TMI Blog2023 (9) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... hine 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. It is settled that if any goods used in the manufacture/fabrication of capital goods and such manufactured/fabricated goods used within the factory of the assessee, cenvat credit is admissible. Accordingly, on merit 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. Time Limitation - HELD 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 susta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re Commissioner (Appeals) who has rejected the appeal vide Order-In-Appeal dated 22.08.2019. Therefore, the present appeals were filed by the appellant against impugned orders dated 04.10.2013 and 15.10.2013 and also filed appeal No. E/12841/2019 against impugned order-in - appeal dated 22.08.2019. Since all the appeals involve common issue, they are taken up together for disposal. 2. Shri Jigar Shah, Learned Counsel along with Shri Amber Kumrawat, Learned Advocate appearing on behalf of the appellant submits that the Adjudicating Authority denied the cenvat credit on the goods such as MS Channel, MS Angle, MS Drums, MS Pipes, HR Sheets, CR Sheets, MS Fabricated support etc. on the ground that these are neither capital goods nor inputs, therefore, credit is not admissible. He submits that firstly these goods were issued for making processed drums/reels, MS Bobbins etc. for use in the manufacturing process of cables and wires therefore these goods are clearly covered as parts or accessories for manufacture of processed drums/reels, MS Bobbins which in turn used in the manufacture of wire and cable in the factory of the appellant, the credit is admissible in terms of Rule 2 (a) (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016 (342) ELT 434 (Tri.Del) Topworth Steels (P) Ltd - 2018 (15) GSTL 383 (Tri. Del) Ambuja Cements Ltd Final Order No. A/87273/2021 2.3 He further submits that the definition of input is of wide import and the expression used in the manufacture should not be interpreted to mean directly used in process of production of goods rather it should be considered as used in or in relation to manufacture even if the goods are used in the machinery. However, in the present case all the iron steel items under consideration, satisfy the main definition of input and have a significant role to play in the main stream manufacturing process of finished goods and without the use of same finished product will never come into being. Therefore, in the present case, the goods in question were admittedly used in or in relation to, directly or indirectly in the manufacture of final product, the credit is admissible under the category of input. In support he placed reliance on the following judgments:- Sanghi Industries Ltd 2017 (10) TMI 30 Thiru Arooran Sugars - 2017 (355) ELT 373 (Mad.) Singhal Enterprises Pvt Ltd 2016 (341) ELT 372 Flometallic Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h as MS channel, MS Angles, MS drums, MS Pipe, HR Sheets, CR Sheets, MS Fabricated support etc. which were used in the manufacture of processed drums / reels, packing drums, MS Drums etc. which were used during the manufacturing process as well as packaging of the final product namely electric wires and cables. The Adjudicating Authority denied the cenvat credit on such goods on the ground that the said goods is not capital goods as it is not prescribed under definition of capital goods. Secondly, the goods in question are not parts or accessories of the capital goods. The appellant made an alternate submission that the goods in question since used in the manufacture of processed drums/ reels, packing drums etc. which are capital goods therefore, the goods on which credit was taken also falls under definition of input. For ease of reference the definition of input under Rule 2(k) of Cenvat Credit Rules, 2004 is reproduced below:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the following judgments:- Rajasthan Spinning and Weaving Mills 2010 (255) ELT 481 SC 7. The short question arising for determination is whether the assessee was right in availing MODVAT credit in respect of the afore-stated items by treating them as capital goods in terms of Rule 57Q? 8. Rule 57Q was substituted by Notification No. 6/97-C.E. (N.T.), dated 1st March, 1997. It enables the manufacturers of specified goods to claim modvat credit of duty paid on capital goods used by them in the factory for manufacture of final product. The Rule, insofar as it is relevant for this case, reads as under : RULE 57Q. Applicability. - (1) The provisions of this section shall apply to goods (hereafter in this section, referred to as the final products ) described in column (3) of the Table given below and to the goods (hereafter, in this section, referred to as capital goods ), described in the corresponding entry in column (2) of the said Table, used in the factory of the manufacturer of final products. TABLE S. No Description of capital goods falling within the schedule to the Central Excise Tariff Act, 1985 (5 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven in Explanation to Rule 57Q, which read as follows : capital goods means-- (a) machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products; (b) components, spare parts and accessories of the aforesaid machines, machinery, plant, equipment, apparatus, tools or appliances used for aforesaid purpose; and (c) moulds and dies, generating sets and weighbridges used in the factory of the manufacturer. 