Custom, Excise & Service Tax Tribunal
M/S Kamal Sponge Steel & Power Ltd vs Cce, Jaipur on 29 September, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi 110 066.
Date of Hearing/Order: 29.9.2016
Appeal No. E/567/2010-EX.(SM)
(Arising out of Order-in-Appeal No. 67(DK)CE/JPR-I/2010 dated 4.6.2009 passed by the Commissioner (Appeals), Central Excise, Jaipur)
M/s Kamal Sponge Steel & Power Ltd. Appellant
Vs.
CCE, Jaipur Respondent
Appearance Ms. Rinky Arora, Advocate - for the appellant Shri S.C. Saini, A.R. - for the respondent CORAM: Honble Mr. V. Padmanabhan, Member (Technical) Final Order No. 53961/2016 Per V. Padmanabhan :
The appeal is directed against the order in appeal dated 4.2.2010. The appellant is engaged in the manufacture of TMT bars falling under Chapter 72 of the First Schedule to the Central Excise Tariff Act, 1995. The present dispute is with reference to the Cenvat credit availed on MS angles, shapes, sections, channels etc. These goods on which the appellant availed Cenvat credit were used for fabrication of supporting structures of furnace plant and rolling mill. The authorities below took the view that Cenvat credit is not allowable for the reason that supporting structures of furnace plant and rolling mill were permanently embedded to earth and hence these were not goods and consequently it cannot be said that these goods were used in the manufacture of capital goods. Since appellant failed to get relief even at the stage of Commissioner (Appeals), the present appeal has been filed.
2. I have heard Ms. Rinky Arora, ld. Advocate for the appellant and Shri S.C. Saini, ld. AR for the Revenue.
3. The submissions made by the ld. Advocate is that the steel plates, channels, angles etc. have been used for the manufacture of supporting structures for capital goods. The present demand covers the period April 2005 to August, 2007. She also submitted that this demand pertains to the period prior to the amendment carried out on 7.7.2009 in the definition of inputs. She further relied on the following case laws and submitted that the issue has been settled in favour of the assessee and prayed for the benefit.
(i) CCE Vs. Rajasthan Spinning & Weaving Mills Ltd. 2010 (255) ELT 481 (SC).
(ii) Union of India Vs. Associated Cement Company Ltd. 2011 (267) ELT 55 (Chhattisgarh).
(iii) Ispat Industries Ltd. Vs. CCE 2006 (195) ELT 164 (Tri.-Mumbai).
(iv) Bajaj Hindustan Ltd. Vs. CCE 2013 (294) ELT 581 (Tri.-Del.)
(v) CCE Vs. India Cements Ltd. 2014 (305) ELT 558 (Mad.).
(vi) Mundra Ports & Special Economic Zone Ltd. Vs. CCE 2015 (39) STR 726 (Guj.).
4. The ld. DR, on the other hand, reiterated the findings of the authorities below.
5. The learned DR on the other hand relied on the decision of Honble Allahabad High Court in the case of Daya Sugar vs. CCE, Meerut I reported in 2015 (316) E.L.T. 394 (All.).
6. The issue of Cenvat credit on structural items used in the fabrication of support structures for capital goods has been decided in favour of the appellants in many recent decisions including those cited by the learned Advocate. I find that identical issue has been decided in the case of Monnet Ispat & Energy Ltd. vs. CCE, Raipur (supra), the Tribunal in that case held as follows :-
6.?The issue regarding the eligibility of steel items namely, bars, flats, channels and sheets used for fabrication of machinery and accessories has been the subject matter of dispute in various cases of similar nature. It is relevant to note here certain basic principles laid down by the Honble Supreme Court in the similar matters. The definition of capital goods under Rule 2(a) of Cenvat Credit Rules, 2004 is very wide and includes all goods of Chapters 82, 84, 85 and 90, a few other specific tariff headings of Central Excise Tariff. Apart from these, other specific items like pollution control equipment, tubes, pipes, etc. storage tanks, the components, spare and accessories of specific goods, etc. are also included. The appellants contention is that steel items have been used in fabrication of components/accessories of specific capital goods namely, rotary klin, rotary cooler (Tariff Heading 8417.10), conveyor system (Tariff Heading 84.28), raw material processing plant (84.79) power plant (85.02) and various pollution control equipment which are specifically covered under the category of capital goods.
