Custom, Excise & Service Tax Tribunal
Steel Authority Of India Ltd vs Salem on 5 August, 2024
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT NO. III
Excise Appeal No. 41747 of 2015
(Arising out of Order-in-Original No. 14/2014-CEX dated 29.12.2014 passed by Commissioner of Central
Excise and Service Tax, No. 1, Foulks Compound, Anai Road, Salem - 636 001)
M/s. Steel Authority of India Ltd. ...Appellant
Salem Steel Pant,
Salem - 636 0013.
Versus
Commissioner of GST and Central Excise ...Respondent
Salem Commissionerate, No. 1, Foulks Compound, Anai Road, Salem - 636 001.
APPEARANCE:
For the Appellant : Mr. Vishal Sundar, Advocate For the Respondent : Mr. M. Selvakumar, Authorised Representative CORAM:
HON'BLE MS. SULEKHA BEEVI C.S., MEMBER (JUDICIAL) HON'BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) FINAL ORDER No. 41034 / 2024 DATE OF HEARING : 30.07.2024 DATE OF DECISION: 05.08.2024 Order :- Per Ms. SULEKHA BEEVI C.S. Brief facts are that the appellants are engaged in manufacturing Hot Rolled and Cold Rolled Stainless Steel Products, Hot Rolled Carbon Sheets, Coils, Plates and Stainless-Steel Coin Blanks. They are a public 2 E/41747/2015 sector undertaking and are registered with the Central Excise Department. During the course of verification of the records of the appellant, it was noted that the appellant has wrongly availed CENVAT Credit under the category of capital goods on items like MS Sheets, Plates, Angles, Technological Structures, foundation bolts and nuts and railway sleepers falling under Chapter 72, 73 & 68. As per Rule 2(a) of the CENVAT Credit Rules, 2004, capital goods are defined as under:-
"(a) "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 heading 6804 of the First Schedule to the Excise Tariff Act;
(ii) pollution control equipment;
(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 fittings thereof;
(vii) storage tank,
(viii) motor vehicles other than those falling under tariff headings 8702, 8703, 8704, 8711 and their chassis [but including dumpers and tippers],] used - (1) in the factory of the manufacturer of the final products, [ * * * ];
or [(1A) outside the factory of the manufacturer of the final products for generation of electricity [or for pumping of water] for captive use within the factory; or] (2) for providing output service;"
1.2 According to Department, the items such as Sheets, MS Plates, Pipes, Angels, Technological Structures, foundation bolts and nuts, etc., fall under Chapter 72 & 73 of Central Excise Tariff Act, 1985 and railway sleepers fall under Chapter 68. As these items do not fall under Chapter 82, 84, 85, 90 or 6804 or 6805 of Central Excise Tariff, 1985, it appeared to the 3 E/41747/2015 Department that the appellant is not eligible to avail credit on such items under the category of capital goods.
1.3 Show cause Notice was issued for the period May 2008 to January 2013 alleging availment of ineligible credit on the above items and proposing to recover the same along with interest and for imposing penalties. After due process of law, the Original Authority disallowed the credit, confirmed the demand and imposed penalties. Aggrieved by such order, the appellant is now before the Tribunal.
2.1 The Ld. Counsel Shri Vishal Sundar appeared and argued for the appellant. It is submitted that during the years 2008 to 2011, the appellant was expanding its factory by installing additional Steel Melting Shop and Cold Rolling Mill-2 (Annealing and Pickling Plant). Work orders to set up the new plants were issued to different contractors like Danielle India Ltd., Andritz Technologies Pvt. Ltd., etc., for design, engineering, manufacture, supply and erection of the plant and machinery. Thus, the machinery and technological structures required for setting up of the additional steel meting shop were fabricated and brought inside the appellant's factory for erection. The impugned items in the nature of MS Angels, Sheets were used for structural support of capital goods. Without such structural support, the capital goods in the nature of storage tank, annealing and pickling line machines cannot be installed or put to use. The allegation of the Department is that the items do not fall under the definition of capital goods as per Rule 2(a) of CCR, 2004. These items are used as parts, spares, 4 E/41747/2015 accessories and supports of capital goods. Without such parts, accessories and supports, the capital goods cannot be put to use and therefore have to be considered as capital goods.