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 of capital goods in the said Rule, which is not there in Rule 57Q, as applicable in the instant case, yet the user test evolved in the judgment, which is required to be satisfied to find out whether or not particular goods could be said to be capital goods, would app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the credit can be allowed in respect of goods like angles, joists, beam, channels, bars, flats which go into fabrication of such structures and plant? 3. Through the impugned order dated 4-5-2010 [2010 (253) E.L.T. 440 (Tri. - LB)], the Principal Bench of the Tribunal presided by the President and the two Members answered the reference by holding as follows : (a) The terms capital goods has been defined in the CENVAT Credit Rules, which in turn have been framed under the rule making powers conferred under Section 37(2) of the Act. The said section refers to credit of duty paid on goods used in, or in relation to the manufacture of excisable goods. Hence, capital goods defined in the CENVAT Credit Rules in the context of providing credit of duty paid, have to be excisable goods. Whether a particular plant or structure embedded to earth can be considered as excisable goods or not has to be determined in the light of the decisions of the Hon ble Supreme Court on the issue, which is no longer res integra. (b) Goods like cement and steel items used for laying foundation and for building supporting structures cannot be treated either as inputs for capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars also considered the issue as to the effect and fundamental value of the evidentiary statement made by the Finance Minister dealing with an amendment in the budget speech. 7. Section 37 of the Central Excise Act, 1944; for short, the Act , is a rule making power. Section 37(2)(xvia) provide for the credit of duty paid or deemed to have been paid on the goods used in, or in relation to, the manufacture of excisable goods. Section 37(2A) of the Act - The power to make rules conferred by clause (xvi) of sub-section (2) shall include the power to give retrospective effect to rebate of duties on inputs used in the export goods from a date not earlier than the changes in the rates of duty on such inputs. Though the power to make rules include the power to give retrospective effect, while doing so the provision under consideration is neither made retrospective nor could it be treated as one. 8. We are in complete agreement with the ratio of Mundra Ports (supra) and M/s. Thiruarooran Sugars (supra) on all fours. 9. Resultantly, we answer the questions formulated in these appeals in favour of the assessees and against the Revenue. 10. In the result, the appeals of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , etc., which have been used by the appellants in the fabrication of support structures on which various capital goods are placed? The same stands denied by the lower authority. The learned DR has sought disallowance of the same by citing the decision of the Larger Bench in the case of Vandana Global Ltd. (supra) and other judgments. Further, he has brought to our notice and emphasized the amendment carried out in Explanation-II to Rule 2(a) which defines the term Input w.e.f. 7-7-2009. It has further been pleaded that the Cenvat credit claimed for the period prior to this will be covered within the decision of the Larger Bench in the case of Vandana Global Ltd. (supra). 14. The Larger Bench decision in Vandana Global Ltd. s case (supra) laid down that even if the iron and articles were used as supporting structures, they would not be eligible for the credit. Considering the amendment made w.e.f. 7-7-2009 as a clarification amendment and hence to be considered retrospectively. However, we find that the said decision of the Larger Bench was considered by the Hon ble Gujarat High Court in the case of Mundra Ports Special Economic Zone Ltd., 2015 (04) LCX0197 - 2015 (39) S.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting authority is directed to decide the issue in the light of the principle of law settled by this Tribunal in Singhal Enterprises Pvt. Ltd. s case(supra). All issues are kept open. Appeal is allowed by way of remand. 4.4 In view of the above judgment the credit on the identical goods in the present case has been held to be admissible. 4.5 We further find that as per Explanation 2 of Rule 2 (k) other than the input mentioned at clause (i) and (ii) of Rule 2 (k) the input also includes goods used in the manufacture of capital goods which are further used in the factory of manufacturer. As per the facts of the present case the goods on which credit was availed was used in the manufacture of processed drums/reel/packing drums/MS drums which are admittedly capital goods and the same are used within the factory of the appellant manufacturer, therefore, the goods in question clearly qualify the term input as provided under Explanation 2 of Rule 2 (k). For this reason also, the appellant are entitled for the cenvat credit. 4.6 Our view is supported by the judgment in the case of Metrochem Industries (Supra), the Tribunal while determining the eligibility of assessee to claim c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer Plant has to be treated as captive power plant of Hindalco. 