TMI Blog2007 (12) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... it of Rs. 3,64,16,843/- on items such as TOR steel, steel plates, sheets, bars, angles, channels, tubes 5tc. The said credit was proposed to be disallowed on the ground that they were not covered by the definition of capital goods under Rule 2(b) of the CENVAT Credit Rules, 2002, by issue of six show cause notices, which were adjudged by the Commissioner by order dated 29-4-2005, allowing credit of 2,06,81,846/- and denying credit of Rs. 156,85,011/- as detailed below Allowed CHN RS. 1. Angles channels joists, beams, plates, sheets, coils, flats, strips, rails, foundation bolts, hex bolts and nuts 72 15939256 2. MS structure 7216 522638 3. Tubes, pipes fittings. 73 1408506 4. Goods used as paint 3208 200639 5. Lubricating oils 2710 204669 6. Electricity transmission structure 7308 632995 7. Aluminium wires/cables for electricity transmission 7614 540054 8. Welding electrodes/welding 8311 545517 Wires ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting supporting structures for machine, machinery, plants and various Mills in the factory. (iii) Roofing materials - used as protective cover for plant and machinery where the Cold Rolling, Galvanizing, Colour Coating, Pickling work are going on. In the absence of the required temperature of steam and coolants, furnaces temperatures shall not be maintained if kept open, for providing cover to colour coating and galvanizing plant where the process requires dust free environment and con trolled temperature for various process involved in the making of finished goods, for constructing supporting structures for machine, machinery, plant and mills, etc. in the factory, various plant processes require chilled water, coolants, steam, hydraulic oils, which are supplied through pipelines all over the plant at required temperature. (iv) Excavator Spares - Credit on the same has been disallowed on the ground these are used before starting of production. Even though these are used before production for other activities these are now used for movement of steel from one Mill to other Mill where EOT cranes are not available. (v) Tipper Spares - C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er plant, Rolling mills, Galvanising Line. (xviii) GI Earthing Strips - M.S. Flats/G.I. Flats/G.I. Earthing strips are used for earthing purposes for the protection of mills, and other machines in compliance with Electricity laws. (xix) Hot Dip Kal. Flats - same as above (xx) GI Flats - same as above (xxi) SS Sink Accessories - These are accessories for guiding the Sink Rolls of molten zinc bath in rotation, which keep the strip constantly dipped in the molten zinc while the process of coating of Zinc on cold rolled strips is on, and as such integral part of galvanising line. (xxii) Castings - These are mechanical parts used in cold rolling mills, galvanising lines and' other machines and equipments (xxiii ) Hook Anchor sheet - These are electro mechanical part of annealing furnace used in annealing the cold rolled coils/sheets. (xxiv) Fabricated steel component, PVC sheet - these are covered by invoice No. 823 dated 10-11-2002 of M/s Paharpur Cooling Towers Ltd. and are G.P. components, PVC formed sheets, GRP segments, steel components falling under CH. No. 8419.40, (xxv) Toggle Block, Sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MS Structures used as supports for machinery in various mills. Therefore, the same reasoning and the factual position considered by Commissioner for allowing credit on the said items would support the appellants' contention of admissibility of credit on cement and CTD/other Bars. 5.3 We find that Cement/steel bars are used in making of foundation for machine, machinery, plant, EOT Crane legs structure etc. all over the various plants situated in the factory, and are also used in making Storage Tanks for water, oils, coolants and other liquid inputs received, and are also used for cellars beneath the floor of the factory where all hydraulic and utility equipments of various mills are installed and are also used for constructing chimney of 110 Mtrs height attached to DG Set for captive power plant in the factory and also used for making underground tunnels for housing heavy duty electrical cables and also for supply of chilled water, distilled water, gas, through pipes, etc. and also used for making trenches for housing light duty electrical and networking cables in the factory and hydraulic pipes for the entire plant and also used for making cellars beneath the floor for i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, (c) In Cold Rolling Mill, there are big gear boxes, which are required to be lubricated continuously. For this, a big reservoir, oil filter unit, pumping unit piping network is technically required to be in stalled, beneath the mill. The lubricating oil is continuously sprayed inside the gear boxes, which has to go back to the reservoir by gravity flow for cleaning and recycling. (d) In response to a query from the Bench as to why Cellar is a necessity, it was submitted that in order to maintain gravitational flow of coolants, lubricant hydraulic oils there is a technical necessity of installing the reservoirs, filtration units, pumping systems piping network underneath the Roll Housing, Gear Box Motors of CR Mill. Hence, the