Sir, We have purchased MS Angle, Beam , HR Sheets for fabrication of Duct, Sand Mixer and other required inside the factory premises for setting up of Sand Plant for manufacture of castings. Without duct, sand mixer etc sand plant cannot work. Central excise department objects cenvat credit on HR sheets, MS Angle, Beam etc. To run foundry Sand Plant is must and for sand plant sand mixer, duct, elevator is mandatory. Please give your valuable advice with favorable order on Asseessee. Kind Regards K.Srinivasan
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Dear K Srinivasan, Please check Vandana Global Judgment and developments occurred after that in this connection. Regards Team YAGAY and SUN (Management and Indirect Tax Consultants)
Sir, Kindly advice what is the legal position as on today for cenvat credit on M.S,Angles, Channels, Beams etc for Sand Plant, Sand Mixer etc which is mainly required for mnufacture of Castings. Since the cenvat credit availed during the 2012-13 and audit objection raised this year, could you please give your valuable opinion / advice / guidance will be immensely helpful to us. Hence request you to kindly advice today position. Regards K.Srinivasn
Dear K Srinivasan,
In the decision of the Larger Bench of the CESTAT in Vandana Global Ltd v CCE, Raipur 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB), the Larger Bench held that 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. This order was delivered on 30 th April 2010.
But the Supreme Court in CCE, Jaipur Vs. Rajasthan Spinning and Weaving Mills Ltd. - 2010 (7) TMI 12 - SUPREME COURT OF INDIA held that MS channels, plates, etc., used in its fabrication, were capital goods. This judgement was delivered on 9th July 2010 – that is after the Larger Bench decision.
Therefore, in this matter Tribunal Bench has held that, in view of the Supreme Court judgment, the view of the Larger Bench is no longer valid.
In our opinion you are eligible for availment of CENVAT credit. Please also check the facts of your matter at your end.
Regards
Team YAGAY and SUN
(Management and Indirect Tax Consultants)
Dear Sir,
As per my view, cenvat credit on MS Angles, Beam and HR Sheets can be taken as per rule 2(k) of Cenvat credit rules, 2004. These are eligible inputs which require mainly for fabrication of your main plant. The rules 2(k) also specifies that cenvat credit will not be allowed on inputs used for laying of foundation or supporting structure for any capital goods. As per your statement, The subject items are to be used mainly in the fabrication of your plant.
Generally it is presumed that MS, Angle, Beam, HR Sheets etc. that are used in relation to capital goods are eligible for credit.However, in most of the cases, though such credit is available, however assessee avails credit of not only such items used for capital goods but also used elsewhere in the factory for other purposes such as construction, fencing, roof tops etc. Secondly, no certificate or evidence provided to department for usage of such items. In your case, the auditors also know that credit for such items is available to you, however the ratio of credit availed in your cenvat credit account on items such as MS Angles, Beams, Sheets etc must have been on the higher side than the percentage of such items actually required and used in manufacture of Duct, Sand Maker etc. Therefore audit paras are raised by the departmentt and after wards it is presumed by the assessee that excise auditors has wrongly taken the audit para as such items are actually available for credit. The role of a particular lot is to be given as such items have Multifunctional Applications.. Also, during audit, proper bifurcation or certificate has to be provided regarding actual and perfect use of such goods.
Sir, To close the audit para I request the present judgment in favor of asseesee if any may be furnished. Though various opinions received from the experts are in favour of asseessee , I need to expose to the department with straight judgment in favour of assessee to close the issue. If any board circular available will be useful. I want to close the issue once for all instead of prolonging the issue. Valuable order in favour assessee required. Kind regards K Srinivasan
Dear Srinivasan,
You may consider following judgment in your matter.
CCE, Jaipur Vs. Rajasthan Spinning and Weaving Mills Ltd. - 2010 (7) TMI 12 - SUPREME COURT OF INDIA.
