Custom, Excise & Service Tax Tribunal
Cgst Varanasi vs Ms Gallant Ispat Ltd on 21 November, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
(E-HEARING)
Excise Appeal No.70444 of 2020
(Arising out of the Order-In-Original - 06-Commr-VNS-2020, dated -
19/06/2020 passed by Commissioner CGST & Central Excise, Varanasi)
Commissioner, CGST & Central Excise, Varanasi
.....Appellant
(Varanasi)
VERSUS
M/s Gallant Ispat Ltd. ....Respondent
(Sahjanwa, Distt.-Gorakhpur)
APPEARANCE:
Shri A. K. Choudhary, Authorized Representative for the Appellant
Shri Amit Awasthi, Advocate for the Respondent
CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.-70807/2024
DATE OF HEARING : 21.11.2024
DATE OF DECISION : 21.11.2024
SANJIV SRIVASTAVA:
This appeal is directed against the Order-In-Original -
06-Commr-VNS-2020, dated-19/06/2020 passed by
Commissioner, CGST & Central Excise, Varanasi. By the
impugned order Commissioner has held as follows:-
Order
I drop the proceedings initiated, against the party, i.e., M/s
Gallant Ispat Ltd., Plot No. 5, Sector-23, PO-Sahjanwa,
2 Excise Appeal No.70444 of 2020
District-Gorakhpur (U.P.), vide the aforesaid Show Cause
Notice No. 15/Commr./2011 dated 29.04.2011.
2.1 The Respondent-Assessee is engaged in the manufacture
of Sponge Iron, Billets, M. S. Bar and Mis rolled bar falling under
Chapter 72 of the First Schedule to the Central Excise Tariff Act,
1985. They are also availing Cenvat Credit facility under Cenvat
Credit Rules.
2.2 During the course of scrutiny of the records of the
Appellant it was observed that the Appellant had taken Cenvat
Credit in respect of M. S. Angle JSBM (Ch. 72163200) Chequered
coil, M. S. Channel, G. C. Sheet, H. R. Plate, Welding Electrodes
etc. All these items had been excluded from definition of inputs
by explanation -2 to Rule 2 (k) of Cenvat Credit Rules, 2004 if
used for construction of factory shed, building or laying of
foundation or making a structure for support of Capital goods.
2.3 Investigations were undertaken and the Show Cause
Notice dated 29.04.2011 was issued to the Appellant asking to
show cause as to why:-
"The amount of Rs. 60,81,820/- should not be recovered
from them under Pule 14 of Cenvat Credit Rules, 2004 read
with Section 11A(1) of Central Excise Act. 1944 alongwith
interest at appropriate rate under Rule 14 of Cenvat Credit
Rules, 2004 read with section 11AB of Central Excise Act'
1944 and why penalty should not he imposed under Rule 15
of Cenvat Credit Rules, 2004 read with section 11 AC of the
Central Excise Act. 1944."
2.4 The Show Cause notice was adjudicated as per the Order-
In-Original No.06-Commr-VNS-2020, dated-19/06/2020 holding
as follows:-
ORDER
(1) I disallow the Cenvat Credit of duty amounting to Rs. 60,81,820/- (Rupees Sixty Lakh Eighty one Thousand Eight Hundred & Twenty only) and order for reversal / recovery of the same under the provisions of Section 11A(2) of Central Excise Act, 1944 read with Rule 14 of Cenvat Credit Rules, 2004.
3 Excise Appeal No.70444 of 2020(ii) I also impose a penalty of Rs. 60,81,820/- (Rupees Sixty Lakhs Eighty one Thousands Eight Hundred & Twenty only) under Rule 15(1) of the Cenvat Credit Rules, 2004 (iii) i order recovery of interest at the prescribed rate on the amount of wrongly availed Cenvat Credit under the provisions Section 11AB of the Central Excise Act, 1944 read with Rule 14 of the Cenvat Credit Rules, 2004.
2.5 Aggrieved Appellant has filed the appeal before the Tribunal which was allowed by remanding the matter for reconsideration observing as follows:-
"2. We note that the main Cenvat credit stands denied to the appellant in respect of MS sheets, angles, channels, MS plates etc. on the ground that they are being used as supporting structurals, which cannot be held to be Cenvatable after the insertion of explanation 2 to Rule 2(k) of Cenvat Credit Rules, 2005. Further a part of the credit also stands denied in respect of welding electrodes used for repair and maintenance in the appellant's factory.
