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2016 (10) TMI 479 - CESTAT NEW DELHI

2016 (10) TMI 479 - CESTAT NEW DELHI - TMI - Denial of CENVAT credit - cenvat credit on iron and steel items (structural steels) used for fabrication of various structures of plants and machineries at site and /or in manufacture of structures supporting capital goods like boiler, coal handling mill, rolling mill, furnaces, conveyors, chimneys etc - inputs under Rule 2(k) of Cenvat Credit Rules, 2004 - Held that: - the decision in the case of C.C.E., Jaipur vs. Rajasthan Spinning & Weaving Mills .....

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n the matter needs fresh adjudication - matter remanded to the original adjudicating authority who will decide the issue de novo after examining all the records of evidence of use and consumption of subject items, if not already produced, the same are to be produced by the appellant before the original adjudicating authority within one month and thereafter within next two months, the original adjudicating authority shall pass appropriate orders. - Appeal disposed off - decided partly in favo .....

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to ₹ 11,45,87,210 and has imposed equivalent penalty on the appellant. The impugned order also confirmed duty of central excise amounting to ₹ 60,27,728/- and has also imposed equivalent penalty on the appellant. 3. The appellant has been represented by the ld. Advocate Shri B.L. Narasimhan who in respect of the issue of Admissibility of Cenvat Credit on iron & Steel items like angles, channels, beams, plates etc. used for fabrication of varous structure(s) supporting capital go .....

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y of iron & steel products like angles, channels, beams etc. used in various projects in the factory; and copies of certificates issued by Chartered Accountant and Chartered Engineer were enclosed with the appeal. (iv) In respect of the quantity of the items used in civil or other ineligible activity, cenvat credit was not availed. (v) Cenvat credit was not availed also on quantity of steel used in foundation for erection and installation of various equipments and capital goods. 3.1 The lear .....

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eturn declaring particulars of such manufacture and clearance for captive consumption and the appellant did not manufacture any capital goods as covered under the definition under Rule 2(a) of Cenvat Credit Rules. 4. The ld. Advocate further submitted as follows: (i) Extended period of limitation was invoked alleging suppression of material facts. (ii) Duty demand on iron and steel manufactured and captively consumed denying Notification No.67/95-CE is not sustainable since the details were prov .....

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inery would not be possible and such machinery cannot be operated. (iv) As per Explanation 2 to Rule 2(a) of Cenvat Credit Rules, 2002/Rule 2(k) of Cenvat Credit Rules, 2004, inputs include goods used in the manufacture of capital goods which are further used in the factory of manufacturer. Since the impugned goods have been used to manufacture parts/components/ accessories of various capital goods within the factory of the Appellant, as per said explanation, Cenvat credit would be admissible on .....

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indra & Mahindra Ltd. v. CCE [2005 (190) ELT 301 (Tri-LB)].Since the impugned items have been used for fabrication of various parts / components of specified capital goods, their eligibility for credit is to be decided at the stage before they become part of immovable goods and subsequent use with capital goods which are embedded to earth would be of no consequence. Applying the said ratio, credit taken in the present case is sustainable. (vii) Even though the word plant was omitted from def .....

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rther used in the factory. Alternatively, credit will be admissible as capital goods under the category of components, spares and accessories of specified capital goods. (C) The appellant also relied on the following decisions: * JayaswalNeco Ltd. v. CCE, 2015 (319) ELT 247 (SC) * CCE, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd., 2010 (255) ELT 481 (SC) * CCE, Tiruchirapalli v. India Cements Ltd., 2012 (285) ELT 341 (Mad.) * CCE, Tiruchirapalli v. India Cements Ltd., 2014 (305) ELT 558 .....

