge. The Appeal is accordingly prayed to be allowed.
4. While rebutting these arguments, Ld. DR has justified the impugned Order. It is also impressed upon that the goods in those cases were different from the present ones. Grinding wheels were not the part of earlier decisions. It is mentioned that the Commissioner(Appeals) has done a meticulous while distinguishing the facts of the present case. From the earlier decisions of High Court as well as of the Tribunals as were impressed upon by the appellant before Commissioner (Appeals) as well. Hence, present is not the case of judicial indiscipline as is alleged. While submitting on merits, para 4 of the order under challenge has been impressed upon and Appeal is accordingly prayed to be dismissed.
5. After hearing both the parties, I observe and hold as follows:
5.1 The moot question to be adjudicated is as to whether grinding wheels, cutting tools and inserts (articles of the first Appeal) and refractory or refractory material (articles of the second Appeal)are capital goods as is alleged by the Department not entitled for availment of 100% of cenvat credit in the same financial year or these articles are the inputs as alleged by the appellant. 4
E/53181-53182/2018 [SM] Findings w.r.t. grinding wheels, cutting tools, inserts, etc. :
For these items it is the appellants case that these have been used in the machines producing final product of the appellant and as such three of these articles are the inputs irrespective of grinding wheels being specifically mentioned in the definition of capital goods. IT is observed from the SCN as well as the Order under challenge that there is no denial to the aforesaid fact that three of these items are used by the appellant in the machines manufacturing the final product. As per Cenvat Credit Rules, capital goods, as well as input are defined under Rule 2(a) and 2(k) respectively. Perusal of both these provisions makes it clear that both the terms are relative to the use they are put to. No doubt, grinding wheels are specifically mentioned in the definition of capital goods to be known as capital goods but they can acquire the relative character of being the input.
The Hon'ble Apex Court in the case of Collector of Central Excise and others Vs. Solaris Chemical Ltd. 2007 (7) SCC 347 has held that when the article is captively consumed in the manner that without the use of the said article it was not possible to manufacture the final product. The article will come within the ambit of expression, "use in relation to the manufacture" occurring in Rule 57a of Central Excise Rules, 1944. This Rule deals with the applicability of modvat scheme. According to these Rules, credit of central excise duty is available in respect of the duties paid on inputs used in the production of final products. The Hon'ble Apex Court in the aforesaid case has further held that any operation in the course of manufacture if so integrally connected with the operation involved in the emergence of manufactured goods it would come within the term of manufacture and the utilisation of the articles for production of final products will clothe it with the character of being an input which shall be available to cenvat in accordance of Rule 57(a). 5
E/53181-53182/2018 [SM] This Tribunal also in the case of Andhra Pradesh Paper Mills Ltd. Vs. Collector of Central Excise 1990 (50) E.L.T. 252 has earlier held that for the items to pass the test of eligibility to the benefit of credit it will be such that they participate in the process of manufacture without which the end product cannot be produced. There is no apparent denial on the part of the Department that the aforesaid three articles have not been used by the appellant in the process of the manufacture of their end product. The adjudicating authority is observed to have maintained silence to this aspect. Specifically, with respect to grinding wheels there has been a decision of Gujarat in the case of C.C.E. Vs. Batli Boi and Company Ltd. 2010 (257) E.L.T. 197 (Gujarat) wherein a decision of the year 2000 by this Tribunal in the case of HMP Cement Ltd. Vs. C.C.E. 2000 (117) E.L.T. 549 was referred holding that the benefit of credit on the grinding wheels has to be extended especially when the grinding wheels are considered as input.
Keeping in view the entire above discussion, three of the goods are held as inputs as such being eligible for the cenvat credit with the 100% utilisation thereof in the same financial year. Hence, the demand with respect to these articles for the interest and the penalty is held not sustainable.
Findings w.r.t. Refractory and Refractory Material :
For two of these articles in Appeal No. E/53182/2018, Ld. Counsel for appellant has conceded for the articles to qualify as capital goods rather than inputs. The liability of payment of interest also has not been denied. It is rather submitted that the interest already stands paid on 21.06.2010 itself i.e. much prior the issuance of the impugned SCN. It is observed that the Order-in-Original dated 28.11.2016 has acknowledged that the interest liability of the 6 E/53181-53182/2018 [SM] appellant comes to Rs. 1,256/- and the said amount stands already paid by the appellant vide GAR-7 challan dated 21.06.2010. This perusal makes it clear that in fact the SCN dated 17.09.2010 should not have been issued as being beyond the date of deposit of the proposed liability of the interest. This perusal makes it clear that adjudicating authority has failed to observe the mandate of the statute for no adjudication where the payment has been made even prior the issuance of SCN. Once the payment stands made, the question of any malafide intent to evade the duty has no more relevance. Thus, the Order of imposition of penalty in Appeal No. E/53182/2018 is not sustainable.
6. In view of the entire above adjudication, the Order under challenge is hereby set aside. Resultantly, both the Appeals stand allowed.
[Dictated and pronounced in the open Court] (RACHNA GUPTA) MEMBER (JUDICIAL) D.J.