3. We find that both the issues now stand decided in favour of the assessee. Reference can be made to Hon'ble Gujarat High Court's decision in the case of Mundra Ports & Special Economic Zone Ltd. v. CCE & Cus. [2015 (39) STR 726 (Gujarat)], wherein the larger Bench of the Tribunal in the case of Vandana Global Ltd. v. CCE, Raipur (2010 (253) ELT 440 (Tri.-LB) was not agreed upon. Similarly in the case of welding electrodes also there are many decisions of Hon'ble High Courts which are being constantly and followed by the Tribunal.
4. Inasmuch as we are not having the assistance of the Id. Advocate for referring to the said decisions and for examining the scope of use of each and every item, we deem it fit to set aside the impugned order and remand the matter to original adjudicating authority for fresh decision in the light of the precedent decisions of the higher courts. Needless to say that the appellant would be given an opportunity to putforth their case before the adjudicating authority.
[Final Order No.70073/2018 dated 04.01.2018 in Excise Appeal No.1675 of 2012]"
2.6 In the remand proceeding the demands have been dropped as per the impugned order.
2.7 Aggrieved Revenue has filed this Appeal stating following grounds:-
4 Excise Appeal No.70444 of 2020"II. The party during personal hearing admitted that structures of required height for installing machinery were fabricated. The adjudicating authority found that a team visited the factory premises and found that only 10-15% of the inputs were used in the fabrication of the capital goods, signifying that the rest of the quantity was used for support structures / foundation.
III. The main issue in the case is as to whether the inputs M. S. Angle JSBM (Ch. 72163200) Chequered coil, M. S. Channel, G. C. Sheet, H. R. Plate, Welding Electrodes etc., used for construction of factory shed, building or laying of foundation or making a structure for support of Capital goods or not. If used, then these items stood excluded from definition of inputs by Explanation 2 to Rule 2k of the Cenvat Credit Rules, 2004. Despite several letters, party did not provide information regarding which capital goods was manufactured from which inputs and how much quantity of each item have been used in manufacture of such capital goods and upon verification, most of the 13 capital goods manufactured were found to have steel support structures. The adjudicating authority has merely discussed that these items/inputs are necessary and integral part of the machinery/components / accessories of the capital goods installed in the Sponge Iron Unit without coming up with the positive conclusion that no quantity of such inputs was used for making support structures, foundation, etc. Thus, adjudicating authority has failed to establish the fact that these items were not used for construction of factory shed, building or laying of foundation or making a structure for support of Capital goods.
IV.(1) The amendment in Rule 2 of the Cenvat Credit Rules, 2004 has been made by budget 2009-10, vide Notification No. 16/2009-CE (NT) dated 07.07.2009 i.e. this notification has come into effect from 07.07.2009. The adjudicating authority cited the decision of Hon'ble Gujrat High Court's judgement in the case of M/s Mundra Ports & Special Economic Zone Ltd. Vs. CCE & Cus (2015(39) S.T.R. 726 (Guj.)], wherein the period involved pertains to the period before amendments in the Explanation-2 of the Rule 2k of the Cenvat Credit Rules, 2004. Therefore, the ratio of Hon'ble Gujrat High Court's judgement in the case of Mundra Ports & Special Economic Zone Ltd. Vs. CCE & Cus is not applicable in the instant case.
2. Furthermore, an appeal has been filed before the Hon'ble Supreme Court against this judgement of Hon'ble Gujrat High Court judgement in the case of M/s Mundra Ports & Special Economic Zone Ltd. Vs. CCE & Cus. This 5 Excise Appeal No.70444 of 2020 appeal is pending before the Apex Court as on date. Therefore, again the ratio of decision is not applicable in the instant case.
V. Further, regarding the Cenvat credit taken on Rail (I.U. Rail) and sleeper Rail Joint, which have been used by the party for connecting nearest Railways Station to the factory for transportation of goods through Rail and as such not used in or in relation to manufacture of final product directly or indirectly hence not eligible for Cenvat Credit. The adjudicating authority while passing the order has not discussed the eligibility of the Cenvat credit taken on Rail (I.U. Rail) and sleeper Rail Joint, but has dropped the demand of the same without any findings.
