Custom, Excise & Service Tax Tribunal
M/S Orient Carbon & Chemicals Ltd vs Cce, Gurgaon on 9 November, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
SCO 147-148, SECTOR 17-C, CHANDIGARH-160017
COURT NO.1
Appeal No.E/60038/2016- (SM)
(Arising out of the Order-in-Appeal No. 106/CE/Appl-II/Delhi/2016(FBD) dated 28.01.2016 passed by the CCE (Appeals), Gurgaon)
Date of Hearing: 27.10.2016
Date of Decision: 09.11.2016
For Approval & signature:
Honble Mr.Ashok Jindal, Member (Judicial)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
No
3.
Whether their Lordships wish to see the fair copy of the order?
seen
4.
Whether order is to be circulated to the Department Authorities?
Yes
M/s Orient Carbon & Chemicals Ltd. Appellant
Vs.
CCE, Gurgaon Respondent
Appearance Sh. Surjeet Bhadu, Sh. Veer Singh, Sh. Rupinder Singh, Advocates- for the appellant Shri. R.K. Sharma, A.R.- for the respondent CORAM: Honble Mr.Ashok Jindal, Member (Judicial) FINAL ORDER NO: 61636/2016 Per Ashok Jindal:
The appellant is in appeal against the impugned order denying the cenvat credit on the capital goods.
2. The brief facts of the case are that the appellant is engaged in the manufacture of Insoluble Sulphur. During the course of audit it was found that imported capital goods namely Analyzer was not found installed inside the factory and the machine was also not included in the LOP. On further verification, the laboratory in which machine was installed in other use of the appellant which is a DTA unit and not in the factory premises of the appellant i.e. 100% EOU. The machine was not installed and used in the factory in violation of Rule 2(a) of Cenvat Credit Rules, 2004. In these set of facts, a show cause notice was issued to deny cenvat credit on the said machine, consequently, to demand the duty along with interest and to impose penalty on the appellant. The matter was adjudicated and cenvat credit was denied by both the authorities below. Consequently, the demand of duty was confirmed along with interest and penalty was also imposed. Aggrieved from the said order, the appellant is before me.
3. The ld. Counsel for the appellant submits that the allegation against the appellant is that the machine/capital goods is not installed in the factory, therefore, the appellant is not entitled to avail cenvat credit as per Rule 2(a) of the CCR, 2004. It is his contention that the usage of machine has not been disputed and the machine has been imported by the appellant of payment of duty, therefore, cenvat credit is available to the appellant in the light of the decision of the Honble Apex Court in the case of Vikarm Cement reported in 2006 (194) ELT 3 (SC) which has been followed by this Tribunal in the case of Siva Shankar Granites (P) Ltd. reported in 2006 (206) ELT 505 (Tri. Bang.). Further, followed in the case of Surya Colour Products P. Ltd. 2012 (280) ELT 455 (Tri. Bang.). Further, in the light of the decision of Jaypee Rewa Cement reported in 2001 (133) ELT 3 (SC). He also relied on the decision of this Tribunal in the case of Triveni Engg. & Inds. Ltd. 2014 (303) ELT 129 ( Tri. Del.). Further he also relied on the decision of this Tribunal in the case of Zenith Machine Tools Pvt. LTd. 2010 (255) ELT 83 (Tri. Bang.) and M/s Glaxosmithkline Consumer Health Ltd. vide Final Order No. 61053-61054/2016 dated 09/08/2016, therefore, he prayed that cenvat credit be allowed.
4. On the other hand, the Ld. AR relied on the decision of this Tribunal in the case of Mangal Electricals Industries 2014 (311) ELT 691 (Tri. Del.)
5. Heard the parties and considered the submissions in detail.
6. The short issue involved in the matter is that whether the appellant is entitled to avail cenvat credit on capital goods which are installed outside the factory or not?
7. For better appropriation of the case, I have to examine Rule 2(a) of the CCR, 2004 which is reproduced as under:
Capital Goods Means:-
(A) The following goods namely-
(i) All goods falling under chapter 82, chapter 84, chapter 85, chapter 90 (heading 6805 grinding wheels and the like and parts thereof falling under chapter 6804) of the first schedule of the Excise Tariff Act;
(ii) Pollution control equipments;
(iii) Components, spares and accessories of the goods specified at (i) and (ii)
(iv) Moulds and dies, jigs and fixtures;
(v) Refractories and refractory materials;
(vi) Tubes and pipes and fitting thereof; and
(vii) Storage tanks Used-
(i) In the factory of the manufacturer of the final products but does not include any equipment or applicance used in an office or; (IA) outside the factory of the manufacturer of the final products for generations of electricity for captive use within the factory; or (2) for providing output services;
8. As per the said definition the capital goods are required to be used in the factory of the manufacturer of the final products. In this case, the capital goods have been installed outside the factory but they have been used in manufacture of their final product for testing purpose, this fact is not disputed. The similar issue has been examined by the Honble Apex Court in the case of Vikarm Cement (Supra) wherein the Honble Apex Court observed as under:
It appears to us on a plain reading of the clause that the phrase within the factory of production means only such generation of electricity or steam which is used within the factory would qualify as an intermediate product. The utilization of inputs in the generation of steam or electricity not being qualified by the phrase within the factory of production could be outside the factory. Therefore, whatever goes into generation of electricity or steam which is used within the factory would be an input for the purposes of obtaining credit on the duty payable thereon. As far as the Explanaiton is concerned, the inputs are restricted to inputs notified under Rule 57A. There is no dispute that both explosives and limestone are notified under Section 57A for manufacture of the final product i.e. cement.
