Custom, Excise & Service Tax Tribunal
M/S. Rasthriya Ispat Nigam Ltd vs Cce,C&St(Appeals), Visakhapatnam on 27 September, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench SMB Court I Appeal No.E/20020/2015 (Arising out of Order-in-Appeal No.29/2014(V-I)CE dt. 29/09/2014) 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. Rasthriya Ispat Nigam Ltd. ..Appellant(s) Vs. CCE,C&ST(Appeals), Visakhapatnam ..Respondent(s)
Appearance Shri Karan Talwar, Advocate for the appellant.
Shri P.S. Reddy, Asst. Commissioner(AR) for the respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member(Judicial) Date of Hearing:27/09/2016 Date of decision:27/09/2016 FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.] The appellants are manufacturers of iron and steel products and are also availing facility of CENVAT credit on inputs and capital goods. On verification of records, it was noticed by the Department that during the period from July 2011 to December 2011, the appellants wrongly availed CENVAT credit of duty amounting to Rs.22,94,942/- on goods viz. crane rails, rails etc. as inputs. The Department entertained a view that these items are not covered by the definition of inputs as per Rule 2(k) of CENVAT Credit Rules, 2004. A show-cause notice was issued to the appellants proposing to deny the credit and also for recovery of the same along with interest and for imposition of penalty. After due process of law, the adjudicating authority confirmed the demand, interest and penalty. In appeal, the Commissioner(Appeals) upheld the same. The appellants are thus before the Tribunal.
2. On behalf of the appellant the learned counsel Shri Karana Talwar submitted that the rails were used within the factory for use in tracks and for replacing damaged rails tracks. He placed reliance on the decisions in CCE, New Delhi Vs. Jindal Steel and Power Ltd. [2015-TIOL-2581-CESTAT-DEL], Jayaswal Neco Ltd. Vs. CCE [2015(319) ELT 247 (SC)] and in Tata Steel Ltd. Vs. CCE, Jamshedpur [2016-TIOL-881-CESTAT-KOL] and submitted that the issue whether credit is available on crane rails, rails, materials used in railway tracks is covered by the said decisions. He also submitted that the assessee is eligible for credit either under the category of inputs or capital goods and for the said proposition, he relied on the decision laid in the case of Modi Rubber Ltd. The learned counsel drew support from Circular No.964/07/2012-CX dt. 02/04/2012 to canvass the proposition that the Department having clarified that credit is admissible on structural components of boiler has to concede the fact that rails and railway tracks being structural components / accessories / parts of crane used in the factory without which the crane cannot be functioned, the credit cannot be disallowed.
3. On behalf of the Department the learned AR Shri Nagraj Naik strongly defended the findings in the impugned order. He submitted that decisions quoted by the appellant pertain to the period prior to 01/04/2007 and therefore are not applicable. The learned counsel submitted that the appellants have claimed credit under the category of inputs and therefore not eligible under the category of capital goods as they are now taking a different stand. He also adverted to the observation made by the original authority in para 15 of the OIO. The original authority has stated that the appellants though have availed credit under the category of inputs are thereafter taken a contention that they are eligible for credit under the category of capital goods. He submitted that the credit has been disallowed as the goods do not fall within the definition of inputs and therefore disallowance of credit is legal and proper.
4. I have heard the rival submissions made before me. The foremost issue to be considered is whether the appellant having availed credit under the category of inputs can content that they are eligible for credit under the category of capital goods. The said issue stands covered by the decisions laid by the Tribunal as well as various High Courts. In CC&CE, Meerut-I Vs. Modi Rubber Ltd. [2000(119) ELT 0917 (Tri. LB)], a similar issue came up for consideration. The Larger Bench held as under:-
21. In appeal No. E/1814/97-NB, we find that the? question whether modvat credit on lubricants as inputs under Rule 57A is liable to be allowed where the goods are declared as capital goods under Rule 57Q instead of as inputs under Rule 57A is also involved. We note that a similar question was considered by a Two-Member Bench of this Tribunal in the case of Devyani Beverages Ltd. v. CCE, Meerut [1999 (33) RLT 73] wherein the Bench held that the declaration filed by the assessee in terms of Rule 57Q was sufficient for the purpose of extending credit on glass bottles which were inputs within the meaning of Rule 57A. We also hold similar view in the instant case and sustain the appellant's challenge against the impugned order of the Commissioner (Appeals) denying Modvat credit on the ground that the declaration was not in terms of Rule 57A. The appeal is, therefore, allowed.
5. The Honble High Court of Madras in the case of CCE, SVs. Chemplast Sanmar Ltd. [2014(310) ELT 870 (Mad.)] referred to the above decision and held that iron and steel products, used for structural support by application of user test, become component of machineries and the credit cannot be denied stating that these are not covered by the definition of capital goods. The Tribunal in the case of Steel Authority of India Ltd. Vs. CCE, Raipur [2014(311) ELT 709 (Tri. Del.)] has categorically held that though the initial claim may be under the category of inputs, the assessee cannot be denied credit of eligible under capital goods. Department does not dispute that the rail, rail material etc. are used to facilitate the transportation of goods using cranes, lifts etc. without which the manufacturing activity cannot be carried out. In such circumstances, I consider that the claim put forward by appellants under the category of capital goods in their reply to show-cause notice yields merit.