VI. Further, regarding the Cenvat credit taken on welding electrodes, the Adjudicating Authority has relied on the decision Hon'ble Supreme Court in the case of M/s Ramala Sahkari Chini Mills Ltd. Vs. C.C.E., Meerut-I, reported in 2010 (260) ELT 321 (S.C.) and allowed the Cenvat Credit to the party. However, the ratio of the relied upon case law is not applicable as in the case no decision was made regarding the issue involved, i.e. credit on welding electrodes, and the matter was referred to the Larger Bench of the Hon'ble Court."
3.1 We have heard Shri A.K. Choudhary, Departmental Representative for the Revenue and Shri Amit Awasthi, Advocate appearing on behalf of the Respondent-Assessee.
4.1 We have considered the impugned order alongwith the submissions made in the appeal and during the course of arguments.
4.2 The matter was remanded by the Tribunal with specific directions to decide the matter in the light of the decision of Hon'ble Gujarat High Court in the case of Mundra Ports & Special Economic Zone Ltd. V/s CCE & Cus. [2015 (39) STR 726 (Gujarat)] wherein the decision of the Larger Bench of the Tribunal in the case of Vandana Global Ltd. V/s CCE, Raipur [2010 (523) ELT 440 (Tri-LB)] was not agreed to. It was specifically directed that the Adjudicating Authority should decided after examining the scope of each and every item. In the remand proceedings by the impugned order following has been observed:-
6 Excise Appeal No.70444 of 20207.1.1 I find that in respect of denial of cenvat credit in respect of MS Sheets, Angles, Channels, etc, the Hon'ble CESTAT vide its Final Order No. 70073/2018 dt. 04.01.2018 has observed that the issue stands decided in favour of the party in light of the Hon'ble Gujrat High Court's decision in the case of Mundra Ports & Special Economic Zone Ltd. Vs. CCE & Cus (2015).
7.1.2 It is observed that the facts of the above cited case were that M/s. Mundra Port and Special Economic Zone Limited, Mundra Port, Mundra appellant was inter alia engaged in providing Port Services. The appellant was registered for Service Tax under the taxing entries of "Port Services", "Storage and Warehousing Services" and "Cargo Handling Services". The appellant used/consumed various input services during the course of providing output services.
The appellant availed Cenvat credit of the Service Tax paid on such input services. A show cause notice was issued wherein the appellant was asked to show cause as to why credit of the Excise duty paid on the cement and steel used in the construction of new jetties and other commercial buildings should not be denied to them. The appellant filed a reply wherein the appellant denied the allegations made in the show cause notice in their entirety and submitted that the Cenvat credit of the Excise duty paid on cement and steel was available to them as they qualified as inputs as defined under the Cenvat Credit Rules, 2004. A second show cause notice was issued wherein the appellant was asked to show cause as to why credit of (a) Excise duty paid on the cement and steel used in the construction of new jetties and other commercial buildings should not be denied to them;
(b) Excise duty paid on air-conditioners installed in the premises of the appellant and used by the electrical department should not be denied to them; and (c) Service Tax paid on various services such as CHA Fees, Surveyors fees, Rent-a-Cab operator, bank charges, labour charges, installation charges, etc., should not be denied to them. The appellant filed a reply dated to the second show cause notice. In the said reply, the appellant denied the allegations made in the show cause notice in their entirety and submitted that the Cenvat credit of the Excise duty paid on cement and steel was available to them as they qualified as "inputs" and the services used by the appellant were "input services" as defined under the Credit Rules. The Commissioner of Central Excise, Rajkot vide common order dated 26-7-2007 in respect of both the show cause notices confirmed the demand along with interest and penalty upholding the allegations made in the show cause notices. Against which, the appellant preferred the appeal before the Tribunal. By the impugned order, to the extent cement and steel are used in the construction of jetty and 7 Excise Appeal No.70444 of 2020 port building are concerned, the Tribunal held that the same are not eligible inputs used in providing output service and accordingly confirmed the demand on this account. The said order of the Tribunal has been challenged in the tax Appeal.
The Tax Appeal was admitted on 22-1-2009 on the following substantial question of law:
"Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in rejecting the claim of the assessee in light of the provisions of Rule 2(k) of the Cenvat Credit Rules, 2004?". The Hon'ble Court decided the case in favour of appellant.