2.2 It is submitted that the Adjudicating Authority has denied the credit on storage bunker fabricated by using the impugned items. The Adjudicating Authority has taken the view that storage bunker is only a part of the production line for temporarily holding the raw materials in the process of production and therefore cannot be said to be a storage tank. This view adopted by the Adjudicating Authority is erroneous, for the reason that such storage bunker though for temporarily holding the raw materials is necessary for ensuring continuous flow of raw materials in the process of production. Certain support structures which were used to put up the pollution control system has been denied alleging that these are used to hold the machineries and cannot be termed as parts, accessories of the pollution control system. It is submitted by the Ld. Counsel without such support structures, the pollution control equipment cannot be installed and effectively function. The various levels and alignment of the pollution control system has to be maintained by such support structures. The credit availed in respect of cable tray has been denied by the Original Authority alleging that it is only for holding electric cables. The cable tray is an important item used in a factory of manufacture. Various items in the nature of parts, components, accessories of capital goods were made using the impugned items. The appellant has furnished a Certificate issued by a Chartered Engineer to establish the end use of the impugned items. The Annexure to the Certificate issued by Chartered Engineer would show that the items have 5 E/41747/2015 been used as part of capital goods for effective use of the capital goods. The Ld. Counsel relied upon the decision in the case of M/s. Singhal Enterprises Private Limited Vs. Commissioner of Customs & Central Excise, Raipur [2016 (341) ELT 372 (Tri.-Del.)] to argue that in the said case the Tribunal had considered the issue as to whether support structures used for capital goods is eligible for credit for the period post 07.07.2009. Applying the user test as decided in the case of Commissioner of Central Excise, Jaipur Vs. Rajasthan Spinning & Weaving Mills Ltd. [2010 (255) ELT 481 (SC)], the Tribunal held that the items in the nature of MS Angles, Channels, Steel Plates, etc., are eligible for credit, when used as support structures without which the capital goods cannot be put to use commercially. 2.3 It is submitted that the railway sleepers were used for laying railway track used for carrying the inputs into the factory as well as carrying the final products outside the factory. The decision in the case of JSW Steel Ltd. Vs. Commissioner of GST & Central Excise [2022 (2) TMI 791-CESTAT Chennai] was relied. In the said decision, the Tribunal relied upon the decision in the case of Jayaswal NECO Ltd. Vs. Commissioner of Central Excise [2015 (319) ELT 247 (SC)] wherein it was held that credit is eligible on the railway track installed for transportation of hot metal in ladle from blast furnace to pig casting.
2.4 The decision in the case of Commissioner of Central Excise, Coimbatore Vs. Jawahar Mills Ltd. [2001 (132) ELT 3 (SC)] as well as the decision in the case of Thiru Arooran Sugars & Ors. Vs. Commissioner of 6 E/41747/2015 Central Excise & Ors. [2017 (355) ELT 373 (Mad.)] was also taken assistance by the Ld. Counsel to argue that applying the user test, the impugned items would be eligible for credit, as these are used for the purpose of installing and effectively using the capital goods. 2.5 The Ld. Counsel argued on the ground of limitation also. It is submitted that the Show Cause Notice dated 22.05.2013 has been issued for the period May 2008 to January 2013 alleging suppression of facts with intent to evade payment of duty. The appellant is a public sector undertaking and the allegation that the appellant has suppressed facts with intent to evade payment of duty is baseless. The entire figures for raising the demand has been taken from the records maintained by the appellant. Further, the Chartered Engineer has inspected the premises and has given Certificate as to the end use of each invoice on which the appellant has availed credit. The appellant has filed periodical returns reflecting the availment of credit during the disputed period. There is no suppression of facts established by the Department. The issue as to whether such items are eligible for credit has always been under controversy. There were decisions rendered by the Hon'ble Apex Court in the case of Rajasthan Spinning & Weaving Mills Ltd. (supra) and Jawahar Mills Ltd. (supra) wherein the user test has been applied to conclude that if such structural items are used for putting the capital goods into effective use, the credit would be eligible. The issue being interpretational, the extended period cannot be invoked. The Ld. Counsel prayed that the appeal may be allowed. 7
E/41747/2015 3.1 The Ld. Authorised Representative Shri M. Selvakumar appeared and argued for the Department. The findings in the impugned order were reiterated. It is submitted that the credit has been availed on structural items which fall under Chapter Heading 72 & 73. These items do not fit into the definition of capital goods under Rule 2(a) of CCR, 2004. The Original Authority after examining each item, has denied the credit observing that these items cannot be considered as spares, components or accessories of capital goods. The items are used as support structures which are permanently embedded to the earth to hold the machineries and therefore cannot be considered as a part of machinery. The Ld. AR referred to para 23 of the impugned order to point out that the Adjudicating Authority has given the list of the items and has examined in detail the eligibility of credit. The structural items have been claimed to be a part of annealing and pickling line machine. Further, the impugned items are used for support structures and credit has been correctly disallowed.