Regards
Team YAGAY and SUN
(Management and Indirect Tax Consultants)
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2014 (3) TMI 873 - CESTAT CHENNAI
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Other Citation: 2013 (292) E.L.T. 82 (Tri. - Chennai)
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PSG and SONS’ CHARITIES METALLURGY and FOUNDRY DIVISION Versus CCE., COIMBATORE
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Eligibility to credit in respect of the impugned goods such as MS angles, channels etc. - Inputs or Capital goods - Held that:- appellants have claimed that they have used the impugned goods for manufacturing ‘sand plant’, which in turn is used for making ‘sand moulds’, which in turn is further used for manufacturing various castings. If the sand plant can be considered as machinery and capital goods, the appellants would have been entitled to input duty credit in respect of the impugned goods utilized for making a sand plant. However, there is a categorical finding by the original authority in his order that the sand plant is embedded to earth and is immovable and as such the same cannot either be considered as goods or as capital goods. Hence, the claim of the appellants for Cenvat credit has been rejected. The reasoning given by the original authority is sound and the same requires no interference - However penalty is waived - Decided partly in favour of assessee.
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No. - E/334/2011
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Order No. - 589/2012
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Dated - May 29, 2012
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Dr. Chittaranjan Satapathy, J.
Shri C. Sadasivam, AR, for the Appellant.
Shri T.H. Rao, SDR, for the Respondent.
ORDER
Heard both sides at length. The appellants have taken 50% of the credit on the impugned goods in the first year and the balance 50% in the second year as was required in respect of the capital goods credit. In the first round, the matter was remanded to the original authority. He has decided the matter afresh and has also clubbed the matter relating to a similar issue pending before him. The present appeal, therefore, relates to a combined Order-in-Original which is partly in respect of the remanded matter and partly in respect of the fresh matter.
2. Though the appellants had initially taken credit on the impugned goods treating the same as capital goods, their present claim is that the impugned goods should be treated as inputs used for manufacture of capital goods.
3. The issue relating to eligibility to credit in respect of the impugned goods such as MS angles, channels etc. is now settled vide the decision of the Larger Bench of the Tribunal in the case of Vandana Global Ltd. v. CCE, Raipur - 2010 (253) E.L.T. 440 and the decision of the Hon’ble Supreme Court in the case of Saraswati Sugar Mills v. CCE, Delhi-III - 2011 (270) E.L.T. 465 (S.C.). It is now settled that no Cenvat credit on such items can be allowed if the same are used for structural support or for repair and maintenance. However, credit is available if such items are used for manufacture of either the capital goods or parts or components of capital goods.
4. In this case, the appellants have claimed that they have used the impugned goods for manufacturing ‘sand plant’, which in turn is used for making ‘sand moulds’, which in turn is further used for manufacturing various castings. If the sand plant can be considered as machinery and capital goods, the appellants would have been entitled to input duty credit in respect of the impugned goods utilized for making a sand plant. However, there is a categorical finding by the original authority in para 16.5 of his order that the sand plant is embedded to earth and is immovable and as such the same cannot either be considered as goods or as capital goods. Hence, the claim of the appellants for Cenvat credit has been rejected. The reasoning given by the original authority is sound and the same requires no interference.
5. However, considering the peculiar nature of the dispute in this case and the special kind of plant which has been constructed using the impugned goods, I am of the view that the ends of justice would be met if the penalty is waived. I order accordingly, and while upholding the duty demand and demand of interest, I set aside the penalty imposed.
6. The appeal is thus partly allowed by setting aside the penalty as indicated above.
(Pronounced in open court on 29-5-2012)
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Sir, The relevant judgement mentioned in your mail stated by department partly set aside in favor of assessee. In all foundry industry sand plant is mandatory to produce sand moulds for which relevant materials such as angles, channels etc is being used. Though the supplier mentioned in their supply bill the tariff number 73 it is purely used for fabrication of duct, elevator etc to run the sand plant. Hence decided judgement in favor of assessee will be useful to settle the deparment query/objections. Kind regards K Srinivasan
Dear Sir, Please refer following cases on similar facts and circumstances : 1.Jubilant Organosys Ltd. Versus CCE, Meerut -CESTAT New Delhi 2.CCE Vs M/s Balrampur Chini Mills Ltd - CESTAT New Delhi 3.Kisan Sahkari Chini Mills Ltd Vs CCE - CESTAT New Delhi You may also take reffered case laws used in above-mentioned judgments. Thanks,
Dear All, Well done! It's good to see that you guys are sharing your experiences, providing your valuable inputs and knowledge with others. Keep it up. Try to give reply to each and every query, pertaining to your core area of knowledge. Do lots of research. Be humble while replying and discussing the matters. I would like to share two phrases with all of you in this regard, viz:- - "Law develops when we discuss it".