The relevant portion of the orders of the Hon'ble High Court Order are as under:
"5. We have heard Mr. Hardik Modh, learned counsel for the appellant and Mr. Y.N. Ravani, learned counsel for the respondent.
6. Before deciding the question, we deem it appropriate to extract Rule 2(k) and 2(1) of the Cervat Credit Rules, 2004.
"Rule 2(k) "input" means -
(1) 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;
(1) "input service" means any service, -
(i) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products up to the place 8 Excise Appeal No.70444 of 2020 of removal, and includes service used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage up to the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation up to the place of removal."
7. It is not disputed that jetty was constructed and input credit was claimed on cement and steel. The aforesaid definition of Rule 2(k) was applicable and Explanation 2 did not provide that cement and steel would not be eligible for input credit. According to learned Counsel for the appellant, the appellant is not manufacturer and, therefore, the provisions of Explanation 2 of Rule 2(k) would be applicable only to the factory and manufacturer. The appellant is neither having any factory nor he is manufacturer. The appellant is a service provider of port. We need not go into this question as to whether the appellant is a factory or manufacturer or service provider in view of the fact that it is not disputed by Mr. Y.N. Ravani, learned counsel appearing for the Revenue in this Tax Appeal that the appellant provides service on port for which he is getting jetty constructed through the contractor and the appellant has claimed input credit on cement and steel. The cement and steel were not included in Explanation 2 from 2004 up to March, 2006. The Cenvat Credit Rules, 2004 were amended in exercise of the powers conferred by Section 37 of the Central Excise Act, 1944 with effect from 7-7-2009, the date on which it was notified by the Central Government from the date of the notification. According to learned Counsel for the appellant, this amended definition would apply only to the factory or manufacturer and would not apply to the service provider. According to him, either before the amendment made in the year 2009 or thereafter, the appellant was neither factory nor manufacturer and he has only constructed jetty by use of cement and steel for which he was entitled for input credit as jetty was constructed by the contractor, but the jetty is situcted within the port area and the appellant is a service provider. According to the appellant, his case is squarely covered by the judgment of the Division Bench of the Andhra Pradesh High Court in Commissioner of Central Excise, Visakhapatnam-II v. Sai Sahmita Storages (P) Limited, 2011 (270) E.LT. 33 (A.P.) 2011 (23) S.T.R. 341 (A.P.) wherein in Paragraph 7, it has been clearly held that a plain reading of the definition of Rule 2(k) would demonstrate that all the goods used in relation to 9 Excise Appeal No.70444 of 2020 manufacture of final product or for any other purpose used by a provider of taxable service for providing an output service are eligible for Cenvat credit. It is not in dispute that the appellant is a taxable service provider on port under the category of port services. Therefore, the appellant was entitled for input credit and the decision of the Division Bench of the Andhra Pradesh High Court squarely applies to the facts of the case and answered the question on which the appeal has been admitted.
8. Mr. Y.N. Ravani, learned counsel for the Revenue has placed reliance on the decision of the Larger Bench of the Tribunal in Vandana Global Limited v. Commissioner of Central Excise, Ratpur, 2010 (253) E.LT. 440. We have carefully gone through the decision of the Larger Bench of the Tribunal. We do not find that amendment made in 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 of particular thing or goods and/or input and as such, the amendment could operate only prospectively. In our opinion, the view taken by the Tribunal is based on conjectures and surmises as the Larger Bench of the Tribunal used the expression that intention behind amendment was to clarify. The coverage under the input from where this intention has been gathered by the Tribunal has not been mentioned in the judgment. There is no material to support that there was any legislative intent to clarify any existing provision. For the same reason, as mentioned above, the decision of the Apex Court in Sangam Spinners Limited v. Union of India and Others, reported in (2011) 11 SCC 408-2011 (266) ELT. 145 (S.C.) would not be applicable to the facts of the instant case.