cellars are technically required for operation of the CR Mill, as an integral part of the Mill. (e) To a further query from the Bench as to whether the Cellar is still required if Hydraulic/Coolant system is installed on ground level, it was answered in affirmative based on the following (i) that if the Hydraulic, Coolant Lubrication system are in- stalled on the ground level, then, the height of the mill f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inable, in view of Tribunal's judgment in the case of United Phosphorus v. CCE, reported in 2002 (150) E.L.T. 650 (T), holding that use of goods in manufacture of immovable property cannot be a ground for denial of credit and further, 'plant' would include the buildings which are used by the manufacturer in a factory which houses and protects from the elements the machinery that a manufacturer uses, as also the raw material and components, that are employed. The ratio of this judgment clearly would substantiate that the findings of Commissioner for denying credit are not sustain able. 5.9 For the said reasons, the coming into existence of tunnels, trenches and cellars as a result of civil construction cannot also be a ground for denial of credit as the same are essential and form supporting part in the manufacturing process, as discussed supra. 5.10 When machine includes plant, as per Note 5 to Section XVI of CETA under which Chapter 84 is inter alia covered, denial of credit on the disputed products is not sustainable as the same are in the nature of components to the said plants as without the columns, beams, cellars, trenches tunnels, roofing etc. the plant can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para 11 that building materials used as raw materials for construction of plant cannot be said to be used as plant in the manufacture of goods and the legislature contemplated that the goods to qualify under Section 8(3)(b) must be intended for use as raw material or as plant or equipment in the manufacture or processing of goods and it cannot be said that building materials fall within that expression. On this reasoning, building materials were denied the benefit of Section 8(3)(b) by the Supreme Court. 21. The definition of capital goods as contained in Explanation 1(a) to Rule 57Q is pari materia with the provision construed by Supreme Court in the aforesaid two judgments. Section 8 has already been extracted supra. It refers to the purchase of goods intended for use in the manufacture or processing of goods for sale. Explanation 1(a) to Rule 57Q refers to machine, machinery, etc. used for producing or processing of goods, for manufacture of final products (apart from referring to goods used for bringing about any change in any sub stance). Thus while Section 8(3)(b) referred to goods used in the manufacture or process of goods, Explanation 1(a) refers to machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from different angle. As per Explanation 2 to Rule 2(g) of CCR, 2002 "inputs" includes goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. Various plants have been installed for manufacture of CR/CF coils/sheets and tubes such as cold rolling mill, pickling line tube mill, DG sets annealing line, EOT cranes, chimney, storage tanks, pollution control/effluent treatment units, utilities like air, steam gas, water etc. Therefore the disputed items are in the nature of components to the said plants as without the columns, beams, cellars, trenches, tunnels, roofing etc. the plant cannot exist and hence, are components of plant. Therefore, invoking Explanation 2 to Rule 2(g) of CCR, credit on cement and steel in any case is admissible. 6.3 In the light of the above, we hold that credit on the disputed cement and steel used for factory building including tunnels, trenches, cellars etc. is admissible. 7. Credit On Roofing Material (GPCC Core/Trap Sheet, blendster ETC.): 7.1 The Commissioner denies credit on GPCC Core/ Trap Sheet, Blendster holding them to be roofing material installed overhead as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o other Mill where EOT cranes are not available, and are hence entitled to credit as material handling equipment. However, we find that Tippers and Spares are classified under Heading 87.06 which has not been disputed by the Appellants. Chapter 87 is excluded from the purview of capital goods and hence, the credit is not admissible. We also find that Excavators were used for leveling of land before construction of factory building, having no relation either directly or indirectly with the manufacturing activity and hence, credit thereon is not admissible. 8.2 Accordingly, we uphold the Order of Commissioner denying credit on Excavator, Tippers and Spares. 9. Other Miscellenous Items: 9.1 Appellants in their defence replies before Commissioner as well as in the appeal before us have claimed that each of the items referred to herein after were in the nature of components, parts or accessories of capital goods which has been substantiated by them in detail. The Commissioner does not dispute the Appellants claim but denies the credit, holding that, the said items are neither components, spares or accessories of capital goods nor inputs which is factuall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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