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2016 (1) TMI 1059 - CESTAT KOLKATA

2016 (1) TMI 1059 - CESTAT KOLKATA - 2016 (335) E.L.T. 303 (Tri. - Kolkata) - Cenvat Credit - eligible inputs - rails and other track materials, namely, sleepers, paints and crossings etc. - Revenue contended that the goods in question do not merit inclusion in the category of ‘inputs’ as the same do not go into the mainstream of the process of manufacture either directly or indirectly, nor included in the list of goods mentioned in the definition of Rule 2(g) of CENVAT Credit Rules, 2002. - .....

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t to the present CENVAT Credit Rules, 2004 and other contentions raised in these Appeals would become more of academic in nature rather than resolving the dispute, hence not resorted to. - Credit allowed - Decided in favor of assessee. - Appeal Nos.EA-102, 394, 520/06, 233/10 & 199/11, 135, 136/10 - ORDER NO.FO/A/75016-75022/2016 - Dated:- 5-1-2016 - DR. D.M. MISRA, MEMBER(JUDICIAL) AND SHRI H.K.THAKUR, MEMBER(TECHNICAL) For the Petitioner : Dr. Samir Chakraborty, Advocate & Shri Abhijit Bis .....

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ese are taken up together for hearing and disposal. 2. The facts involved in M/s.Tata Steel Ltd., are marginally different from the facts involved in other appeals filed by M/s.SAIL & also by the Revenue, hence, need to be stated separately. 2.1 In Tata Steel s case, the facts in brief are that the appellant entered into correspondences with the Revenue beginning with their letter dated 08.10.2013, with a request to inform whether CENVAT Credit on rails and other track materials, namely, sle .....

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definition of inputs as prescribed under Rule 2(g) of CCR,2002 allows credit on items used in or in relation to the manufacture of final product, whether directly or indirectly or whether contained in the final product or not; and since the rail track materials were used in their works for bringing raw materials and dispatching of finished excisable goods, accordingly CENVAT Credit on rails, sleepers, signal points, crossings etc. were eligible to CENVAT Credit. The department through its letter .....

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w cause cum demand notice on 11.01.2005 alleging irregular availment of CENVAT Credit amounting to ₹ 1,05,38,425.64 on rails and sleepers as inputs and ₹ 3,13,389/- as capital goods during the period January, 2004 to April, 2004, respectively. On adjudication, the total demand of ₹ 1,08,51,815/- was confirmed with interest and equal amount of penalty imposed under section 11AC of the Central Excise Act, 1944 read with Rule 13 of CENVAT Credit Rules, 2002. Hence, the present app .....

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CENVAT Credit on rails & other materials claiming as inputs was irregular since it was shown as fixed asset and not inputs in their respective Balance sheets. Also, the amount of credit claimed on rails was not eligible to credit as the same failed to satisfy the definition of capital goods contained in Rule 2(b)/2(a) of CENVAT Credit Rules, 2002/2004. In the case of Appeal No.E-394/06, the show cause notice was issued on 14.08.2003 for the period 01.04.2000 to 31.03.2003 invoking extended .....

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are admissible. 3. The learned Sr. Advocate Dr.Samir Chakraborty appearing for the Appellants, namely, M/s.Tata Steel Ltd. and M/s.SAIL submitted that the dispute of eligibility to CENVAT Credit on the inputs/capital goods viz. rails, railway track materials is common to all the appeals and facts are more or less similar. He has submitted that rails and other materials such as sleepers, points and crossings used in laying of railway tracks for movement of material, handling equipments and also i .....

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s etc. are taken into the plants like Blast Furnace through rails. The Hot Metal i.e. liquid iron from Blast Furnace are carried to the Steel Melting Shop by the ladles through overhead crane rails system, which is spread throughout the plant. The liquid steel is poured in the ladle fitted on railway locomotives in which the very process of steel making takes place by adding various ferroalloys to attain the steel of the required quality. The process of top pouring takes place on the ingot mould .....

