TaxTMI 
TaxTMI 
2023 (9) TMI 1086
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....re of processed drums and packing drums which were manufactured in the factory of the appellant by the Contractors M/S Lalita Engineering Contractor who had also raised invoices for conducting the said activity within the factory. The appellant also maintained the RG-1 register for details of the fabricated goods and the generation and clearance of the waste which arose during the making of such MS Drums. 1.2 The case of the department is that the steel goods used for fabrication of drums are neither capital goods nor components or accessories of any capital goods as defined in Rule 2(a) (A) of Cenvat Credit Rules, 2004. Accordingly, the Show cause notices dated 27.12.2011, 13.09.2013, 21.10.2013 and 02.08.2018 were issued proposing denial of cenvat credit and recovery of the same in terms of Section 11 A (5) of Central Excise Act, 1944 read with Rule 14 of the Cenvat Credit Rules, 2004 along with interest under Section 11AA of the Act read with Rule 14 of the Rules and penalty under Section 11AC read with Rule 15 of the Rules. The Show cause notices dated 27.12.2011, 13.09.2013 and 21.10.2013 were adjudicated by learned commissioner vide Order-In-Original dated 04.10.2013 and 1....
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....n were used in or in relation to the manufacture hence, the credit is admissible. 2.2 Without prejudice to his above submission, he further submits that if at all the credit is not admissible under capital goods the goods in question are falling under the category of input also in terms of Explanation 2 to Rule 2(k) of Cenvat Credit Rules, 2004 on the ground that all these goods were admittedly used in the manufacture of capital goods namely processed drums/reels, MS Drums which were used in the factory of the appellant in or in relation to the manufacture of final product namely wires and cables. Therefore, the iron and steel items under dispute satisfied the definition of input also. For this reason also appellant is entitled for cenvat credit. In support, he placed reliance on following judgments:- * Metrochem Industries - 2013 (292) ELT 578 (Tri.) * Rajasthan Spinning and Weaving Mills Ltd - 2010 (255) ELT 481 (SC) * Hindustan Zinc Ltd - 2007 (214) ELT A115 (SC) * SLR Steels Ltd - 2012 (280) ELT 176 (kar.) * L.H Sugar Factories - 2010 (253) ELT 135 (Tri. Del) * Sanghi Industries - 2022 (5) TMI 475 * Kallakurichi ....
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....suppression of fact and the extended period cannot be invoked. In support he placed reliance on the following judgments: * Dynamic Industries Ltd - 2014 (307) ELT 0015 (Guj.) * Suvikram Plastex Pvt. Ltd - 2008 (225) ELT 282 (T) * Rallis India Ltd - 2006 (201) ELT 429 (T) * Patton Ltd - 2006 (206) ELT 496 (T) * Satguru Engineering & Consultants Pvt Ltd - 2006 (203) ELT 492 (T) * Indian Hume Pipes Co. Ltd - 2004 (163) ELT 273 (T) 2.5 He submits that as per the submission with regard to the limitation, the appellant cannot be imposed penalty and demand being not sustainable interest is also not payable. 3. Shri Anoop Kumar Mudvel, Learned Superintendent (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order. He further submits that admittedly the goods on which cenvat credit was taken falls under Chapter 72 & 73 which is not covered under the definition of capital goods. Therefore, the cenvat credit taken by the appellant treating the goods as capital goods is not admissible. 3.1 He further submits that the iron & steel material under dispute is not parts or accessories of the capital goods. F....
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....e plain reading of the above definition of inputs the following criteria to be satisfied to qualify goods as input. 1. To be used in or in relation to manufacture of final product or for any other purpose 2. Whether directly or indirectly 3. Whether contained in the final product or not 4. Within the factory of production 4.2 As per the fact of the present case in view of the chartered engineer certificate submitted by the appellant, the use of the goods is not under dispute that the same were used in the manufacture of processed drums/ packing drums/ bobbin. These drums are used in relation to manufacture of final product as per the nature of the final product which is wire and cables. The wires and cables for purpose of processing in the manufacture are shifted from one process machine to other process machine which is possible only after winding of wires and cables on the drums and also for the purpose of packing by winding of final product. On the basis of this use the goods i.e. iron and steel material are clearly used in or in relation the manufacture, directly or indirectly, whether contained or not in the final product. In view of the ....
