Custom, Excise & Service Tax Tribunal
M/S.Aditya Cement vs Cce, Jaipur-Ii on 31 August, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI
Date of Hearing:9.8.2016
Date of Decision:31.08.2016
Excise Appeal No. 2008/2008-EX(DB)
[Arising out of Order-in-Original No.36/2008/CE/JP-II dated 21.07.2008 passed by the Commissioner, Central Excise, Jaipur]
For Approval and Signature:
Honble Mr. Justice (Dr.) Satish Chandra, President
Honble Mr. Ashok K. Arya, Member (Technical)
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Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
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Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
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Whether Their Lordships wish to see the fair copy of the Order?
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Whether Order is to be circulated to the Departmental authorities?
M/s.Aditya Cement Appellants
Vs.
CCE, Jaipur-II Respondent
Appearance:
Shri Amit Jain, Advocate for the appellant.
Shri Yogesh Agarwal, DR for the respondent.
Coram: Honble Mr. Justice (Dr.) Satish Chandra, President Honble Mr. Ashok K. Arya, Member (Technical) Final Order No.53330 /Dated:31/08/2016 Per Ashok K. Arya:
1. The appellant viz. Aditya Cement Ltd. is in appeal against the order No.36/2008/CE/JP-II dated 21.07.2008 passed by the Commissioner of Central Excise, Jaipur-II whereunder several credits amounting to Rs.2,02,68,866/- have been disallowed and a penalty of Rs.10 lakhs has also been imposed on the appellant.
1.1 The matter concerns with the admissibility of cenvat credit on dumpers and parts thereof, which was treated by the appellant as an input under Rule 2 (k) of Cenvat Credit Rules, 2004.
1.2 The Adjudicating Authority viz. Commissioner has disallowed the cenvat credit on dumpers and parts thereof saying that in case of the manufacturer, goods falling under Chapter 87 , whereunder as per the impugned order the dumpers are classified as motor vehicles under Tariff Item No.87041010, are excluded from the purview of capital goods as defined under Rule 2 (a)(A) of CCR and they are neither inputs under Rule 2 (k) of CCR, 2004.
2. The appellant has been represented by the ld. Counsel, Shri Amit Jain, who has mainly submitted as follows:-
(i) The appellant uses dumpers to facilitate movement of limestone from the mining area to the crusher, located within the same mining area; limestone is used for manufacturing clinker, which is further used in the manufacture of cement. Appellant availed credit of the duty paid on the dumpers and their parts, as inputs, since these were used in relation to manufacture of dutiable final product.
(ii) The dumpers are covered by the definition input under Rule 2(k) of Cenvat Credit Rules. The same are covered by the expression in or in relation to the manufacture of final products and appear to be covered by the definition of input under Rule 2 (k) of the Cenvat Credit Rules and the following case laws are relied upon in this case:-
(1) CCE Vs. Rajasthan State Chemical Works-1991(55) ELT 444(SC).
(2) J.K. Cotton Spg. & Wvg. Mills Co.Ltd.-1997(91)ELT 34 (SC) (3) Union Carbide India Ltd. Vs.CCE-1996(86)ELT 613(T-LB) (4) CCE Vs. Tata Engg. &Locomotives Co.Ltd.-2003(158) ELT 130(SC).
(iii) The dumpers have been used for transportation of limestone from mining area to the crusher, situated within the mining area, which is further used for manufacturing of cement, therefore, dumpers are to be treated as used in or in relation to manufacture of final products and thus qualifies as an input. In the appellants own case i.e. Aditya Cement Vs. Union of India - 2008 (221) ELT 362 (Raj), the Honble Rajasthan High Court observed that railway track material has been used by the assessee for transporting coal, for use as fuel.
(iv) In the case of Singh Alloys & Steel Ltd. Vs. Asst. CCE- 1993 (66) ELT 594 (Cal.), Honble Calcutta High Court held that the definition of inputs is very wide and that the only relevant question is whether these are used in or in relation to the manufacture.
(V) Alternatively, dumpers are also covered by the definition of capital goods under Rule 2(a)(A) of the Credit Rules. Dumpers have been admittedly used in mines for transportation of limestone to the crushers, one of the raw materials used in manufacture of final product. Thus, transportation of limestone is a process integrally connected with manufacture of cement (final product) and hence, qualifies as an accessory to various capital goods/machineries integrally connected with the manufacture of final product. In this regard, reliance is placed on the following decisions where credit has been allowed on material handling equipments, as capital goods.:-
. Jayaswal Neco Ltd. Vs. CCE 2015 (319) ELT 247 (SC) . Tata Steel Ltd.Vs. CCE 2016(335) ELT 303 (T-Kol) . CCE Vs. Ajanta Transistor Clock Mgg. Co. -2009(233)ELT 97 .CCE Vs. Vikram Cement 2000 (123) ELT 628 (T-New Delhi)
(vi) Further, cenvat credit has also been allowed on dumpers as capital goods in the following cases, including appellants own case.:-
(1) Aditya Cement Vs. CCE Final Order No.A/52754- 52755/2015-SM(B)
(2) Malabar Cements Ltd. Vs.CCE-2002(149)ELT 751(T-Bang.)
(3) 2003(153)ELT A-94 (SC).
3. Revenue has been represented by ld. AR, Shri Yogesh Aggarwal. The ld. AR has reiterated the findings given in the impugned order .
4. We have carefully considered the facts on record and the submissions along with the case laws cited by both the sides.