6. The next issue to be addressed is whether the appellant is eligible for credit on the rails, materials used in railway tracks. It is submitted by the appellant that these rails and railway tracks formed an integral part of tracks used for movement of goods in the factory. He submitted that without such tracks, the cranes cannot be put into functional use. In the case of Jindal Steel and Power Ltd. (supra), the Tribunal while considering a similar issue whether credit is available on railway tracks has also analysed the issue whether railway tracks fall under the category of capital goods. In para 5 of the judgment, the Tribunal has observed as under:-
5.?Heard both the sides and examined appeal records. The Revenue appeal is on the short point that the steel structures which are emerging are not capital goods. They are either support structures or platforms, frames, foundations, and parts of civil structure not covered by the category of capital goods. In this regard, we find that learned Commissioner (Appeals) in Para 8.5 of the impugned order examined the nature and functions of each one of the impugned items specifically with reference to the scope of capital goods as per Rule 2 of Cenvat Credit Rules and came to the conclusion that these impugned goods can be classified into three groups namely the first group consists of Crane Girder & Crane Rail, Crane Column, Crane Surge Girder and Crane Auxiliary Girder. The uses of these goods in the respondent factory are that Crane Girder and Crane Rail are provided to hold the crane rails in position so that overhead crane is able to move at a required height. Crane rails are used for long travel of EOT crane; Crane Columns function to transfer the handled load to the ground when overhead crane is working by combined action of axial force and bending moment. Crane Surge Girder & Crane Auxiliary Girder are used to hold crane girder in position properly while crane is working. In view of their use, all these goods are essential accessories for EOT crane installed in respondents factory as EOT crane cannot perform without them. . .. . They are essential accessories in the respondent plant. Therefore, all the impugned goods as mentioned above are covered in the scope of term accessories in the definition of capital goods at clause (ii) of Rule 2(b) of the Cenvat Credit Rules because they are specifically designed, fabricated/ manufactured as per specific technical requirements and they are technological necessity of the plant for the manufacture of Iron and steel products in respondents factory and they are essentially required for running the plant and machinery. Since no evidence has been adduced to establish that these goods have not been used in the factory of manufacturer and therefore the respondent has complied with the condition of Rule 2(b) of Cenvat Credit Rules that such goods should be used in the factory of the manufacturer of final product.
7. In Jayaswal Neco Ltd. case, the Honble Apex court had occasioned to consider the eligibility of credit on railway track material. The Honble Court has observed as under:-
14.?Applying the aforesaid test to the facts of this case, it is apparent that the use of railway tracks is related to the actual production of goods and without the use of the said railway track, commercial production would be inexpedient.
15.?In the instant case, the manner in which railway track materials have been used by the appellant was explained by the appellant before the Commissioner and veracity thereof was accepted by the Commissioner. Therefore, without any fear of contradiction, we may note the exact process that is involved :
These railway tracks used in transporting hot metal in ladle placed on ladle car from blast furnace to pig casting machine through ladle car where hot metal is poured into pig casting machine for manufacture of pig iron. Secondly the system also helps in taking hot pigs from pig casting machine to pigs storage yard by the big wagon where hot pig iron are dumped for cooling and making ready for dispatchers. This Railway tracks are also used in handling of raw materials at wagon tippler to stacker reclaimer where stacking and reclaiming of raw material is taken place and required quantity is conveyed for further processing at stock house.
16.?It reflects that the appellant has installed railway tracks within the plant which is a handling system for raw material and processed material.
17.?The aforesaid process squarely meets the test laid down by this court in M/s. J.K. Cotton Spinning & Weaving Mills Co. Ltd.s case. It is clear that the railway tracks are installed not only within the plant, but the main objective and purpose for which the capital expenditure on laying these railway tracks is incurred by the appellant is for transporting hot metal in ladle placed on ladle car from blast furnace to pig casting machine through ladle car where hot metal is poured into pig casting machine for manufacture of pig iron. It is clear from the above that the use of railway tracks inside the plant not only form the process of manufacturing, but it is inseparable and integral part of the said process inasmuch as without the aforesaid activity for which railway tracks are used, there cannot be manufacturing of pig iron.
8. Co-ordinate Bench of the Tribunal in the case of Tata Steel Ltd. & others (supra) as well as in the case of CCE &ST, Raipur Vs. SKS Ispat and Power Ltd. [2015(326) ELT 620 (Tri. Del.)] has held that credit is eligible on rails used within the factory and also for rails meant for EOT cranes.
7. In view of the foregoing discussions, following the decisions laid in the above judgments, I hold that the denial of credit is unjustified. The impugned order is set aside. The appeal is allowed with consequential reliefs, if any.
(Pronounced and dictated in open court) SULEKHA BEEVI C.S. MEMBER(JUDICIAL) Raja.
7