Custom, Excise & Service Tax Tribunal
M/S U.P. State Sugar Corporation Ltd vs Cce, Noida on 25 March, 2013
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No.2, R. K. Puram, New Delhi. Court No. 1 Date of hearing/decision: 25.03.2013 Honble Sh. 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. 895 of 2009-SM (Arising out of order in appeal No. 191-CE/APPL/ NOIDA/08 dated 31.12.2008 passed by the Commissioner (Appeals), Customs & Central Excise, Noida) M/s U.P. State Sugar Corporation Ltd. Appellant Vs. CCE, Noida Respondent
Present Ms. Rashi Sureka, Advocate for the appellant Present Ms Shweta Bector, DR for the Revenue.
Coram: Honble Sh. Rakesh Kumar, Member (Technical) Final Order No. 55973/2013 Per: Rakesh Kumar:
The appellant are manufacturers of sugar chargeable to central excise duty. The availed cenvat credit in respect of central excise duty paid on inputs and capital goods in terms of provisions of Central Excise Rules, 2002/2004. The period of dispute in this case is from March 2002 to February 2007. The jurisdictional Assistant Commissioner issued a show cause notice dated 29.03.2007 to the respondent for denying cenvat credit amounting to Rs.11,67,441/- in respect of various items, its recovery alongwith recovery of interest and imposition of penalty on the appellant. The show cause notice was adjudicated by the Joint Commissioner vide order-in-appeal dated 14.07.2008 by which the Joint Commissioner confirmed the cenvat credit demand alongwith interest thereon and imposed penalty of equal amount on the appellant. On appeal being filed to the Commissioner (Appeals), the same was partly allowed vide order-in-appeal dated 31.12.2008. The Commissioner (Appeals) upheld the cenvat credit demand of only Rs. 5,89,550/- in respect of welding electrodes, paint, sulphur, polythene sheet, G.C. sheets & Twill bags and machinery parts and other items. She also reduced the penalty to Rs. 1 lakh. Against this order of Commissioner (Appeals) this appeal has been filed.
2. Ms. Rashi, Advocate, the ld. Counsel for the appellant, pleaded that so far as G.C. sheets and twill bags are concerned, the appellant are not contesting the denial of cenvat credit in respect of these items; that as regards welding electrodes, the same has been used for repair and maintenance of the plant and machinery and hence the same are eligible for cenvat credit in view of Honble Chhattisgarh High Court in the case of Ambuja Cements Eastern Ltd. vs. CCE, Raipur reported in 2010 (266) ELT 690 (Chhattisgarh); that as regards the paints, the same have been used for paining the surface of machinery to protect the same from moisture, that the paint is specifically covered by the definition of input and hence the denial of cenvat credit in respect of the same is incorrect; that sulphur has been used for whitening the sugar and hence the same is to be treated as input; that chemicals have been used for conditioning the boiler feed water and without the use of these chemicals smooth function of the boiler is impossible, and that polythene sheets have been used to cover the sugar bags so as to protect the sugar from moisture as moist sugar being not saleable has to be reprocessed; that in view of this polythene sheets used to protect sugar from moisture have to be treated as used in relation to the manufacture of the sugar and would be eligible for credit, and that items of machinery are covered by definition of capital goods. She, therefore, pleaded that except for twill bags and G.C. sheet the impugned order in respect of other items is not correct.
3. Ms. Shweta Bector, ld. DR defended the impugned order and reiterated the finding of the Commissioner in it.
4. I have considered the submissions from both the sides and perused the record.
5. As regards G.C. Sheets and twill bags, the same have been used for repair work of the factory building and godown and hence would not be eligible for cenvat credit. Even the appellant are not contesting the denial of cenvat credit amounting to Rs. 71,376/- in respect of these items. In view of this, the Commissioner (Appeals)s order upholding the demand of cenvat credit demand of Rs. 71,376/- in respect of these items is uphold.
6. As regards welding electrodes the same admittedly have been used for repair and maintenance of the plant and the issue stands decided in favour of the appellant by judgments of Honble High Court of Chhattishgarh in the case of Ambuja Cement Eastern (supra), judgment of Honble Rajasthan High Court in the case of Hindustan Zinc Ltd. (supra) and the judgment of Honble Karnataka High Court in the case of Alfred Herbert (India) Ltd. (supra). In view of this, the impugned order denying the cenvat credit in respect of welding electrodes used for repair and maintenance of plant and machinery is not sustainable.
7. As regards the sulphur, the same admittedly is used for whitening of the sugar and hence the same would be covered by the definition of input as given in cenvat credit rules as the definition of input covers all the items in or in relation to the manufacture of final product whether directly or indirectly or whether contained in final product or not. As regards paints, the same admittedly has been used, it for protecting the mill machinery from rust. The paints is covered by the definition of input. In view of this, the denial of cenvat credit in respect of paint and sulphur is also not sustainable.
8. As regards the boiler chemicals, the same are undisputedly used for conditioning the heat water of the boiler which is necessary for smooth functioning of the boiler. Since with smooth functioning of the boiler, manufacturing is not feasible keeping in view the ratio of Honble Calcutta High Court in the case of Singh Alloys & Steel Ltd. vs. Asstt. Collector of Central Excise reported in 1993 (66) ELT 594 (Cal.) cenvat credit in respect of boiler chemical has to be allowed.
9. As regards the eligibility of polythene sheets for cenvat credit, the use of this item is to protect the sugar from moisture. The sugar absorbs moisture from the air and moist sugar being not marketable, has to be reprocessed. To avoid reprocessing, the sugar bags are covered by polythene bags. Since the use of polythene sheets is after completion of manufacture of sugar, I am of the view that polythene sheets cannot be treated as input used in the manufacture of sugar and as such the same would not be eligible for cenvat credit. Therefore the appellant would not be eligible for cenvat credit in respect of polythene sheets.
10. As regards the machinery parts, the same admittedly are parts of various machinery and hence would be covered by the definition of capital goods. Therefore, the impugned order denying the cenvat credit in respect of machinery parts is not sustainable.
11. In view of the above discussion, while the Commissioner (Appeals)s order denying the cenvat credit in respect of G.C. sheets, twill bags and polythene sheets is upheld, the impugned order denying cenvat credit on remaining items i.e. in respect of welding electrodes, paints, sulphur, boiler chemicals and machinery parts is set aside. Looking to the fact that the dispute in this case is of interpretation of Cenvat Credit Rules, the penalty on the appellant is set aside.
(Rakesh Kumar) Member (Technical) Pant