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duty were carried out by using the said rail tracks. The Ld. Advocate placed 19 photographs showing the movement of raw material, intermediate and finished goods inside the factory premises. 3.2 It is his argument that the aforesaid functions imparted by using the rails are integrally connected to the process of manufacture and clearance of dutiable products within the factory, directly or indirectly and the present issue stands settled by the recent judgement of the Hon ble Supreme Court in th .....

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han High Court in the case of Aditya Cement v. UOI - 2008 (221) ELT 362(Raj.) wherein the credit on railway track materials was held to be admissible. 3.3 The ld.Advocate further submitted that the reliance placed by the Revenue on the judgment of Jharkhand High Court in their case in WP (T) No.2463/2004 is completely misplaced. He has argued that while disposing the SLP carried out against the said judgement of the Hon ble Jharkhand High Court, Hon ble Supreme Court has made it clear that the T .....

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nted the railway sleepers and rails as capital asset and consequently even though no depreciation might have been availed for the purpose of Income Tax on that part of the value representing Central Excise duty, the depreciation benefit having been enjoyed on the value of the rails, net of central excise duty, the claim for CENVAT Credit on inputs is to be disallowed, it is his contention that the Revenue s allegation is not only factually erroneous, but also irrelevant in determining whether or .....

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s capital asset; the distinction between capital assets and capital goods has been explained by the Apex Court in the case of CCE v. Ginni Filaments Ltd. - 2005 (181) ELT 145(SC). 3.5 Further he has submitted in view of the decision laid down by the Hon ble Supreme Court, High Court and the Tribunal, the said goods are inputs and/or capital goods, hence, eligible to the benefit of CENVAT Credit. It is his contention that to be called as inputs and eligible to CENVAT Credit under the CENVAT Cre .....

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he material used as inputs have a nexus, even indirect with a process, which is integrally connected with the ultimate production of the final product till they are fit for being put into marketing stream and such process is so integrally connected with the ultimately production of the final products that it would be commercially inexpedient to produce the finished goods without the process, all such inputs are eligible to benefit of CENVAT Credit. The transfer of raw materials and finished prod .....

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ntral Excise Tariff either as inputs or capital goods subject to the exceptions specified and fulfilment of conditions laid down under the CENVAT Credit Rules, it would be seen that except those goods which are defined as capital goods under Rule 2(b)/2(a) of CENVAT Credit Rules, 2002/2004 and thus specifically excluded from Rule 2(g)/2(k) of the CENVAT Credit Rules, 2002/2004, all goods which are used in or in relation to the manufacture of final products whether directly or indirectly, whether .....

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ispute that the plant and machinery like blast furnace, converters and LD plants are goods falling under chapter 84 of First Schedule to the Central Excise Tariff Act, 1985. Thus, they are covered under the sub-clause (i) of Rule 2(b) or Rule 2(a)(A) of CCR,2002/2004 as accessories, therefore capital goods, and eligible to CENVAT Credit. The definition of accessories has been succinctly explained by the Honble Supreme Court in the case of CCE v. Insulation Electrical (P) Ltd. - 2008 (224) ELT 5 .....

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ciple of law that if the subject goods are inputs and the claim was advanced as capital goods and vice versa, the credit cannot be denied on that ground alone. In support he has referred to the decision of Larger Bench of this Tribunal in the case of CC & CE v. Modi Rubber Ltd. - 2000 (119) ELT 197(T-LB), Raymond Ltd. v. CCE - 2014 (300) ELT 317 (T), Krishna Sahkari Chini Mills Ltd.v. CCE - 2010 (261) ELT 308(T), SAIL v. CCE, Raipur - 2014 (311) ELT 709(Tri.-Delhi) and CCE v. Bhilai Steel Pl .....