7.?These steel items used in this manner by the appellant has not been factually disputed. However, the point of dispute is that the resultant fabricated items became part of structures which are embedded to earth and become immovable, thereby losing the name of goods. Hence, Revenue contends that these items used are outside the purview of capital goods or inputs. We find that the Honble Supreme Court evolved user test to answer the question whether the items falls within the purview of capital goods and held that in the case of Rajasthan Spinning Mills (supra) that steel plates and MS channels used in the fabrication of chimney would fall within the ambit of capital goods. The Honble Karnataka High Court in the case of SLR Steels Ltd. [2012 (280) E.L.T. 176 (Kar.)] held as under :
7.?A perusal of the aforesaid provision makes it very clear though storage tanks may be immovable property and the pollution control equipment are included within the definition of capital goods, input as defined in Rule 2(k) makes it clear that input includes in goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. Therefore, the input is not necessarily to be used in the manufacture of final product. By virtue of explanation 2 - goods used in the manufacture of capital goods which are further used in the factory of the manufacturer also falls within the definition of input. In 2009, this explanation has been amended to the following effect :
but shall not include cement, angles, channels Centrally Twister Deform bar (C.T.D.) or Thermo Mechanically Treated bar (TMT) and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods.
8.?Therefore, the notification of the Legislature is very clear that it is only the inputs used in the manufacture or construction of capital goods which is construed as input and Cenvat credit is available on the duty paid in purchase of such inputs. If the cement, angles, channels, Centrally Twister Deform bar (C.T.D.) or Thermo Mechanically Treated bar (T.M.T.) and other items are used in the construction of factory shed, building or laying of foundation, the duty paid on such items the assessee would not be entitled to Cenvat credit. Similarly, though the assessee is entitled to Cenvat credit of cement and steel used in the manufacture of capital goods viz., storage tank, if any structure for support of capital goods is constructed and steel and cement is used for such support, the assessee is not entitled to the benefit of Cenvat credit on the duty paid on such cement and steel. Therefore, there is no ambiguity in any of these provisions. When once a storage tank and pollution control equipment constitutes capital goods and any raw material purchased for construction of those goods, the duty paid could be utilized as a Cenvat credit by the assessee notwithstanding the fact that the storage tank is an immovable property.
8.?The Honble Madras High Court in the case of CCE v. India Cements Ltd. [2014 (310) E.L.T. 636 (Mad.)] held that MS plates, angles, channels, etc. used in the erection of various machineries such as electrostatic precipitator for raw mill project, additional fly ash handling system, MMD crusher, etc. can be considered as eligible for Cenvat credit as component of capital goods. The Honble High Court held after examining the various case laws in favour of assessee. Applying this principles, we find that the allegation in the show cause notice that steel items used by the appellant are neither components nor spares nor accessories is not sustainable.
9.?In the case of Associated Cement Company Ltd. [2011 (267) E.L.T. 55 (Chhattisgarh)], the Honble High Court of Chhattisgarh agreed with the findings of this Tribunal holding that wear plate, MS Plate, angles, channels, etc. used for connecting/fitting fans, casing, ducting in kilns for the manufacture of clinker are eligible for Cenvat credit. Another allegation made in the show cause notice regarding various steel items having been used in the manufacture of structurals to support the other machinery, has not also been elaborated with evidence. For e.g., the credit was sought to be denied on steel items used for installation of conveyor system on the ground that these items are merely structures giving support to conveyor system. We find that conveyor system as a whole is rightly categorized as capital goods and unless it is established that certain structures are not part of the conveyor system, mere allegation that certain steel items are only supports will not be sufficient to deny the credit. Similarly, the allegation that silo is merely an item which was for receiving finished product and is not used for processing the goods is misleading and contrary to facts. Silo is a storage facility of the finished goods and it is a fact that silo is a storage tank included as a capital goods in the overall scheme of manufacture of final product.
10.?The items in dispute are either specifically find place in Central Excise Tariff as machinery, equipment (kiln, conveyor system raw material processing plant) or specifically included in the definition for capital goods like pollution control equipments, components spare and accessories, storage tanks. Applying the principle of user test laid down by the Honble Supreme Court in Jawahar Mills case (supra) the angles, beams and channels used in the making and fabrication of these capital goods are found eligible for Cenvat credit.
11.?Accordingly, we allow the appeal, with consequential relief, if any.
7. The facts of the present case are identical to the one cited above, the learned DR on the other hand has relied upon the decision of Honble High Court of Allahabad in the case of Daya Sugar vs. CCE, Meerut I (supra), but I find that the facts in the Daya Sugar case are different from the present one.
8. In line with the above discussions, I allow the appeal and set aside the impugned order.
(Operative part of the order pronounced in the open court.) (V. Padmanabhan) Member (Technical) RM