- "Knowledge is power when shared"
Regards, Team YAGAY and SUN
Sirs I am really happy to see your mail. The purpose of continuous correspondence regarding cenvat credit on angles, channels which is used for sand plant structure for making sand moulds and in turn finished goods called castings. I want to know right judgement so that department should close the issue and stop further proceedings. Kind regards K.Srinivasan
Thanx a lot Pradeep Khatri Sir. Mr. Srinivasan, With reference to your query, i have submitted my point of view. I am sorry as i do not have any more to offer on the above issue. I request others to provide relevant information to U; or u may contact the Tax Management India site here who provides Paid Consultancy or any other Consultant from the List of Experts who provide their views regularly in the Discussion Forum here so as to help and guide u in your matter.
Dear All,
We are attaching herewith relevant judgment on the aforesaid matter. We hope that you will find it useful while submitting the reply to the concerned authorities. In this judgment the Hon'ble Madras High Court has allowed the CENVAT credit on structural steel items.
Regards,
Team YAGAY and SUN
(Management and Indirect Tax Consultants)
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2014 (7) TMI 881 - MADRAS HIGH COURT
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The Commissioner of Central Excise and Service Tax Versus M/s. India Cements Ltd.
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Cenvat Credit - capital goods - structural steel items viz., M.S. Plates, Angles, Channels and HR Sheets used for civil construction activity - Held that:- This Court in the case of India Cements Limited [2011 (8) TMI 399 - MADRAS HIGH COURT] applied the principles laid down in the decision of Commissioner of Central Excise Jaipur V. Rajasthan Spinning and Weaving Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT OF INDIA] and held that the Tribunal was justified in allowing the assessee's contention in respect of the very same assessee. - credit allowed - decided in favor of assessee.
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No. - Civil Miscellaneous Appeal No.1265 of 2014
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Dated - July 10, 2014
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R. Sudhakar And G. M. Akbar Ali,JJ.
For the Appellant : Mr. K. Mohanamurali Standing Counsel
JUDGMENT
(Judgment of the Court was delivered by G. M. Akbar Ali,J.)
This Civil Miscellaneous Appeal has been filed under Section 35-G of the Central Excise Act, 1944 challenging the order dated 08.05.2013 made in Final Order No.40179 of 2013 on the file of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), South Zonal Bench, Chennai.
2. The substantial question of law raised before this Court is as follows:
"Whether the Tribunal is correct in holding that structural steel items viz., M.S.Plates, Angles, Channels and HR Sheets used for civil construction activity, are capital goods eligible for credit in terms of Rule 57Q as it stood at the relevant time?"
3. The first respondent herein/assessee is a manufacturer of cement falling under Chapter 25 of the Central Excise Tariff. The assessee availed Cenvat Credit on capital goods used in the erection of various capital goods, viz., new additional ESP for raw mill project, additional fly ash handling system, MMD Crusher etc. and utilizing the credit for payment of duty on clearance of excisable goods from their unit. They also used M.S.Angles, M.S.Beams, M.S.Channels and TMT bars for the erection of new plant and machineries in their factory and treated the same as components.
4. A Show cause notice dated 19.2.2009 was issued by the Department stating that these are not capital goods and a demand was made on these goods. Reply was sent by the assessee objecting to the demand on 13.3.2009. Rejecting the contention of the assessee, the Assessing Officer confirmed the said demand of ₹ 53,23,756/-, which includes Cenvat of ₹ 51,86,528/- Edu.Cess - ₹ 1,03,724 and S and HE Cess - ₹ 33,504/-) under proviso to Section 11A(1) of the Central Excise Act, 1944 and with Rule 14 of the Cenvat Credit Rules 2004 along with interest and penalty. Aggrieved by which the assessee preferred an appeal before the Appellate Tribunal.