5. The Revenue has denied the cenvat credit on the dumpers and parts thereof saying that these items are neither inputs nor capital goods for the purpose of availing cenvat credit. However, the appellant argues that the items in question are covered within the definition of inputs given in Rule 2 (k) of the Cenvat Credit Rules, 2004. The appellants contention is that the dumpers are material handling equipments used for transportation of limestone from mining area to the crusher which is further used for the manufacture of cement; therefore, the dumpers are to be treated as used in or in relation to the manufacture of final products and thus, qualifies as an input. The appellant has also referred to the words in or in relation to the manufacture, which have been used in the definition and meaning of input given in Rule 2 (k). The appellant says that it is not necessary that input has to be part of the final product in all cases, therefore, dumpers have to be treated as an input.
6. The subject goods (s), assessee manufacturer is using for carrying raw materials like limestone etc. from the mining area to the site of the crusher. After examining the facts on record and the decisions of CESTAT, Bangalore in case of Malabar Cements Ltd. (supra) and CESTAT, Delhi in the case of Jindal Steel and Power Ltd. Vs. CCE, Raipur 2015-TIOL-2376 (CESGAT-Delhi) and considering the Honble Supreme Courts decisions in the cases of CCE, Jaipur Vs. Rajasthan Spinning & Weaving Mills Ltd. 2010 (255) ELT 481 (SC) and Jawahar Mills Ltd. 2001 (132) ELT 3 (SC), where yardstick of user test has been mentioned, we are of the considered view that the dumpers as such are accessory to the capital goods involved in manufacture of final products.
6.1 CESTAT, Delhi in the case of Jindal Steel & Power Ltd. (supra) have held that transfer vehicles used within the factory are eligible for cenvat credit. CESTAT in this case in respect of such vehicles observes as under:-
8. They are not transfer vehicles or trucks for common public transport of goods. As admitted in the proceedings, they are specially designed for industrial purpose and the sic operate within narrow scope of factory premises. In the case of Bhusan Steel Ltd. (supra), this Tribunal held that diesel locomotive torpedo ladle car carrying molten metal not only enhances the effectiveness, but without it the handling and in turn production of finished goods would not be possible. The Tribunal upheld the lower authoritys order holding that diesel locomotive as accessory of capital goods.
9. In the case of Tata Steels Ltd. (supra), the Tribunal held that coke transfer car is used as material handling equipment and without that coke could not be transferred from oven to furnace, accordingly, eligible for credit. The Tribunal relied on Larger Bench decision in the case of Banco Products (India) Ltd. [2009 (235) ELT 636 (Tribunal-LB) = 2009-TIOL-421-CESTAT-AHM-LB. The Larger Bench of this Tribunal held that machines used for delivery of raw material in time or increasing the effective working of the same and even removal of finished goods contribute to manufacture of finished goods. 6.2 Honble Supreme Court in the case of Commissioner Vs. Malabar Cements Ltd.- 2003 (153) ELT A-94 (SC) did not admit the Revenues appeal against the decision of CESTAT, Bangalore in the case of Malabar Cements Ltd.Vs. Commissioner 2002 (149) ELT 751 (Tribunal-Bangalore), where dumpers were declared eligible for Modvat credit under Rule 57 Q of erstwhile Central Excise Rules.
6.3 Further, Honble Rajasthan High Court in the case of Aditya Cement Vs. Union of India- 2008 (221)ELT 362 (Rajasthan)held that Railway track materials used for transport within the factory /mine premises are entitled to Modvat credit under Rule 57Q of erstwhile Central Excise Rules, 1944. Honble Rajasthan High Court in this case , inter alia, observes as under:-
19.?We are of the opinion that the principle emerging from decisions of the Honble Supreme Court and of this Court applies to the present case also. In the light of the aforesaid principle, if we take into account the use of iron and steel ingot as parts and components of its machinery used in manufacturing Cement, Railway Track materials needed for transporting fuel as essential for manufacturing in the plant, it is clear that so far as the items of iron and steel are concerned, they are used as providing parts and components of the plant and machinery and becomes essential elements of the machine itself without which the machinery would not be functioning smoothly and properly. Therefore, the direct involvement of those parts and components which are essential to hold the machine become part and parcel of the machine itself. Such components and parts of the machine become eligible for availing Modvat credit of duties paid thereon. In view thereof the appellants must be held entitled to avail Modvat credit of duties paid on 5% of the total value of iron and steel purchased by manufacturer used as components and parts of the machines. It is not in dispute and no claim is laid to other 95% of the steel and iron.
20.?So far as the claim to Railway Track material is concerned, it is common ground that the same has been used for transporting of coal and product of cement. Apparently, though the coal is not end product of the appellant but used as essential adjunct of plant for feeding it with fuel, the essential element of production process for manufacture of cement. Without supply of fuel the plant does not function. Therefore, the Railway Track used for one of the essential activity of running the plant itself cannot be kept out of consideration for availing Modvat credit though which is not being used directly for the purpose of manufacture of cement. But if as an integral part of manufacturing cement bringing of coal directly to the machine from site, railway track is used, it becomes part of plant and of manufacturing process. Similarly, until the end product reaches in deliverable state, it remains part of the manufacturing process. In view of this matter the claim of the assessee in respect of Modvat credit of duty paid on railway track material deserves to be sustained.
7. In the light of discussions made above and the observations of the higher judicial fora and the case laws cited above, the subject goods dumpers and parts thereof are held to be entitled to cenvat credit.
8. The impugned order is set aside and the appeal is allowed with consequential relief.
[ order pronounced on 31.08.2016] ( Justice Dr. Satish Chandra) President ( Ashok K. Arya) Member (Technical) Ckp.
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