9. Mr. Ravani has also vehemently urged that since jetty was constructed by the appellant through the contractor and construction of jetty is exempted and, therefore, input credit would not be available to the appellant as construction of jetty is exempted service. The argument though attractive cannot be accepted. The jetty is constructed by the appellant by purchasing iron, cement, grid, etc., which are used in construction of jetty. The contractor has constructed jetty. There are two methods, one is that the appellant would have given entire contract to the contractor for making jetty by giving material on his end and then make the payment, the other method was that the appellant would have provided 10 Excise Appeal No.70444 of 2020 material to the contractor and labour contract would have been given. The appellant claims that he has provided cement, steel, etc., for which he was entitled for input credit and, therefore, in our opinion, the appellant was entitled for input credit and it cannot be treated that since construction of jetty was exempted, the appellant would not be entitled for input credit. The view taken contrary by the Tribunal deserves to be set aside.
10. For the reasons given above, this Tax Appeal succeeds and is allowed. The denial of input credit to the appellant by the respondent is set aside. The appellant would be entitled for input credit. The question is answered in favour of the assessee-appellant and against the department. No order as to costs.
7.1.3 Further, I find that on the similar issue of the party, for the period of March, 2009 to July, 2009, has been decided by the Hon'ble CESTAT vide Final Order No. A/71986/2017-EX[DB] dated 26.09.2017, allowed the credit to the party. The findings of the Hon'ble Tribunal in para 8.6, is as under:
8.6 Therefore, as far as the contentions raised by the Revenue for the denial of credit are concerned the same are not tenable as far as the interpretation of the law is concerned. It is not the case of the department that inputs on which the credit has been availed were not essentially required for manufacturing activity of the appellant. The Appellant in this regard have relied the case of CCE- Coimbatore v. Jawahar Mills Ltd. 2001 (132) E.L.T. 3 (S.C.), where it was held that 'user test' is required to be satisfied to find out whether or not particular goods could be said to be capital goods. In the instant case also when we apply the 'user test', we find that the items satisfy the test and therefore the credit should allowed on these items.
7.1.4 Further, I find that the Cenvat credit has been denied on the ground that the Explanation 2 to Rule 2k of Cenvat Credit Rules, 2004 excludes some inputs used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods. In this regard I find that the capital goods being manufactured by the party using steel are "Silos", "Bag Filer (Pollution Equipment", "Conveyor", "Electro Static Precipitator (Pollution Equipment)", "Kiln Platform", "Duct Support (Pollution Equipment)", "Gas Cooling Tower (Pollution Equipment)", "Day Bin", "I-Bin (Intermediate Bins", "Product House", "Electric Cable Towers", "Sponge Chimney (Pollution Equipment) and "Cooler Discharge Transfer Tower" etc. I observe that these items are necessary and integral part of 11 Excise Appeal No.70444 of 2020 the machinery/components/accessories of the capital goods installed in the factory.
On the other hand, it is evident that the Explanation 2 to Rule 2k of Cenvat Credit Rules, 2004 excludes some inputs used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods. Hence, I come to conclusion that this explanation clause is not applicable in the party's case for the reasons that, capital goods manufactured by the party were beyond the purview of exclusion clause of explanation 2 to Rule 2k of the Cenvat Credit Rules, 2004. Moreover, it is not in the show cause notice that goods used by the party do not satisfy the requirement of 'capital goods' within the meaning of the Cenvat Credit Rules, on the ground of its use and that the subjected goods have been used for construction factory shed, building or laying of foundation or making of structures for support of capital goods, therefore, proposal denying the Cenvat Creidt does not hold ground. Further, the party has submitted the photograph of capital goods fabricated and installed within the factory of manufacture alongwith the certificate of Chartered Engineer, wherein it has been certified that goods manufactured by the party using steel are part of capital goods fabricated within the factory of manufacture and are technically necessary and integral part of the machinery / components/accessories of the capital goods installed in the Sponge Iron Unit.
I also find that earlier, on the request of the party, to verify whether disputed items have been actually used in the manufacture/fabrication of capital goods, a team of officer of Gorakhpur Division visited the party's unit on 24.01.2012 and had submitted their report, which was as under:-
"the team visited the factory premises and found that all the goods as mentioned in Page 2-3 of the Show Cause Notice from Sl. No. (1) to (xiii) are actually the capital goods of the Cenvat Credit Rules, 2004 and the same have been manufactured inside the factory by using the items of Iron and Steel falling under Chapter 72 & 73 and installed purposefully at certain height as per requirement with support of structure of Iron & Steel.