5. The Tribunal considered the contention of the assessee as well as the Revenue and held that the assessee satisfied the user test. The Tribunal, while allowing the appeal, followed the earlier order of this Court and the law laid down in the case of Commissioner of Central Excise, Jaipur V. Rajasthan Spinning and Weaving Mills Ltd., reported in 2010 (255) ELT 481) and in paragraph Nos.7 and 8, held as follows:
"7. In the present case, it is seen that the items in question were used in the erection of various machineries such as, - new additional Electrostatic Precipitator for raw mill project, additional fly ash handling system, MMD crusher etc. for the Dry Process Cement Manufacturing Plant. It is evident that MS Angles, MS Beams, MS Channels etc. were used in the erection of machineries it become component of the same, which are integral part of Dry Process Cement Manufacturing Plant. It is noted that Fly Ash handlish system is a pollution control equipment and particularly mentioned in 2(a)(A)(ii) of Rules, 2004. The allegation in the above show-cause notice that the Chapter Heading of these items were not covered under Rule 2(a) of the Rules, 2004, is not sustainable, in respect of pollution control equipments because the rule does not specify the tariff headings under which pollution control equipment should be falling. The appellant established that these items were used for erection of capital goods namely Dry Process Cement Manufacturing Plant, which falls under Chapter 84, as mentioned in Serial No.(i) of Rules 2(a)(A). Thus, the items in question are covered in serial No.(iii) of Rules 2(a)(A) of the Rules, CBEC has clarified that all parts, components, accessories which are to be used with capital goods in serial (i) and (ii) of Rules 2(a)(A) and classifiable under any chapter heading are eligible for availment of CENVAT credit. A plain reading of serial (iii) cannot lead to a different conclusion either.
8. After considering the use of the goods in question, in our considered view, the present case is covered by the decision of the Hon'ble Madras High Court in appellant's own case as referred above. We have also noticed that the Hon'ble Supreme Court in the case of Rajasthan Spinning and Weaving Mills Ltd.(supra) as relied upon the Hon'ble High Court in the appellant's own case, allowed MODVAT credit on MS channels, steel plants etc. as capital goods used for erection of chimney for diesel generating set. The findings of the Commissioner that these are structures fixed to earth with concrete foundations and are immovable appears to be beyond the scope of the show-cause notice. So, the case of M/s.Triveni Engineering and Industries Ltd. (supra) as relid upon by the learned AR is not applicable in the present case."
6. Aggrieved by the order of the Tribunal, the Revenue has preferred the present appeal.
7. Learned Standing Counsel appearing for the Revenue heavily relied upon the decision reported in 2011-TIOL-73-SC-CX (Saraswati Sugar Mills V. Comissioner of Central Excise, Delhi - III) in Civil Appeal No.5295 of 2003 dated 02.08.2011. However, we find that this Court has earlier considered the case of the assessee in two similar cases of the previous assessment years in C.M.A.No.1301 of 2005 dated 31.12.2012, where a reference was made to an order passed earlier in respect of the very same assessee. While dismissing the appeal filed by the Revenue the Division Bench of this Court held as follows:
"8. Even though learned standing counsel appearing for the Revenue submitted that the judgment in the assessee's own case reported in AIT-2011-358-HC (The Commissioner of Central Excise V. M/s.India Cements Limited) had been appealed against, as of today, there are no details; in any event, the fact herein is that the Revenue does not controvert the facts found by the Assistant Commissioner that the impugned goods were used for fabrication of structurals to support various machines like crusher, kiln, hoppers, pre-heaters conveyor system etc. and that without these structurals, the machinery could not be erected and would not function.
9. In the decision reported in AIT-2011-358-HC (The Commissioner of Central Excise V. M/s.India Cements Limited), pointing out to Rule 57Q and the interpretation placed by the Apex Court in the decision reported in 2010 (255) E.L.T.481 (Commissioner of Central Excise Jaipur V. Rajasthan Spinning and Weaving Mills Ltd.) and in particular Paragraph Nos.12 and 13, wherein the Apex Court had applied the user test by following the Jawahar Mills's case, this Court held that steel plates and M.S.Channels used in the fabrication of chimney would fall within the ambit of "capital goods". In the face of this decision in the assessee's own case there being no new circumstance or decision in favour of the Revenue, we do not find any good ground to take a different view herein too.
