Custom, Excise & Service Tax Tribunal
M/S Lafarge India Pvt. Limited vs Cce, Raipur on 27 September, 2016
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R. K. Puram, New Delhi. Date of hearing: 26.08.2016 Pronouncement on: 27.09.2016 Excise Appeal No. 1754 of 2009 (Arising out of order-in-original No. COMMISSIONER/RPR/24/2009 dated 24.03.2009 passed by the Commissioner, Central Excise & Customs, Raipur). M/s Lafarge India Pvt. Limited Appellant Vs. CCE, Raipur Respondent
Appearance:
Sh. P. K. Sahu and Sh. Prashant Shukla, Advocates for the appellant Ms. Neha Garg, AR for the Respondent.
Coram:
Honble Justice (Dr.) Satish Chandra, President Honble Shri B. Ravichandran, Member (Technical) Final Order No. 53775/ 2016 Per: B. Ravichandran:
The appeal is against order dated 24.03.2009 of Commissioner of Central Excise, Raipur. The issue involved in the present appeal is the eligibility of appellant for availing cenvat credit of duty paid on various steel items like TMT bars, Coil, Steel tubes and pipes, modified armor plate, rectangular bar, PCC Chequred plate, chain conveyor etc. falling under Chapter 72 and 73 of the Central Excise Tariff Act, 1985. The appellants are engaged in the manufacture of Cement liable to Central Excise duty. They availed cenvat credit on inputs and capital goods. By entertaining a view that the appellant had wrongly availed credit on various steel items stated above, proceedings were initiated against them which resulted in the impugned order. The original authority disallowed the total cenvat credit of Rs. 2,70,89,749/- and imposed equal amount of penalty.
2. We have heard both the sides and perused the appeal records including written submissions and case laws relied upon by both the sides. The disputed items on which credit has been denied were all listed individually and their usage has been also shown in detail. The nature of items and their usage is not in dispute. The steel structure (including pipes and accessories), rectangular bar, expansion joint, non standard part and various specific items like chain, conveyor chain, roller chain, Oil tank, air tank, plate armour ring, steel ball, Coal bin duct were all used in assembling of complete machine like coal crusher, kiln parts of coal mill and are integrated to the total machinery which are used in the manufacture of cement and clinker. Similarly, various specific items have been used in storage tanks, silos in the construction of various plant and machinery like raw mill, conveyor system, packing machine etc. Another set of steel items were used in expansion project of the appellant unit. The emerging items after usage of these steel items were raw mill house, coal mill house, preheater tower, rotary kiln, clinker cooler etc. The original authority held that various steel items on which cenvat credit has been availed were used for construction of foundation and super structure of huge plant and machinery cannot be considered as excisable goods as such structure are attached to earth and hence not marketable.
3. We have examined the impugned order carefully. The original authority gave great emphasis to the question of excisability of emerging structure as capital goods. The finding is to the effect that since these steel items were used in or in relation to fabrication of various structures including support structures and overall plant and machinery which is embedded to earth hence, these steel items cannot be considered to have been used in the manufacture of any marketable capital goods. We find that the concept of marketability and excisability of capital goods is introduced by the original authority in considering the eligibility of item for cenvat credit either as an input or as a capital goods. We find no such stipulation in the Cenvat Credit Rules regarding excisability of plant and machinery to be established before credit can be allowed on the input used in the manufacture of capital goods by the manufacturer. Various case laws and Board Circulars have been quoted by the original authority to examine the scope of excisability of plant and machinery and capital goods manufactured or erected at site. We find the original authority has misdirected himself into this examination without any justification.
4. The matter relating to eligibility of iron steel structure items for cenvat credit either as an input or as a capital goods has been a subject matter of various decisions. We note that the appellants have put up various alternative arguments if the steel items on which credit availed or not to be considered as used in the manufacture of capital goods, they made a plea that such items used in the repair and maintenance of capital goods can be allowed credit.
