Custom, Excise & Service Tax Tribunal
Cce, Raipur vs M/S Shri Bajrang Metallics Pvt. Ltd on 14 July, 2010
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R. K. Puram, New Delhi. Date of hearing/ decision: 20.07.2010 For approval and signature: Honble Shri Justice R.M.S. Khandeparkar, President Honble Shri Rakesh Kumar, Member (Technical) ---------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 Lordships wish to see the fair copy of the Order? 4 Whether Order is to be circulated to the Departmental authorities? Excise Appeal No. 663 of 2006 [Arising out of order-in-appeal No. 131/RPR-I/2005 dated 26.10.2005 passed by the Commissioner (Appeals-I) Customs & Central Excise, Raipur]. CCE, Raipur Appellants Vs. M/s Shri Bajrang Metallics Pvt. Ltd. Respondent
Present for the Appellants : Sh. Nitin Anand, DR Present for the Respondent : None Coram: Honble Sh. Justice R.M.S. Khandeparkar, President Honble Sh. Rakesh Kumar, Member (Technical) Oral Order No._____ Per: Shri Justice R.M.S. Khandeparkar:
Heard the learned DR for the appellants. None present for the respondent though served.
We have perused the records with the help of learned DR.
The appellants challenge the order passed by the Commissioner (Appeals) on 26.10.2005 whereby the order passed by the adjudicating authority disallowed the credit in relation to certain items has been modified in favour of the assessee. The penalty imposed has also been set aside.
The adjudicating authority by its order dated 15.07.2005 had disallowed cenvat credit to the tune of Rs. 15,92,582/- on various items to the respondents and had ordered recovery of interest as well as imposed penalty of Rs. 50,000/-.
The respondents herein are engaged in manufacture of Billets, MS Rounds, TMT Bars, MS CTD Bars and Waste & Scrap falling under Chapter 72 of the Central Excise Tariff Act, 1985. They were availing benefit of cenvat credit in terms of Rule 3 of Cenvat Credit Rules, 2002. On scrutiny of cenvat returns filed by the respondents for the month of March 2003 and April 2003, it was revealed that the respondents had availed 50% of cenvat credit on the items like MS Channels, MS angles, MS Beams, Plate Cuttings, Plain Plates, TMS Angle, Joists, MS CTD Bars, Forged Rounds, Blooms Cuttings etc. amounting to Rs. 7,96,291/- allegedly used as capital goods while taking the balance of 50% of cenvat credit in the month of April 2003. Since the investigation revealed that the goods and items in respect of which the cenvat credit was sought to be availed were neither capital goods nor components nor spares and accessories of the capital goods used in the factory for the manufacture of the final product, show cause notice came to be issued to the respondents on 19.01.2004 which was contested by the respondents while contending that the credit was correctly availed in respect of goods which were used within the factory for some purpose of manufacture of the final product and that, therefore credit cannot be denied.
The adjudicating authority while observing that the main issue which was required to be decided in the matter was whether the credit on the items in question was sought to be availed were used by the respondents in their factory for structural work held that the final products which emerged out of the utilization of the impugned goods were only structural items falling under Chapter 73 of the Central Excise Tariff Act, 1985 and that such structural items having fabricated at the site became immovable property. While disallowing the cenvat credit for the said items the order dated 15.07.2005 came to be passed.
In appeal against the said order by the respondents herein, the Commissioner (Appeals) did not agree with all the findings of the adjudicating authority and held that except on CTD bars to the extent the same were used in the construction of civil foundation, all the impugned goods had been used in the manufacture/ fabrication of essential components and accessory of the plant and machinery installed in the factory and, therefore, were eligible for availment of credit.
While arriving at the said finding the Commissioner (Appeals) has referred to each of the items and use thereof in the factory. Plain reading thereof discloses that the Commissioner (Appeals) was merely able to identify with reference to each of those items as were used in the fabrication of structure either for the purpose of installation of some part of the machinery or to support such machinery or to support an enclosure having machinery therein. In other words all the items were used for structure fabrication which in turn was embedded in the earth for support to the machinery or the building.
The Larger Bench of the Tribunal in Vandana Global Limited vs. Commissioner of C. Ex. Raipur reported in 2010 (253) ELT 440 (Tri.-LB), while dealing with the points as to whether the term capital goods can include plain structures embedded to the earth and whether the goods like Angles, Joists, Beams, Bars, Flats which go into fabrication of such structure can be treated as inputs in relation to their final products as an inputs for capital goods as well as whether the credit can be allowed in respect of such goods which go into fabrication of such structures and plant ruled that held as under:-
47. It has also been argued that the impugned goods which are used for laying foundation and building structural support should be granted credit ignoring the fact that at the intermediary stage non-excisable goods in the nature of immovable property attached to earth come into being. Reliance is placed on several decisions where credit has been allowed even though intermediate goods produced are exempt from payment of duty. In this connection we note that as the learned Jt. CDR has rightly submitted, the erstwhile Rules 57D and 57R of the Central Excise Rules, 1944 provided for non-denial of the credit if any intermediate product came into existence during the manufacture of final product. Hence, credit can be allowed if intermediate goods emerge during the process of manufacture of the final product. The immovable capital assets in the form of foundations and structural supports embedded to earth cannot be considered as intermediate goods arising in the process of manufacture of the final product. The precedent decisions cited by the learned counsel do not advance the case of the appellants for obtaining credit of duty paid cement and steel items in question as the foundation and structural support built using such items cannot be considered as intermediate goods arising in the process of manufacture of the final product.
The points for determination were answered thus:-
49. In the light of the foregoing findings, we answer the questions referred to the Larger Bench as follows:-
(a) The term capital goods has been defined in the Cenvat Credit Rules, which in turn have been framed under the rule making powers conferred under Section 37(2) of the Act. The said Section refers to credit of duty paid on goods used in, or in relation to the manufacture of excisable goods. Hence, capital goods defined in the Cenvat Credit Rules in the context of providing credit of duty paid, have to be excisable goods. Whether a particular plant or structure embedded to earth can be considered as excisable goods or not has to be determined in the light of the decisions of the Honble Supreme Court on the issue, which is no longer res integra.
(b) Goods like cement and steel items used for laying foundation and for building supporting structures cannot be treated either as inputs for capital goods or as inputs in relation to the final products and therefore, no credit of duty paid on the same can be allowed under the Cenvat Credit Rules for the impugned period.
As already observed above the authorities below have found that the goods in question were used for manufacture of structures which either supported the machinery or the enclosures having machinery in the factory, and the manner in which they are used does not disclose the same to be capital goods entitled to avail credit under the Cenvat Credit Rules.
The final goods for which the impugned goods were utilized being structural items like platform, supporting structures used for making foundation and base, none of them were eligible to avail the cenvat credit as was rightly observed by the adjudicating authority. Considering the same, the impugned order cannot be sustained.
The appeal, therefore, succeeds. Impugned order is hereby set aside with all consequential relief.
[Justice R.M.S. Khandeparkar] President [Rakesh Kumar] Member [Technical] /Pant/