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E.L.T. 585 (Tri. - Bang.) * CCE v. SLR Steels Ltd., 2012 (280) E.L.T. 176 (Kar.) * Monnet Ispat& Energy Ltd. v. CCE, 2015 (330) E.L.T. 711 (Tri. - Del.) * The India Cements Ltd. v. CCE, 2015-TIOL-2715-CESTAT-MAD * Omax Auto v. CCE, 2014 (314) E.L.T. 439 (Tri. - Del.) * Jodhpur Alloys Pvt. Ltd. v. CCE, 2013 (292) E.L.T. 448 (Tri. - Del.) * CCE v. Hi-Tech Power & Steel Ltd., 2015 (315) E.L.T. 428 (Tri. - Del.) * Simbhaoli Sugars v. CCE, 2016-TIOL-550-CESTAT-ALL * CCE v. Jindal Steel & .....

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Infrastructure Ltd. v. CCE, 2015 (40) S.T.R. 825 (Tri. - Ahmd.) * SAIL v. CCE, 2008 (222) E.L.T. 233 (Tri. - Kolkata) * Hindustan Copper Ltd. v. CCE, 2006 (206) E.L.T. 276 (Tri. - Del.) * CCE v. Jindal Steel & Power Ltd., 2006 (201) E.L.T. 598 (Tri. - Del.) * Tata Engineering And Locomotive Co. Ltd. v. CCE, 2005 (191) E.L.T. 209 (Tri. - Mumbai) 4.1 The Appellant also submits that quantification of duty demand is not correct as submitted in the Appeal Memorandum and substantial duty demand i .....

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s not eligible for cenvat credit on structural items on the basis of findings of adjudicating authority. (iii) The reliance is placed on the following decisions: * Vandana Global Ltd. vs. C.C.E., Raipur 2010 (253) ELT 440 (Tri-LB). * Daya Sugar vs. C.C.E., Meerut I 2015 (316) ELT 394 (All.) * Dwarikesh Sugar Industries Ltd. vs. C.C.E., Meerut 2016 (334) ELT 58 (All.) * Bharti Airtell Ltd. vs.C.C.E., Pune III 2014 (35) STR 865 (Bom.) * Tower Vision India Pvt. Ltd. vs.C.C.E. Rohtak 2016 TIOL 639 ( .....

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t credit on iron and steel items (structural steels) used for fabrication of various structures of plants and machineries at site and /or in manufacture of structures supporting capital goods like boiler, coal handling mill, rolling mill, furnaces, conveyors, chimneys etc. The second issue is duty demand on angles, channels, etc. manufactured and captively consumed in fabrication of structures of capital goods where benefit of Notification No.67/95-CE dated 16.3.95 has been denied to the appella .....

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whether directly or indirectly and whether contained in the final product or not and includes lubricating oil, greases, cutting oils, coolants, accessories of the final products cleared along with the final products, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose used in the factory of production; (ii) all goods, except light diesel oil, high speed diesel oil, moto .....

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e in the definition of input , all the goods (except the exclusions given) are included if they are used in or in relation to the manufacture of final product or for any purpose used in the factory of production. Further, Explanation 2 to Rule 2(k) makes it clear that input would include all such goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. In other words, if certain inputs have been used within the factory of production for manufactur .....

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eligibility of cenvat credit are fulfilled in their case. 8. The Revenue has submitted that as per definition of capital goods given in Rule 2(a) of Cenvat Credit Rules, 2004, iron and steel items (for structural use) like angles, channels, beams etc. have been used in the manufacture of structural items supporting capital goods like boiler, coal handling mills etc.; and these supporting structures cannot be called capital goods under the said definition of capital goods . Revenue further submit .....

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without supporting structures, erection and installation of huge machinery would not be possible and such machinery cannot be operated. 8.1 Revenue further submits taking support from the decision of the Larger Bench of the Tribunal in the case of Vandana Global Ltd. 2010 (253) ELT 440 (Tri-LB) and other decisions listed in their written submissions mentioned in the para 5.1 above that the appellant is not eligible for cenvat credit on the findings of the impugned order. The appellant however su .....

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coal handling mills, and said supporting structures cannot be called capital goods, and/or goods even; therefore, for the said inputs cenvat credit is not admissible. 8.2.1 But we are unable to comprehend that when there are no supporting structures for capital goods like boilers, coal handling mills, how would these capital goods/equipments operate In other words, in order to make such capital goods like boilers, coal handling mills, conveyors etc. fully operational (for further use in manufact .....