10. As far as the reliance placed by the Revenue on the decision reported in 2011(270) E.L.T.465 (SC) (Saraswati Sugar Mills V. Commissioner of C.Ex., Delhi-III) is concerned, we do not think that the said decision would be of any assistance to the Revenue, considering the factual finding by the Tribunal therein in the decided case that the machineries purchased by the assessee were machineries themselves. Thus, after referring to the decision reported in 2010 (255) E.L.T.481 (Commissioner of Central Excise Jaipur V. Rajasthan Spinning and Weaving Mills Ltd.), the Apex Court held that in view of the findings rendered by the Tribunal that the machineries were complete and having regard to the meaning of the expression "components/parts", with reference to the particular industry in question, the Apex Court rejected the appeal filed by the assessee.
11. Thus going by the factual finding, which are distinguishable from the facts found by the Authorities below in the case on hand, we have no hesitation in rejecting the Revenue's appeal, thereby confirming the order of the Tribunal.
12. Learned standing counsel appearing for the Revenue pointed out that the Tribunal had merely passed a cryptic order by referring to the earlier decisions. We do not think that this would in any manner prejudice the case of the Revenue, given the fact that on the identical set of facts, the assessee's own case was considered by this Court and by following the decision reported in 2010 (255) E.L.T.481 (Commissioner of Central Excise Jaipur V. Rajasthan Spinning and Weaving Mills Ltd.) , the Revenue's appeal was also rejected. In the circumstances, this Civil Miscellaneous Appeal is dismissed. No costs. Consequently, C.M.P. No.16107 of 2005 is also dismissed."
8. From a perusal of the above said judgment, it is seen that there is no change in the circumstance and this Court had already considered the issue and held that the decision reported in 2011-TIOL-73-SC-CX (Saraswati Sugar Mills V. Comissioner of Central Excise, Delhi - III) in Civil Appeal No.5295 of 2003 dated 02.08.2011 is distinguishable on facts. This Court applied the principles laid down in the decision reported in 2010 (255) E.L.T.481 (Commissioner of Central Excise Jaipur V. Rajasthan Spinning and Weaving Mills Ltd.) and held that the Tribunal was justified in allowing the assessee's contention in respect of the very same assessee.
9. The present appeal is also in respect of the very same assessee and therefore we find no distinguishable fact or issue contrary to the earlier decision of this Court. The Tribunal has also found that the assessee has satisfied the user test in the present case. Hence, following the principles laid down in the decision reported in 2010 (255) E.L.T.481 (Commissioner of Central Excise Jaipur V. Rajasthan Spinning and Weaving Mills Ltd.) and the earlier decision of this Court in C.M.A.No.3101 of 2005 dated 13.12.2012, we are inclined to reject the appeal, thereby confirm the order of the Tribunal. Accordingly, this Civil Miscellaneous Appeal stands dismissed. No costs.
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Dear Sirs, Thank you all for your kind efforts on replies on knowledge shaing in the case of Cenvat credit. The judgement if any we submit to the department there should not be any more query. Could you please do the needful. Regards K Srinivasan.
Dear K Srinivasan,
Please refer my replies to your query. Vide following two judgments, legal position in this matter has been settled.
- CCE, Jaipur Vs. Rajasthan Spinning and Weaving Mills Ltd. - 2010 (7) TMI 12 - Supreme Court of India
- The Commissioner of Central Excise and Service Tax Versus M/s. India Cements Ltd.- 2014 (7) TMI 881 - Madras High Court.
Further, it is advisable that you should prepare a detailed reply and counter each and every allegation levied by the Department (Including countering the disallowance of CENVAT credit, Limitation if any, bonafide believe, levy of Interest and Imposing penalty on your organization and on the key personnel, if any).
We hope after submitting the facts, contentions, clarification and the settled legal position, Department will surely be set aside the demand raised against your organization.
You may also contact us, in case, you need our services for drafting of reply. We charge reasonable fee for providing our services.
We remain.
Team YAGAY and SUN
(Management and Indirect Tax Consultants)
Mobile:- 09818131923
E-Mail:- yagaysun@india.com
Dear Sir, Whether the case law is applicable for a scenario where cement and steel input on foundation for erection of ETP is claimed. The ETP is essential for a factory and it is indirectly related to manufacturing. The setting up of ETP is plant requires cement and steel in the foundation to hold tight the structure on the ground. Kindly validate my understanding. regards, ganeshan
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