The descriptions of each item as given in the SCN are also found to be correct."
And, at the relevant time, it was settled position of law that the components, spares and accessories need not fall in Chapter-82, 84 and Chapter 85 of the Central Excise Tariff Act, 1985. They ccould fall in any Chapter. The only 12 Excise Appeal No.70444 of 2020 condition was that they should be part, component or accessories of machinery specified in clause (i).
I also find that in the case of CCE, Coimbatore v. Jawahar Mills Ltd. reported in 2001 (132) ELT 3(SC), it was held that, "user test" is required to be satisfied to find out whether or not particular goods could be said to capital goods. In the present case, applying the user test, I find that the items satisfy the test as also observed in the Verification report of jurisdictional Range Officer. Further, applying the user test of 'capital goods' as enunciated by the Hon'ble Supreme Court, in the case of Rajasthan Spinning & Weaving Millls, the Hon'ble Madras High Court in the case of India Cements Ltd., reported in 2012 (285) E.L.T. 341 (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 in line with the present Rule 2(a) of the Cenvat Credit Rules, 2004, the disputed goods, in the present case should be considered as 'capital goods' for the purposes of Cenvat benefit. In the case of Mangalam Cement Ltd. vs. Commissioner of Central Excise, Jaipur-I reported in 2018 (360) ELT 737 (Tri, -LB), wherein it has been held that, "Cenvat credit - Inputs/Capital goods - Cement and Steel items used for fabrication of support structure for smooth erection of the machine, to be considered as 'accessories' of capital goods Items also merit consideration as 'input' for the purpose of Cenvat benefit being used in manufacture of capital goods Such items eligible to get benefit of Cenvat Credit, as they fall within scope and ambit of both Rule 2(a)(A) as well as 2(k) of Cenvat Credit Rules, 2004. In the case of Hindustan Zinc Ltd., reported in 2007 (214) ELT 510 (Raj.), the Hon'ble High Court has held that:
"Cenvat/Modvat-Capital goods-MS/SS plates used in workshop meant for repair and maintenance of machinery, which are used for manufacture of final product - Such roods which are necessary for running of plant and up-keeping of machinery directly involved in the manufacturing of products, held to be eligible to avail Modvat credit - No substantial question of law arises-Rule 2(a) and 3 of cenvat Credit Rules, 2004-Section 35G of Cental Excise Act, 1944,"
The above decision has been upheld by the Hon'ble Apex Court in the cae of U.O.I vs. Hindustan Zinc Ltd. reported in 2007(214) ELT A115 (S.C.).
7.2 Now, I take up the issue of denial of Cenvat credit on welding electrodes. I find that while the remanding the case the Hon'ble Tribunal, in respect of welding electrodes also has given its finding as under:
13 Excise Appeal No.70444 of 2020We find that both the issues now stand decided in favour of the assessee. Similarly, in the case of welding electrodes also there many decisions of Hon'ble High Courts which are being constantly followed by the Tribunal.
7.2.1 It is observed that with regard to availment of Cenvat Credit on welding electrodes, the show cause notice dt. 28.04.2011 has relied upon the Civil Appeal No.5554 & 5555 of 2009 in the case of Maruti Suzuki Ltd. vs. C.C.E. Delhi-III.
I find that the above decision of Hon'ble Supreme Court, relied upon in the impigned show cause notice, has been distinguished by Hon'ble Supreme Court in the case of Ramala Sahkari Chini Mills Ltd. Vs. C.C.E., Meerut-I, reported in 2010 (260) ELT 321 (S.C.), wherein Hon'ble Supreme Court approving the eligibility of Cenvat Credit on welding electrodes, has held as under:
Cenvat/Modvat - Welding electrodes used in maintenance of machines whether eligible to credit as inputs - Supreme Court in Maruti Suzuki Ltd. case [2009(240) E.L.T. 641 (S.C.)] held that all three components of definition viz., specific part, inclusive part and place of use, to be satisfied for claiming credit as inputs Goods to fall under "inputs" as per said decision must be (i) used in or in relation to manufacture of final product whether directly or indirectly, and whether contained in final product or not; (ii) covered within six enumerated categories in Rule 2(g) of Cenvat Credit Rules, 2002 and (iii) used within factory of production
- First and third parts namely specific part and location of use to be satisfied for goods to be inputs Supreme Court's ruling relating to confining goods only to inclusive part of definition, that is to the six specified categories, not agreed with Prima facie, restricting definition of inputs to six categories not intended by legislature Phrase "and includes"
not intended by legislature to impart restricted meaning to definition of inputs Interpretation of such term in Maruti Suzuki case requires reconsideration by Larger Bench-Rule 2(g) ibid - Rule 2(k) of Cenvat Credit Rules, 2004.