5. The appellant relied on various decided cases in support of their claim by making the following submission in this regard:
(i) In Commissioner vs. Rajasthan Spinning & Weaving Mills Ltd. 2010 (255) ELT 481 (SC), the Honble Supreme Court has held that steel plates and MS channels used in the fabrication of chimney would fall within the ambit of capital goods. The Honble Madras High Court in India Cements Ltd. vs. CESTAT, Chennai 2015 (321) ELT 209 (Mad.) has held that MS plates, angles, channels etc. used in the erection of various machineries such as crusher, kiln, hoopers etc. can be considered as eligible for cenvat credit as component of capital goods. Similarly, Associated Cement Company Ltd. 2011 (267) ELT 55 (Chhattisgarh), the Honble High Court of Chhattisgarh agreed with the findings of this Tribunal holding that wearplate, MS Plate, angels, channels etc. used for connecting/ fitting fans, casing, ducting in kilns for the manufacture of clinker are eligible for cenvat credit. The Honble Karnataka High Court in CCE vs. Mysore ICL Sugars Ltd. 2011 (271) ELT 360 (Kar.) has held that cenvat credit on the raw materials used in manufacture of tank which is an immovable property, cannot be denied. In CCE vs. JSW Ispat Steel Ltd. 2015 (327) ELT 549 (Tri.) this Honble Tribunal has allowed the cenvat credit on the goods used in setting up of oxygen plant.
(ii) The Commissioner has also denied cenvat credit on the steel structures used for bag filter which is pollution control equipment. In Ipitata Sponge Iron Ltd. vs. CCE 1998 (104) ELT 339, it was held that dust collection filter bags for de-dusting system is pollution control equipment. In Reliance Industries Ltd. vs. CCE -2004 (170) ELT 529 (Tri.), cenvat credit on parts of weighbridge has been allowed. Therefore, oil tank and air tank used for filter bags are also pollution control equipment or part thereof and eligible for cenvat credit.
(v) The definition of input as given in the Rule 2(k) of Cenvat Credit Rules, 2004 has been amended with effect from 07.07.2009 to exclude cement angles, channels, centrally twisted deform bar (CTD) or Thermo Mechanically Treated bar (TMT) and other items used for construction of factory shed, building or laying of foundation or making of structure for support of capital goods from the meaning of input. This amendment in definition establishes that these items were included in the definition of input earlier. In Xpro India Ltd. vs. CCE 1992 (60) ELT 433, this Honble Tribunal has relied upon various Supreme Court decisions to hold that amended provision can be looked into for the purpose of understanding the meaning of the original provision. Amendment to Explanation 2 of Rule 2(k) of the Cenvat Credit Rules w.e.f. 7.7.2009 is not clarificatory in nature and, therefore, it cannot be rely to deny the cenvat credit on steel items used in construction of structures during the notice period which is prior to 07.07.2009. (Mundra Port & Special Economic Zone Ltd 2015 (39( STR 726 (Guj.)
6. We find that apart from the various other case laws relied upon by the appellant as above, the decisions of Honble Madras High Court in India Cements Limited 2012 (285) ELT 341 (Mad.), 2014 (310) ELT 636 (Mad.) and 2014 (305) ELT 558 (Mad.) all on the same set of facts, though with reference to erstwhile Rule 57Q are also relevant. The Honble Supreme Court in Jayaswal Neco Limited 2015 (319) ELT 247 (SC) allowed cenvat credit on railway track materials used for handling raw material processed goods. The Tribunal in Bellary Steel and Alloys Limited vs. CCE, Belgaum 2005 (180) ELT 92 (Tri. Bang.) held that cenvat credit is available on HR sheet, angles, channels etc. used in fabrication and erection of technological structure and blast furnace and material handling system. Such supporting structure are also capital goods and the fact that they are embedded to earth is no reason for denying credit/ credit on input used. The Honble Punjab & Haryana High Court in CCE, Jullandhar vs. Pioneer Agro Extracts Ltd. 2008 (230) ELT 597 (P&H) held that channels and angles, joint of iron steel used for installation of batch vessel or essential plant and machinery and are eligible for credit as capital goods. The Honble Madras High Court in Thiru Arooran Sugar - 2015-TIOL-1734-HC-Mad.CX held that credit on M.S. Plates, angles, channels utilised in construction / erection of plant were eligible for credit. The High Court observed that the principle laid-down by the Honble Supreme Court in Rajasthan Spinning and Weaving Mills Ltd. (supra) is applicable to such situation.