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....ct. The parties are ad idem that diesel generating set falls under Chapter 85 under Heading No. 85.02, as described at Serial No. 3 of the afore-extracted Table. Similarly there is no dispute that chimney attached with the generating set is covered by the items described in Serial No. 5 thereof. However, the controversy centres around the question whether the steel plates and M.S. channels used in the fabrication of chimney would fall within the purview of Serial No. 5 of the Table below Rule 57Q. 10. Having examined the question in the light of the language employed in Rule 57Q and the case law on the point, we are of the opinion that the appeal is devoid of any merit. 11. In Jawahar Mills Ltd. (supra), heavily relied upon by the learned counsel for the assessee, the question which came up for consideration was whether the claim of modvat credit by some manufacturers in respect of certain items by treating them as capital goods in terms of Rule 57Q was in order. Some of the items under consideration were power cables, capacitors, control panels, cable distribution boards, air compressors, etc. The Court examined the question in the light of the definition of capi....
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....as correct in law in holding that the assessee was entitled to avail of modvat credit in respect of the subject items viz. steel plates and M.S. channels used in the fabrication of chimney for the diesel generating set, by treating these items as capital goods in terms of Rule 57Q of the Rules. 15. For the foregoing reasons, we find no substance in the appeal preferred by the Revenue. The same is dismissed accordingly. Parties are left to bear their own costs." * Vandana Global Ltd - 2017 -TIOL-2853-HC- Chattisgarh-CX "This bunch of matters are before us by reason of an order delivered by three member Bench of Customs, Excise and Service Tax Appellate Tribunal; for short the 'Tribunal', which is challenged in Tax Case No. 59 of 2011. 2. By the order dated 17-6-2008 the Principal Bench of the Tribunal referred the following issues for consideration to the Larger Bench : "(a) Whether the term "capital goods" can include plant, structures, embedded to earth? (b) Whether the goods like angles, joists, beam, channels, bars, flats which go into fabrication of such structures can be treated as 'inputs' in relation to their final produc....
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....deration before different High Courts either cited as precedent or as relied upon by the Tribunal in different other matters. The Gujarat High Court in Mundra Ports & Special Economic Zone Ltd. - 2015 (39) S.T.R. 726 (Guj.) referred to the contents of the amendment, to the extent it is relevant for the purpose of this case and held as follows : "We do not find that amendment made in the Cenvat Credit Rules, 2004 which come into force on 7-7-2009 was clarificatory amendment as there is nothing to suggest in the Amending Act that amendment made in Explanation 2 was clarificatory in nature. Wherever the Legislature wants to clarify the provision, it clearly mentions intention in the notification itself and seeks to clarify existing provision. Even, if the new provision is added then it will be new amendment and cannot be treated to be clarification on particular thing or goods and/or input and as such, the amendment could operate only prospectively." 6. That view has been quoted with approval by the Madras High Court in M/s. Thiruarooran Sugars v. Customs, Excise and Service Tax Appellate Tribunal (CMA 3814/2014 and connections) decided on 10-7- 2017 [2017 (355) E.L.....
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....e Shri Rahul Gajera for the appellant submits that all these items were used as structure to hold capital goods viz furnace, hence, eligible to credit as per the definition of 'input' prescribed under Rule 2(k) of CCR, 2004. He submits that the credit for fabrication of the capital goods is admissible to the appellant in view of the judgement of the Principal Bench At Delhi in the case of Singhal Enterprises Pvt. Ltd. vs. C.Cus. & C. Ex., Raipur ' 2016 (341) ELT 372 (Tri-Del.).He further submits that there is no dispute of the fact that these items are used for the purpose mentioned above. However, he fairly accepts that Chartered Engineer's Certificate in this regard has not been placed by the Appellant. 4. Ld. AR for the Revenue on the other hand submits that the claim of the Appellant is not supported by any evidence including Chartered Engineer's Certificate, therefore, the matter may be remanded to the adjudicating authority for verification of the said claim of the Appellant. 5. I find that the Principal Bench at Delhi in Singhal Enterprises Pvt. Ltd's (supra) in laying down the principle on the eligibility of credit on similar items observed as follows:- ....