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structures for the capital goods. But when said structures are specifically meant to make the capital goods like boilers, coal handling mills etc. fully operational and when the said boilers etc. are integral part of the manufacturing operations of steel plant (factory), where iron and steel products are manufactured, one cannot say that subject steel items (structural steels like angles, channels, beams, plates etc.) are not cenvatable items in case of the said steel manufacturing plant /facto .....

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ed along with the washing machine/T.V.) for such essentials in order to make use of said washing machine/T.V. By using same analogy, it is necessary to examine if the subject structural steel items are finally essential accessory to related capital goods or are essential (input) used in or in relation to manufacture of final products or for any other purpose, within the factory of production. Further in terms of the wordings of Explanation 2 to Rule 2(k) of Cenvat Credit Rules, 2004, it is neces .....

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items for claiming cenvat credit. In this regard the Hon ble High Court s observations in the said case are reproduced below: 7. As far as the other items, namely, Rebar Coils, CTD Bars, TOR Steel and Cement are concerned, as to whether they are capital goods or not, the Tribunal having regard to the law laid down by the Apex Court in Jawahar Mills s case, has liberally construed the above Rule and factually found that these are the items, which are used for the purpose of construction of the pl .....

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2010 (255) E.L.T. 481 (Commissioner of Central Excise, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd.). In paragraphs 12 and 13, while applying the user test and following the Jawahar Mills s case, the Apex Court has held that even though steel plates and M.S. Channels used in the fabrication of chimney would fall within the ambit of capital goods . 8.4 Further in the case of of C.C.E., Tiruchirapalli vs. India Cements Ltd. 2014 (305) ELT 558 (Mad.), the assessee was held to be entitled .....

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ey for diesel generating set (by treating these items as capital goods) are admissible items for cenvat credit. For the present facts also on the issue of admissibility of cenvat credit on the subject structural steel items, we use the same reasoning of applying the user test as mentioned by the Hon ble Supreme Court in the case of Rajasthan Spinning and Weaving Mills and we hold that subject structural steel items like angles, channels, beams are eligible for cenvat credit here. 8.4.1 Here, we .....

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hat the same should be used in the factory of manufacturer. The Hon ble Supreme Court in this case inter alia states that the modvatability of an item, and whether the item has been used for capital goods or not would be decided mainly upon user of the said capital goods . In other words, the manufacturer s user of the said capital goods will determine whether the modvat (presently called cenvat credit) could be claimed with reference to the said items. The same user test has been quoted and app .....

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s if used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product would be Capital goods , and, therefore, qualify for availing Modvat credit. Per clause (b), the components, spare parts and accessories of the goods mentioned in clause (a) used for the purposes enumerated therein would also be Capital goods and qualify for Modvat credit entitlement. Clause (c) makes moulds and dies, generating sets and weigh bridges used in .....

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is very liberal. Further, the Hon ble Supreme Court in the case of Rajasthan Spinning & Weaving Mills (supra), inter alia observed as under: 12. Inter alia observing that capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances if any of these goods is used for producing or processing of any goods or for bringing about any change in the substance for the manufacture of final product, although this view was expressed in the light of the afore-noted definition .....

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item falls within the purview of capital goods would depend upon the user it is put to. 8.5 We have considered all the submissions along with case laws including Larger Bench decision of CESTAT in the case of Vandana Global (supra), given by the Revenue; however in our considered view , in the light of the Hon ble Supreme Court s decision in the case of M/s Rajasthan Spinning & Weaving Mills (supra) and Hon ble Madras High Court decision in the cases of C.C.E., Tiruchirapalli vs. India Cemen .....

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e for the cenvat credit. 8.7 In view of the above discussion, the appeal on this issue is allowed with consequential relief. 9. The second issue in the appeal is the denial of exemption benefit of Notification No.67/95-CE for the items like angles, channels, beams manufactured and captively consumed for fabrication of structural goods by the appellant. The adjudicating authority namely the Commissioner has denied the benefit of exemption Notification No.67/95-CE dated 16.3.95 mainly on the groun .....

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