7. We note that the Tribunal has been consistently following the ratio that the steel items when they are used in fabrication of capital goods and their accessories inside the manufacturer premises are eligible for credit by applying user test as evolved by the Honble Supreme Court in Rajasthan Spinning and Weaving Mills Ltd. (supra). A reference can be made to latest decision of the Tribunal in Singhal Enterprises Pvt. Ltd. vs. CC&CE, Raipur vide final order No. 53013/2016 dated 12.08.2016. The findings of the Tribunal are as under:
13. Now we turn to the question, whether credit is admissible on various structural steel items, such as, MS Angles, Sections, Channels, TMT Bar etc., which have been used by the appellants in the fabrication of support structures on which various capital goods are placed? The same stands denied by the lower authority. The learned DR has sought disallowance of the same by citing the decision of the Larger Bench in the case of Vandana Global Ltd. (supra) and other judgments. Further, he has brought to our notice and emphasised the amendment carried out in Explanation-II to Rule 2(a) which defines the term input w.e.f. 07.07.2009. It has further been pleaded that the cenvat credit claimed for the period prior to this will be covered within the decision of the Larger Bench in the case of Vandana Global Ltd. (supra).
14. The Larger Bench decision in Vandana Global Ltd.s case (supra) laid down that even if the iron and articles were used as supporting structurals, they would not be eligible for the credit, considering the amendment made w.e.f. 07.07.2009 as a clarification amendment and hence to be considered retrospectively. However, we find that the said decision of the Larger Bench was considered by the Honble Gujarat High Court in the case of Mundra Ports & Special Economic Zone Ltd. 2015 (04) LCX0197, wherein it was observed that the amendment made on 07.07.2009 cannot be held to be clarificatory and as such would be applicable only prospectively.
15. We find that the controversy can be laid to rest by making a reference to the decision of the Apex Court in the case of CCE, Jaipur vs. Rajasthan Spinning & Weaving Mills Ltd. -2010 (255) ELT 481(SC), wherein the Honble Supreme Court has considered an identical issue of steel plates and MS channels used in the fabrication of chimney for diesel generating set. The credit stands allowed in the light of Rule 57Q of the erstwhile Central Excise Rules, 1944. In the said judgment, the Apex Court has referred to the user test evolved by the Apex Court in the case of CCE, Coimbatore vs. Jawahar Mills Ltd. -2001 (132) ELT 3 (SC), which is required to be satisfied to find out whether or not particular goods could be said to be capital goods. When we apply the user test to the case in hand, we find that the structural steel items have been used for the fabrication of support structures for capital goods. The appellants have argued that the various capital goods, such as, kiln, material handling conveyor system, furnace etc. cannot be suspended in mid air. They will need to be suitably supported to facilitate smooth functioning of such machines. It is obvious that the structural items have been suitably worked upon for this purpose. Accordingly, the goods fabricated, using such structurals, will have to be considered as parts of the relevant machines. The definition of Capital Goods includes, components, spares and accessories of such capital goods. Accordingly, applying the User Test to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of Capital Goods as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit.
8. In view of the ratio laid down in various decisions of this Tribunal, Honble High Courts and the Honble Supreme Court we find no merit in the impugned order. Accordingly, same is set aside, the appeal is allowed.
(Pronounced on 27.09.2016).
(Justice (Dr.) Satish Chandra) President (B. Ravichandran) Member (Technical) Pant