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....abrication of support structures for capital goods. The appellants have argued that the various capital goods, such as, kiln, material handling conveyor system, furnace, etc. cannot be suspended in mid-air. They will need to be suitably supported to facilitate smooth functioning of such machines. It is obvious that the structural items have been suitably worked upon for this purpose. Accordingly, the goods fabricated, using such structurals, will have to be considered as parts of the relevant machines. The definition of 'Capital Goods' includes, components, spares and accessories of such capital goods. Accordingly, applying the 'User Test' to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of 'Capital Goods' as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat credit." 5. Also, I find merit in the contention of the Ld. AR for the Revenue that the Appellant should establish the said use by adducing evidences. In the result, the matter is remanded to the adjudicating authority to examine the claim of the appellant on the eligibil....
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....er Cenvat Credit Rules, 2004 is that they have to be used within the factory of manufacture. This criteria has not been satisfied in this matter. However we find that in the case of Hindalco Industries Ltd.2014 (313) E.L.T. 311 (supra), after considering apex court judgment in Vikram Cements2006 (197) E.L.T. 145 (S.C.) it was observed as under : 6.3 We are of the view that the ratio of the above-mentioned judgments of the Apex Court is squarely applicable to the facts of this case, as the Renu-sagar Power Plant, which is a captive power plant of the appellant company, together with the cement factory of the appellant company constitute one integrated unit and it is not disputed that except of small quantity of electricity generated being used in the Renu sagar township, the remaining quantity is used in the appellant's factory for production of aluminium. Therefore, the Cenvat credit in respect of capital goods and inputs used in the captive power plant located at Renu sagar cannot be denied just because the power plant is located at some distance from the factory. 6.4We also find that the Apex Court in the case of State of U.P. v. Renu-sagar Power Company reported in (198....
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.... capital goods, for repair and maintenance of capital goods, for fabrication of staging structures and supporting structures, etc., as no excisable products can be manufactured without the same. Further, the amended definition of 'inputs' under Cenvat Credit Rules provides for availability of Cenvat credit to a manufacturer on all items utilized by the manufacturer in the factory for or of production. Accordingly, I allow this appeal and set aside the impugned order. The appellant will be entitled to consequential benefit in accordance with law" 25. Feeling aggrieved by the aforesaid order of the Tribunal, the Revenue has filed the present appeal inter alia stating that the Board has issued clarification vide Circular dated 18-5-2012, in respect of its Circular [dated] 2-4-2012, wherein it was reiterated that in terms of Rule 2(k) of the Cenvat Credit Rules, 2004, while Cenvat credit is available in respect of parts of Boiler, the same is not admissible in respect of structural components used for laying of foundation or making of structures for support of capital goods/Boiler, therefore, the Tribunal has erred in not considering the issue in its correct prospecti....
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....2 to Rule 2(k), as a whole, reads as under : "Explanation 2. - 'Input' include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer but shall not include cement, angles, channels, Centrally Wasted Deform bar (CTD) 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." (emphasis supplied) 30. It may be noted that the Rule 2(k) was further substituted by Notification [No.] 3/2011-C.E. (N.T.), dated 1-3-2011 and a specific exclusion was provided for goods used for laying of foundation or making of structures for support of capital goods. Rule 2(k) as substituted w.e.f. 1-3-2011 reads as under : "2(k) "input" means, - (a) all goods used in the factory by the manufacturer of the final product; or (b) any goods including accessories, cleared along with the final product, the value of which is included in the value of the final product and goods used for providing free warranty for final products; or (c) all goods used for generation of electricity....
