Custom, Excise & Service Tax Tribunal
M/S. Vinayak Steels Ltd vs Cc&Ce, Hyderabad-Iii on 3 February, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench SMB Court I Appeal No.E/1292/2012 (Arising out of Order-in-Appeal No.119/2011(H-III)CE dt. 20/01/2012 passed by CC,CE&ST(Appeals-I&III), Hyderabad) For approval and signature: Honble Ms. Sulekha Beevi, C.S., Member(Judicial) 1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? M/s. Vinayak Steels Ltd. ..Appellant(s) Vs. CC&CE, Hyderabad-III ..Respondent(s)
Appearance Shri Lalit Mohan Chandana, Advocate for the appellant.
Shri R.K. Dass, Authorised representative for the respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member(Judicial) Date of Hearing:19/01/2016 Date of decision:.
FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.] The appellants are aggrieved by the denial of CENVAT credit.
2. The appellants are engaged in the manufacture of sponge iron & MS ingots and are registered with the Central Excise Department. They are availing CENVAT credit on the duty paid on inputs, capital goods and input services. During the verification of records, it was found that appellants had irregularly availed CENVAT credit on HR plates / coils (Rs.2,65,887/-) as inputs and on welding electrodes (Rs.60,658/-) as capital goods and of service tax paid on input services of repair of JCB excavator / loader (Rs.2,445/-) during the period July 2010 to March 2011. A show-cause notice dated 20/05/2011 was issued proposing to disallow the credit and demand recovery of the same along with interest and to impose penalty. After due process of law, the adjudicating authority confirmed the demand along with interest besides imposing penalty of Rs.2,65,887/-. The appellants carried the issue in appeal and vide the order impugned herein, the Commissioner(Appeals) allowed the credit on input services and reduced the penalty imposed from Rs.2,65,887/- to Rs.25,000/-. However, the demand on irregular credit availed on HR coils / plates and welding electrodes was confirmed. Being aggrieved the appellants have preferred the present appeal.
3. On behalf of the appellant, the learned consultant Shri Lalit Mohan Chandana submitted that appellants had filed a detailed reply to the show-cause notice along with annexures showing the manner in which the impugned items were used in the factory. He submitted that the HR coils / sheets were used to fabricate Former sheet which are used in induction furnace. These Formers melts and mixes with the liquid metal and becomes part of finished product during the process of manufacture. That without Former sheet, it is impossible to run induction furnace. He adverted to CBEC circular No.690/6/03 dt. 20/01/2003 and contended that the Circular clarifies that Steel Former captively consumed in Induction furnace is in the nature of input. That though Commissioner(Appeals) in the impugned order stated that Former Sheet is an integral part of induction furnace, denied the credit for the reason that appellant did not maintain proper records for the use of the HR items. He contended that in the appellants own case, for an earlier period, the Tribunal vide judgment reported in Vinayaka Steels Ltd. Vs. CC&CE, Hyderabad [2014(300) ELT 93 (Tri. Bang.)] had allowed the credit on HR sheets used to fabricate Former, but imposed penalty for not maintaining records and non-filing of returns observing the same to be procedural lapse. The credit on welding electrodes was denied. These were used in fabrication of D-Stoner Assembly which is an equipment for reduction of contamination levels of iron ore. The credit availed on welding electrodes was denied on the ground that they cannot be treated as capital goods. He submitted that as welding electrodes were used to manufacture capital goods, credit has to be allowed.
4. Against this, the learned AR Shri S.V. Nair contended that credit has been rightly disallowed. The appellants did not maintain proper records for the use of HR sheets /coils, welding electrodes etc. They failed to maintain the records as required under Rule 9(5) of CENVAT Credit Rules, 2004. They have not produced any Chartered Engineers certificate to establish the usage of the materials. The appellants had not declared the manufacture of Former Sheets in their monthly returns. Regarding the quantity of impugned items used for Former Sheet and D-Stoner Assembly, there is no reliable evidence except the submissions and chart prepared by the appellant. That as there is no evidence, the Commissioner(Appeals) has rightly disallowed the credit.
5. I have heard the rival submissions. Commissioner(Appeals) has observed in the impugned order that Former Sheet is an integral part of induction furnace. The reason for denying credit is that appellants did not adduce any evidence regarding the use of HR items to make Former Sheet. That appellants did not maintain any records or file returns showing the captive consumption of Former Sheet. Again credit on welding electrodes used for D-Stoner Assembly is denied for want of evidence establishing the usage of welding electrodes in D-Stoner Assembly. It is observed in the impugned order, that welding electrodes can be used for repairing or fabrication of any item and without any documentary evidence, the credit cannot be allowed. The Tribunal in the appellants own case has allowed credit on Former Sheets even though appellant failed to maintain proper records. Penalty was imposed for not maintaining records. From the write ups annexed to the reply to the show-cause notice as well as the CBEC Circular No.690/6/03 dt. 20/01/2003, it is understandable that Former Sheet is an integral part of Induction Furnace. The appellant cannot manufacture finished goods without Former Sheet. Therefore though appellant failed to maintain records, it can be safely inferred that HR sheets/coils were used to make Former Sheet which was essential in the process of manufacture undertaken by appellant. In the appellants own case, the Tribunal has allowed credit on Former Sheets. Following the decision of CESTAT in the appellants own case, reported in 2014(300) ELT 93 (Tri. Bang.), I hold that credit availed on HR coils/sheet (Rs.2,65,887/-) used to make Former sheet is to be allowed. However, in the case of welding electrodes in the absence of evidence to establish that these items were used to manufacture capital goods / D-Stoner Assembly, I am not inclined to allow the same. Therefore, I uphold the disallowance of credit availed on welding electrodes. As the appellant failed to maintain records, following the judgment in appellants own case, cited supra, the penalty of Rs.25,000/- is also upheld.
6. In the result, the impugned order is modified to the extent of allowing the credit availed on HR coils/plates (Rs.2,65,887/-). The disallowance of credit availed on welding electrodes (Rs.80,658/-) and the penalty of Rs.25,000/- imposed is sustained. Appeal is thus partly allowed in above terms with consequential reliefs, if any.
(Pronounced in court on ..) SULEKHA BEEVI C.S. MEMBER(JUDICIAL) Raja.
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