2019 (11) TMI 556 - AT - Central Excise

Tribunal allows exemption for using cement in factory without duty payment

The Tribunal overturned the denial of exemption under Notification No. 67/95-CE for using cement within the factory without duty payment. It emphasized ... Exemption under Notification No. 67/95-CE - capital goods - use within the factory of production - in relation to manufacture - integral part test - Cenvat CreditExemption under Notification No. 67/95-CE - use within the factory of production - in relation to manufacture - integral part test - Whether cement manufactured and used within the assessee's factory without payment of duty qualified for exemption under Notification No. 67/95-CE as being used 'in or in relation to' the manufacture of the final product. - HELD THAT: - Notification No. 67/95 grants exemption to capital goods or specified goods manufactured in a factory and used within the factory of production 'in or in relation to manufacture of final products.' The Tribunal held that the phrase 'in relation to' is not confined to inputs directly entering the manufacturing process but also covers goods used in relation to manufacture, including those forming integral supports or foundations for plant and machinery. Reliance was placed on the reasoning in Thiruarooran Sugars (as considered by the Tribunal) which applied the 'integral part' concept and the user test, following the approach in Saraswathi Sugar Mills, to conclude that structurals and foundations erected using materials like steel and cement are integrally connected to the capital goods that manufacture the final product. On the material before it, the Tribunal found the denial of exemption unsustainable because the use of cement within the factory fell within the scope of 'in relation to' manufacture and thereby met the Notification's requirements.Denial of exemption under Notification No. 67/95-CE set aside; appeal allowed.Final Conclusion: The Tribunal concluded that cement used within the factory ''in relation to'' manufacture qualifies for exemption under Notification No. 67/95-CE; the impugned order denying exemption was reversed and the appeal allowed with consequential reliefs as per law. Issues:Denial of exemption under Notification No. 67/95-CE dated 16th March 1995 for using cement within the factory without payment of duty.Analysis:The appellant challenged the order of the Commissioner of Central Excise & Service Tax confirming the denial of exemption under Notification No. 67/95-CE. The appellant, a manufacturer of pig iron, cleared cement captively without duty payment, leading to the denial of exemption. The adjudicating authority upheld the demand, citing the appellant's activities as the reason for ineligibility for the claimed exemption. The appellant's first appeal was unsuccessful, prompting the current appeal.The Revenue contended that the appellant used cement within the factory without duty payment, leading to a show cause notice and subsequent demand confirmation. The appellant's reliance on Notification No. 67/95 was disputed, emphasizing the manufacturing of pig iron and clearance of cement without duty payment. The Revenue presented supportive decisions to bolster their stance.Upon review, the Tribunal noted that Notification No. 67/95 grants exemption for goods used within the factory in or in relation to the manufacture of final products. The Tribunal emphasized that cement need not be directly used in manufacturing but can be used in relation to the final product's manufacture. The Tribunal distinguished previous cases cited by the Revenue, highlighting the importance of the 'in relation to' aspect. Reference was made to a High Court judgment supporting the integral role of certain materials in the manufacturing process.Ultimately, the Tribunal found the denial of exemption incorrect and unsustainable. The impugned order was set aside, and the appeal was allowed with any consequential relief as per the law. The judgment was pronounced in open court on 20/09/2019.