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the decision of Honble Supreme Court in M/s Jayaswal Neco Ltd s case dropped the demands holding that railway track materials are eligible to CENVAT Credit vide Order-in-Original No.07-12/MP/Commr./RAN-II/2015-16 dt. 07.08.2015. Hence, in view of the decision of the Hon ble Supreme Court in the case of Birla Corporation Ltd. Vs. CCE 2005 (186) ELT 266(SC), Jayswal Neco Ltd. Vs. CCE,Nagpur 2006(195) ELT 142(SC), Indian Oil Corporation Ltd. v. CCE - 2006 (202) ELT 37(SC), the Revenue cannot cont .....

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appellant s approach is nothing, but taking recourse of a new ground which was not placed before the original authority, hence should not be considered. It is his grievance that this was also not placed before Hon ble Jharkhand High Court and being a new ground cannot be entertained ab initio in terms of Rule 5(2) and 5(3) of Central Excise (Appeals) Rules, 2001 read with CESTAT (Procedure) Rules, 1982. It is his contention that this ground was also not taken in their written memorandum of Appea .....

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ed the stand of the Appellant. It is his contention that this order of the Hon ble Jharkhand High Court has not been set aside by the Hon ble Supreme Court, but the Apex Court directed only that the matter be decided on merit by CESTAT without being influenced by the order dated 13.07.2006 of Hon ble Jharkhand High Court at Ranchi. It is his plea that this is because that Hon ble Jhakhand High Court order was not against any order of the lower authority, but against some letters of the Commissio .....

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. Rails have various uses as mentioned in Chapter 73 of the CETA, for railways, tramways, switches, plates, crossings, tracks, fish-plates and sale plates etc.. These are classifiable under Tariff Item 7302. In Section Note 1(F) of Section XV of CETA,1985 these items are excluded from Section XVI i.e. machinery, appliances and electrical goods. Under CENVAT Credit Rules, 2002 or 2004 such rails of Chapter 73 are excluded from capital goods eligible to CENVAT Credit. It is his contention that in .....

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d by Chapter 86, but the said Chapter 86 is outside the benefit of CENVAT Credit as capital goods, under CENVAT Credit Rules, 2002 or 2004, hence, not eligible to CENVAT Credit. 4.3 The learned Special Counsel further submitted that the judgment of the Hon ble Supreme Court in Jaiswal Neco s case relate to discussion on eligibility of railway track materials used for handling raw materials under Rule 57Q of the erstwhile Central Excise Rules, 1944. It is his contention that even though the said .....

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ed as eligible to credit as capital goods under Rule 57Q no longer exists due to major amendment in the Central Excise law in this regard initiated by 1996 and culminating to CENVAT Credit Rules, 2002 and finally CENVAT Credit Rules, 2004. Now, capital goods means as per CENVAT Credit Rules, 2002/2004, seven items and except some general items, like pollution control equipments, storage tank, refractories etc., include chapter specific goods under chapter 82, 84, 85, 90 and few items of Chapter .....

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nce not eligible to credit. 4.5 Further, the learned Special Counsel has submitted that the Commissioner s order dated 07.08.2015 referred to by the Appellant was passed mainly relying on the judgement of the Honble Supreme Court in Jayaswal Neco Ltd. s case(supra) and few other cases in coming to the conclusion that rails are capital goods and eligible to CENVAT Credit without realizing that the appellants had been claiming CENVAT Credit for rails as inputs and not as capital goods; and second .....

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d if rails are considered as components/accessories of locomotives which are classified under Chapter 86 of CETA, the said Chapter 86 is also excluded from the scope of definition of capital goods. It is his contention that if the rails are part of overhead crane system, the same are admissible to CENVAT Credit as capital goods, subject to production of necessary installation certificates/evidences. 5.1 Heard both sides at length and perused the records. 5.2 The issue involved in the present cas .....

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,55,640 was claimed as inputs and ₹ 12,20,798/- as capital goods/-(in all the six Appeals). While recording reasons in denying CENVAT Credit, in M/s.Tata Steel Ltd. s case, the ld. adjudicating authority mainly anchored his reasoning on the stand taken by them before the Hon ble Supreme Court in their own case reported as 2005(181) ELT 301(SC) claiming exemption under a notification. In that case M/s Tata Steel Ltd. claimed that the locomotive, other machineries, the tracks and other trans .....