3.2 The Ld. AR pointed out that GI structurals are used as part of main receiving sub-station electrical equipment. The sub-station as a whole is part of the power unit and cannot be treated as capital goods. The credit on such items cannot be allowed.
3.3 Likewise, bolts, nuts and used by the appellant as a part of electric arc furnace in steel melting shop and various plate, etc., are claimed to have used in cooling tower parts of the steel melting shop. Though the appellant has submitted the end use of such structural items to contend that 8 E/41747/2015 these are part of capital goods, it can be seen that these are mere structural items used in the assembly line and do not form part of any machine by themselves. Some of the structural items are only for the purpose of support to capital goods and do not form part of capital goods. It is submitted that the Original Authority has correctly disallowed the credit and confirmed the demand of duty. It is prayed that the appeal may be dismissed.
4. Heard both sides.
5. The issue to be decided is whether the appellant is eligible for credit of structural items in the nature of MS Angles, MS Plates, Sheets, etc. At the outset, it has to be stated that the appellant has furnished a Certificate issued by Chartered Engineer who has examined and verified each and every invoice and given the end use of the structural items (MS Angles, Sheets) used by the appellant. The Department has not adduced any evidence to discredit this Certificate. Again, thought the credit has been availed under the category of capital goods, it does not prohibit assessee from claiming credit under the category of inputs, if the impugned items fit into the definition of inputs, as held by the Larger Bench in the case of Commissioner of Central Excise Vs. Modi Rubber Ltd. [2000 (119) ELT 197 (LB)]. We now proceed to analyse the eligibility of credit on various items. 9
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6. The Ld. Counsel for the appellant has referred to para 20 of the impugned order in which the Adjudicating Authority has discussed the eligibility of credit on storage bunker. It is held that the storage bunker only temporarily holds raw materials in the process of production and therefore cannot be called as storage tank which falls within the definition of capital goods. The definition of capital goods as reproduced above, includes storage tank. Merely because, the bunker is used for temporarily holding the raw materials, it cannot be said that it does not serve the purpose of storage. We hold that the credit in regard to storage bunker is eligible.
7. Certain items used in the nature of support structure for Bag Filters, Hoppers for Spark Arrestor and structure for dust silos has been claimed by the appellant as being components, parts or accessories of machines / pollution control equipment. The Original Authority has held that these items are permanently embedded to earth and therefore cannot be considered as parts, components, accessories of machineries / equipment. It can be seen that pollution control equipment falls within the definition of capital goods. The said equipment cannot be put into effective use without being embedded to earth. There are various parts which have to be assembled and connected at site using steel structures. The items which are used for holding and connecting the various parts of the pollution control equipment and other machines which in our view is eligible for credit.
8. The credit availed on cable tray has been denied alleging that these cable trays apparently are used for holding electrical cables. The Ld. 10 E/41747/2015 Authorised Representative has argued that only support structures which intend to hold the capital goods or put for effective use of a machinery would be eligible for credit. The cable trays are used for holding electrical cables of the machines and are accessories of capital goods. We hold that the credit is eligible.
9. In para 23 of the Order-in-Original, detailed list of structural items used for capital goods are given. The appellant contended that these items qualify as capital goods, component, spares and accessories of capital goods. The Ld. Counsel has drawn our attention to the Certificate issued by the Chartered Engineer dated 09.12.2014. The said Engineer has verified all impugned items mentioned in the Annexure to the Show Cause Notice dated 22.05.2013 on which credit has been denied. The Annexure to the Certificate gives the list with description of each item and end use. It is opined by the Chartered Engineer that the items such are sheets, angles, channels, etc., have been received and erected for use of machines as parts, components, accessories and technological structures of machinery of steel melting shop. We have perused the Annexure to the Certificate issued by the Chartered Engineer. Most of the items show that the end use is parts, components, accessories or for supporting the capital goods for putting the capital goods into effective use.