Cenvat/Modvat - Inputs - Interpretation of definition - Legislative intention - Legislature not intended to restrict definition of inputs to only six enumerated categories - By employing phrase "and includes", restricted meaning to definition of inputs not intended to be imparted by legislature - Rule 2(g) of Cenvat Credit Rules, 2002 - Rule 2(k) of Cenvat Credit Rules, 2004.
7.2.2 Thus, I find that in light of the above findings of the Hon'ble Supreme Court, availment of Cenvat credit on 14 Excise Appeal No.70444 of 2020 welding electrodes by the party, can be said to be legally valid and falls within the eligibility of input for Cenvat credit.
4.3 The decision of the Larger Bench of the Tribunal which held that the amendments made by Notification No.16/2009-CE(NT) dated 07.07.2019 has been set aside by the Hon'ble Chhattisgarh High Court in the case of Vandana Global Ltd. V/s Commissioner of C.Ex. & Cus., Raipur reported in 2018 (16) GSTL 462 (Chhattisgarh) observing as follows:-
"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."15 Excise Appeal No.70444 of 2020
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."
4.4 That being so the only reason for denial of Cenvat Credit in respect of these goods could have been if it was found that the goods were used elsewhere then for manufacture of capital goods used in the factory of manufacture. As is evident from the impugned order Commissioner has gone through each and every aspect to conclude that these items were used for manufacture of capital goods used in the factory of manufacturer. We have reproduced the findings in earlier part of the order in Para 4.2.
4.5 Accordingly, the impugned order cannot be faulted on this account.
4.6 Revenue has filed appeal for denial of Cenvat Credit on welding electrodes by stating that the decision of the Hon'ble Supreme Court in the case of Ramala Sahkari Chini Mills Ltd. V/s Commissioner of C.Ex., Meerut-I reported as 2010 (260) E.L.T. 321 (S.C.) is only a decision referring the matter to the Larger Bench. However, we find that the Larger Bench vide the Order reported at 2016 (334) E.L.T. 3 (S.C.) has confirmed the admissibility of Cenvat Credit on welding electrode used in maintenance of machines. Relevant para of the judgment is reproduced below:-
"We have heard the learned counsels for the parties. We have also read and considered the order dated 29th November, 2010 [2010 (260) E.L.T. 321 (S.C.)] of this Court referring the matters to a larger bench for a decision on the question as to whether the definition of the term "input" in Rule 2(g) of the Cenvat Credit Rules, 2002 is to be understood to include items beyond the six items mentioned specifically in Rule 2(g). The answer to the question referred, according to us, is self-contained in the order of reference which has referred, inter alia, to a three Judge 16 Excise Appeal No.70444 of 2020 Bench decision of this Court in Regional Director, Employees' State Insurance Corporation v. High Land Coffee Works of P.F.X. Saldanha and Sons & Anr. [(1991) 3 SCC 617]. There are other decisions of this Court by Coordinate Benches (three judge) on the issue which need not be adverted to specifically inasmuch as it has been clearly held in Regional Director, Employees' State Insurance Corporation (supra) that the word "include" in the statutory definition is generally used to enlarge the meaning of the preceding words and it is by way of extension, and not with restriction. We answer the question referred to us in the above manner leaving it for the appropriate bench of this Court to decide on the factual parameters of the case(s) and the entitlement of the assessee(s) to Cenvat credit in the facts of each case."
4.7 In view of the Larger Bench decision of the Hon'ble Supreme Court, we do not find any merits in this appeal on this issue.
5.1 We do not find any merits in this appeal and the same is dismissed.
(Operative part of the order pronounced in open court) Sd/-
(P. K. CHOUDHARY) MEMBER (JUDICIAL) Sd/-
(SANJIV SRIVASTAVA) MEMBER (TECHNICAL) Nihal