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disallowed the CENVAT Credit on the rail and track materials. 5.3 While recording reasons in denying CENVAT Credit in the case of SAIL, the adjudicating authority had while denying credit observed that the applicant in their books of accounts shown these items as capital asset and not as an inputs, thus the goods being classifiable under Tariff Item No.7302.10 of CETA,1985 itself fall outside the scope of capital goods and were also not eligible as inputs. He disallowed credit on rails used on m .....

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ders of the original authority and allowed the appeal filed by the appellant-assessee. 5.5 On going through the orders impugned in the present appeals, we find that no serious analysis of the relevant provisions of the statute and the principle of law settled in this regard while disallowing or allowing the credit had been recorded. The ld. Sr. Advocate Dr. Chakraborty has vehemently argued that the principle of admissibility of CENVAT Credit on rail and railway track materials is no more res in .....

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resent cases under Cenvat Credit Rules,2002/2004. In support, he refers to the judgment of Honble Supreme Court in Vikram Cements case (supra) wherein their Lordships have held that there is no difference in the MODVAT and CENVAT Scheme. Challenging the said contention, the learned Special Counsel for the Revenue has submitted that the shortcomings in the erstwhile Rule 57Q had been done away with after the introduction of new set of Rules governing admissibility of CENVAT Credit on capital go .....

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s Ltd. & Bhilai Steel Plants case(supra), wherein it is observed that there is no bar in changing the claim of admissibility of CENVAT credit either as capital goods or as inputs at any stage of the proceeding. We find force in the contention of the Ld. Advocate for the Appellant, in view of the principle laid down in the above two cases that credit cannot be denied merely on the ground that the claims to CENVAT credit have been changed at the Appellate stage from inputs to capital goods an .....

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aterials have been used by the appellant was explained by the appellant before the Commissioner and veracity thereof was accepted by the Commissioner. Therefore, without any fear of contradiction, we may note the exact process that is involved : These railway tracks used in transporting hot metal in ladle placed on ladle car from blast furnace to pig casting machine through ladle car where hot metal is poured into pig casting machine for manufacture of pig iron. Secondly the system also helps in .....

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or raw material and processed material. 17. The aforesaid process squarely meets the test laid down by this court in M/s. J.K. Cotton Spinning & Weaving Mills Co. Ltd.s case. It is clear that the railway tracks are installed not only within the plant, but the main objective and purpose for which the capital expenditure on laying these railway tracks is incurred by the appellant is for transporting hot metal in ladle placed on ladle car from blast furnace to pig casting machine through ladle .....

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ent set of Appeals, Dr.Samir Chakraborty, ld. Sr.Advocate argued that following the aforesaid judgement of the Hon ble Supreme Court and that of Hon ble Rajastan High Court in Aditya Cement Ltd. s case(supra), recently Commissioner of Central Excise, Ranchi dropped six periodical show cause cum demand notices involving total demand of ₹ 8.51 crores(approx.) issued for the subsequent period i.e. from March, 2008 to October, 2014 to M/s.SAIL. Taking shelter of the said Order and the photogra .....

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the department is precluded from challenging the applicability of the said judgment to the present case. In support, he has referred to the judgements of Hon ble Supreme Court in CCE, Navi Mumbai v. Amar Bitumen and Allied Products 2006(202)ELT 213(SC), Birla Corporation Ltd. v. CCE - 2005 (186) ELT 266(SC), and Jayaswal Neco Ltd. v. CCE - 2006 (199) ELT 145(SC). 5.8 To ascertain the present status of the said adjudication order, after conclusion of the hearing, the department has been directed .....

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 case referring to its earlier judgment in Birla Corporation case has observed as: 6. This Court in a catena of cases has consistently taken the view that if an earlier order is not appealed against by the Revenue and the same has attained finality, then it is not open to the Revenue to accept judgment/order on the same question in the case of one assessee and question its correctness in the case of some other assessees. The Revenue cannot pick and choose. [See : Union of India & Others v. .....

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