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....y the Hon'ble High Court and observed that the amendment made on 7-7-2009 cannot be held to be clarificatory and as such would be applicable only prospectively. 33. The Madras High Court in India Cement (supra) noticed Vandana Global (supra) but relied upon the Apex Court judgment in Rajasthan Spinning & Weaving Mills Ltd. (supra), wherein the Apex Court has considered an issue of steel plates and MS channels used in the fabrication of chimney for diesel generating set and after considering it, the Apex Court allowed the Cenvet credit on MS Rod, sheets, MS Channel, MS Plate, etc., used for fabrication of structures to support various machines/capital goods. 34. In Thiru Arooran Sugars (supra), a Division Bench of the Madras High Court specifically considered as to whether MS structural, (which support plant and machinery), cement and steel (which are used in erecting foundations to hold plant and machinery) are integral part of capital goods eligible for Cenvat credit under the Cenvat Credit Rules, 2004 prior to the amendment of Explanation 2 to Rule 2(k) by notification dated 7-7-2009. The Madras High Court has held that irrespective or whether 'user test' is tes....
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....are extracted herein below :- 2(a) "capital goods" means :- (A) the following goods, namely :- (i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, Heading No. 6805 grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Central Excise Tariff Act; (ii) pollution control equipment; (iii) components, spares and accessories of the goods specified at (i) and (ii); (iv) ; (v) ; and (vi) , used- (1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office; or (2) for providing output service; 2(k) "input" means - (i) all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or a....
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....e finished goods will not be commercially viable. The expression 'accessories', as per the dictionary meaning, normally understood as a thing, which could be added for something else, in order to make the former more useful, versatile or attractive. Since, the disputed goods were used for fabrication of support structure for smooth erection of the machines, the same in our view should be considered as 'accessories' of the capital goods. 7. For ascertaining as to whether a particular item would fall under the definition of 'capital goods' or not, the 'user test' has to be applied to find out that in absence of use of that particular goods, what will be ultimate effect on the goods manufactured by the assessee. It is no doubt a fact that the above machineries without its proper installation, will not be functional to the satisfaction level, in order to achieve the desired objective. Thus, applying the 'user test', the Hon'ble Supreme Court in the case of Rajasthan Spinning & Weaving Mills Ltd. - 2010 (255) E.L.T. 481 (S.C.) held that even though steel plates and M.S. Channels are used in fabrication of Chimney, would fall within the ambit of 'capital goods'. The relevant par....
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....goods, in the present case, should be considered as 'capital goods' for the purpose of the Cenvat benefit. 9. On perusal of definition of 'input' extracted above, it would reveal that all the goods (excepting light diesel oil/high speed diesel oil and motor spirit) are considered to fall under such definition, when 'used in or in relation to manufacture of final products', whether directly or indirectly, and whether contained in the final product or not. The only condition required to be fulfilled is that the goods must be used within the factory of production. Further, Explanation 2 appended to such definition clause provides that 'input' includes goods, which are used in the manufacture of capital goods for further use in the factory of the manufacturer. On a conjoined reading of the definition of input and Explanation 2 appended thereto, it makes the position clear that inputs are not only goods, which are used in the manufacture of final products, but also those which are 'used in or in relation to' the manufacture of the final product. The relationship between those goods and the final product could be either direct or indirect and may include or may not include their....
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....rit we are of the view that the appellant have rightly availed cenvat credit on iron and steel materials used for manufacture of processed drums/reels/packing drums etc. which were further used in the factory of the appellant manufacturer. 4.9 As regard the submission on limitation, we find that firstly, on this identical issue there were so many judgments having conflicting views but subsequently the larger bench of the Tribunal and various High Courts and Supreme Court consistently expressed the view that the cenvat credit on the goods in question is admissible. We are of the view that when issue involve is of interpretation of cenvat credit rules, no mala fide can be attributed to the appellant. Further, the appellant have been declaring the availment of cenvat credit which is in dispute in their ER- 1 return, therefore, there is no suppression and wilful mis-statement with intent to evade duty on the part of the appellant. Accordingly, the demand for the extended period is not sustainable also on limitation in the light of the judgment of jurisdictional High Court of Gujarat in case of Dynamic Industries Ltd. The similar view as regard limitation was taken in the following j....