9. Further, in the case of Siva Shankar Granites (P) Ltd. (Supra), the facts of the case are that the benefit has been denied on the ground that they have used the capital goods in the mining area which was not within the bonded area in terms of the Customs Notification and in these set of facts, the Tribunal observed as under:
The Capital goods have been sent to the quarry which is owned by the appellants and the granites which are excavated from themines are utilized for carrying out the necessary manufacturing processes for export in terms of the Notification in question. There is no denial that the excavated granites from the mines have been brought to the factory and has been used in the manufacture of the export items. The only objection raised by the Revenue is that the quarry is not a part of the bonded premises. This view has to be negative for the reason that the capital goods have been used in manufacture of the goods which are required for export of the items in terms of para (b) of the notifications.
and this Tribunal allowed the cenvat credit.
10. Further, in the case of Surya Colour Products P. Ltd. 2012 (280) ELT 455 (Tri. Bang.) has allowed the cenvat credit by observing as under:
I find that both the lower authorities have proceeded on the ground that the appellant had not used these machines in the factory of the manufacturer of final products. From the records, it seem so. At the same time, I find that the provisions of Rule 4(5)(a) of the Cenvat Credit Rules, 2004 allows an assessee to avail the credit on capital goods even if they are sent to job worker for any other purpose. The provisions of Rule 4(5)(a) have not been examined by the lower authorities in this case. If the provisions of Rule 4(5)(a) are examined, then the relief eligible to the appellant under the provisions of Rule 4(5)(a) cannot be denied.
11. Further, in the case of Jaypee Rewa Cement (Supra) the Honble Apex Court has examined the issue and hold that the capital goods used in or relation to manufacture of the final product whether directly or indirectly are entitled for cenvat credit. The issue was also examined in the case or Triveni Engg. Inds. Ltd. (Supra) wherein this tribunal observed that the capital goods should be used in the factory to manufacture of final product. Admittedly, these capital goods have been used in manufacturing of final product manufactured by the appellant.
12. I also gone through the decision of Zenith Machine Tools Pvt. Ltd. (Supra) wherein the capital goods found installed in sister concern who is a job worker of the appellant, this Tribunal observed as under:
The first issue involved in this case is whether the lower authorities were justified in seeking reversal of cenvat credit and capital goods which were found in the job workers premises. It is disuputed in this case, that the said job worker M/s Aditya Engineering is doing job work for the appellant. It is also undisputed that the entire job worked material from M/s Aditya Engineering comes to the appellant for use in the further manufacturing of excisable products. I find that the provisions of Rule 4(5)(a) very clearly envisages eligibility to cenvat credit on the inputs or capital goods which are sent to job worker. The only condition in Rule 4(5)(a) is that the said capital goods has to be received back within 180 days of that being sent to job worker and this condition not complied with, then assessee shall reverse an amount equivalent to the cenvat credit taken and can take the cenvat credit when the capital goods are received back in the factory or the job workers premises. I find that there is no dispute that the said capital goods are utilized by the job worker, it would lend support to the argument that there would be a revenue neutrality and the reversal of cenvat credit would be revenue neutral as the appellant is entitled to take credit on such amount as soon as he receives the capital goods back from the job workers premises. This being the case, I do not find any reason for reversal of the Cenvat Credit on the capital goods which were found in the factory premises of the job worker, who is undisputedly one of the group concerns of the appellant.
13. The Ld. AR relied on the decision of this tribunal in the case of Mangal Electricals Industries (Supra) to say that cenvat credit is not available to the appellant. First of all in the case laws discussed in the preceding paragraph have not analyzed in the case of Mangal Electricals Industries (supra). Further, the said capital goods were installed in unregistered unit and never intimated to the department and during the course of investigation these capital goods has found installed in other unit but the appellant did not take any defence at that time that the capital goods has sent to other unit for the purpose of job worker. As in the case of Mangal Electricals Industries (supra) this tribunal has not analyzed the precedent decision of this tribunal as well as the decision of the Honble Apex Court therefore, the said decision is not applicable to the facts of this case.
11. As it is admitted fact that although the capital goods has been installed in the outside the factory but the same has been used in manufacture of final product of the appellant. In that circumstances, I hold that the appellant is entitled to avail cenvat credit on capital goods in dispute. Therefore, the cenvat credit availed by the appellant is allowed. In result, the impugned order is set aside. The appeal is allowed with consequential relief, if any.
(Order to be pronounced on 09.11.2016)
Ashok Jindal
(Member Judicial)
rt
7 E/60038/2016
M/s Orient Carbon & Chemicals Ltd. Vs. CCE, Delhi-III