10. However, certain items have been used for sub-station electrical equipment which in our view is not eligible for credit. For this reason, Sl.No. 50 to 60 in the Annexure to the Chartered Engineer Certificate is not eligible 11 E/41747/2015 for credit. At Sl.No. 99 relating to invoice No. 21 dated 01.08.2009, the name of capital good is mentioned as 'Earthing Material'. This is also used for electrical protecting wiring and therefore not eligible for credit. Sl.No. 109, in regard to invoice No. 27 dated 09.04.2009 the description is shown as 'Galvanised Structure'. The end use of this item is for electrical equipment in main receiving sub-station. We hold that the said invoice is not eligible for credit. So also, Sl.No. 144-149 are items used for electrical power and main receiving sub-stations. These items are not eligible for credit. At Sl.No. 165-168 are items in the nature of GI earthing wire used for electrical protective earthing which in our view is not eligible for credit. At Sl.No. 173 in regard to invoice dated 30.10.2009, the description of item is 'DCS System Spares' which is used for electrical equipment in main receiving sub-station is not eligible for credit. At Sl.No. 290, it is noted that it is a duplication of Sl.No. 289 and for this reason, this invoice dated 03.04.2010 is not eligible for credit. At Sl.No. 294-297, the items described are 'GI Earthing Strip' which is used for protective wiring and electric equipment which in our view is not eligible for credit. At Sl.No. 335, 336, 337 & 342, the items used are for electrical installation and protective wiring, etc., which in our view, is not eligible for credit. On merits, the issue of eligibility of credit of the items explained in this para is held in favour of Revenue and against the assessee.
11. In regard to credit availed on railway sleepers, the Ld. Counsel had relied upon the decision in the case of JSW Steel Ltd. (supra). In the present case, we find that the appellant has availed credit on railway tracks as well as concrete sleepers. In our view, the credit availed on concrete 12 E/41747/2015 sleepers would not be admissible. In Annexure 1 of the Chartered Engineer Certificate, the details of the credit availed in respect of railway sleeper and concrete sleeper has been given. On perusal, we are of the view that concrete sleeper in this Annexure is not eligible for credit. On merits, the issue of eligibility of credit on concrete sleepers is held in favour of revenue and against the assessee.
12. The Tribunal in the case of Singhal Enterprises Private Limited (supra) had occasion to consider the issue of eligibility of credit wherein the user test was put into application to allow the credit. The Tribunal relied upon the decision in the case of Rajasthan Spinning & Weaving Mills Ltd. (supra) and held that when steel plates, MS Channels, Sheets are used for fabrication of capital goods or for putting the capital goods into effective use, the credit is eligible. Similar view was taken in the case of Thiru Arooran Sugars Vs. Ors Vs. Commissioner of Central Excise [2017 (7) TMI 524 (Mad.)] and in the case of Commissioner of Central Excise, Tiruchirapalli Vs. India Cements Ltd. [2014 (305) ELT 558 (Mad.)]. On applying the user test, we find that the credit is eligible except for the specifically mentioned items in the paragraphs 10 and 11 which we have held against appellant.
13. The Ld. Counsel has argued on the ground of limitation. The Show Cause Notice dated 22.05.2013 has been issued for the period May 2008 to January 2013. It is submitted that the period from May 2008 to April 2012 is barred by limitation. The Ld. Counsel submitted that the entire 13 E/41747/2015 demand has been raised on the basis of the documents / accounts maintained by the appellant, as reflected in para 15 of the Show Cause Notice. For this reason, the allegation that appellant has suppressed facts is without any basis. The appellant is a Public Sector Undertaking and there is no men rea on the part of the appellant to evade tax. The decision in the case of Commissioner of GST, Customs and Central Excise Vs. Commandant, CISF Unit [2019 (24) GSTL 232 (Tri.-Del.)] was relied. The appellant was subjected to regular audits by the Department and CERA, wherein no finding was made that appellant availed ineligible credit. The decision in the cse of Raj Kumar Forge Ltd. Vs. Union of India [2010 (262) ELT 155 (Bom.)] and Uniworth Textiles Ltd. Vs. Commissioner of Central Excise, Raipur [2013 (288) ELT 161 (SC)] were relied.
14. On perusal of the Show Cause Notice, apart from a vague allegation that appellant has suppressed facts with intention to evade duty, there is no positive act of suppression established against the appellant. The appellant has filed periodical returns disclosing the credit availed. Several audits were conducted. The appellant being a Public Sector Undertaking there cannot be any wilful intention to evade payment of duty as decided in the case of CISF Unit (supra). The decision in the case of Uniworth Textiles Ltd. (supra) has held that there has to be wilful suppression with intent to evade payment of duty. On the totality of facts, and following the decision, we are of the view that demand raised invoking the extended period cannot sustain.
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15. In the result, the impugned order is modified to the extent of disallowing the credit on items which have been mentioned in paras 10 and 11 on merits and setting aside the demand of duty by disallowing credit for the extended period. The appellant will be liable to pay duty on items discussed in paras 10 and 11, if they fall within the normal period.
16. The appeal is partly allowed in above terms with consequential reliefs, if any.
(Order pronounced in open court on 05.08.2024)
Sd/- Sd/-
(VASA SESHAGIRI RAO) (SULEKHA BEEVI C.S.)
MEMBER (TECHNICAL) MEMBER (JUDICIAL)
MK