7. However, since, admittedly, some quantity of electricity generated is used in the township and is not used in the factory of the appellant company for manufacture of excisable goods, to that extent, the input duty credit would not be admissible in view of judgment of the Apex Court in the case of CCE v. Solaris Chemtech Ltd. [2007 (214) E.L.T. 481 (S.C.)]. However, for determining the quantum of input duty credit, which would be inadmissible on this ground, the matter would have to be remanded to the original Adjudicating Authority. Mankapur chini mills 2019 (367) ELT 889 (All.) 22. We have examined the submissions advanced by the Learned Counsel for the parties and gone through the record. 23. The issue in hand pertains to the period 2005-06 to August, 2008, wherein the respondent-assessee, who is the manufacturer of V.P. Sugar and molasses, had procured Cenvat credit on items such as MS Plates, MS Channels, HR Coils, M.S. Angles, etc. The Revenue issued a show cause notice proposing to disallow the credit on the ground that these items had been used either for repair and maintenance of pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacture of capital goods. 26. Refuting the submissions of the Learned Counsel for the Revenue, the stand of the Learned Counsel for the respondent-assessee is that the Tribunal has rightly passed the order and there is no illegality in the impugned order inasmuch as there is no dispute on the use of steel items in their factory and during the relevant period, the capacity of the plant had been extended and the said goods have been used as structural support for capital goods. 27. In order to consider rival submissions, first of all we would like to refer Rule 2(k) of Cenvat Credit Rules, 2004 which defines input . This Rule as framed initially in 2004, read as under : 2(k) input means 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 as fuel, or for generation of electricity or steam used for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otor spirit, commonly known as petrol; (B) any goods used for- (a) construction or execution of works contract of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of service portion in the execution of a works contract or construction service as listed under clause (b) of Section 66E of the Act; (C) capital goods, except when,- (i) used as parts or components in the manufacture of a final product; or (ii) the value of such capital goods is up to ten thousand rupees per piece; (D) motor vehicles; (E) any goods, such as food items, goods used in a guesthouse, residential colony, club or a recreation facility and clinical establishment, when such goods are used primarily for personal use or consumption of any employee; and (F) any goods which have no relationship whatsoever with the manufacture of a final product. Explanation. - For the purpose of this clause, free warranty means a warranty provided by the manufacturer, the value of which is included in the piece of the final product and is not charged separately from the cust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as structure to hold the capital goods, hence, it is wrong to say that respondents are not eligible to Cenvat credit. Therefore, in our considered opinion, the Tribunal has rightly allowed the appeal and the reasoning given by the Tribunal cannot be said to be not cogent or correct appreciation of evidence on record. 36. Insofar as the assertions of the Revenue that while passing the impugned order, the Tribunal has ignored to consider the judgment rendered in Bajaj Hindustan Ltd. (supra) is concerned, we find that the Bajaj Hindustan Ltd. (supra) was a case where the assessee had failed to demonstrate the usage of the material itself and the Court, therefore, found that there was no substantive question of law involved but it was only a question of fact that the assessee was raising before it. In the case in hand, the respondent-assessee has specifically stated that during the relevant period, the said items were used as structural support of capital goods. Moreso, Bajaj Hindustan Ltd. (supra) does not lay down law for the items Cenvat is not available and there is no question of law formulated and answered. Thus, we are of the view that ratio laid down by the Bajaj Hindust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2. - Input includes goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. 5. From the perusal of the above definition of capital goods , it makes the position clear that such goods, which fall under Chapters 82, 84, 85 and 90, answer to the definition of capital goods. Further, components, spares and accessories of the goods of above Chapters also qualify for the purpose of definition of capital goods. On reading of the above definition, it reveals that no Chapter of the Central Excise Tariff Act, 1985 (CETA) has been prescribed for the components, spares and accessories for consideration as capital goods. Thus, it is evident that irrespective of the classification of components, spares and accessories, when those are fitted to the machines/machineries of the above eligible Chapters, the same should also be considered as capital goods for availment of Cenvat credit of Central Excise duty paid thereon. 6. In this case, the appellant contended that the Power Plant installed by it within its factory premises consists ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the said Rule, which is not there in Rule 57Q, as applicable in the instant case, yet the user test evolved in the judgment, which is required to be satisfied to find out whether or not particular goods could be said to be capital goods, would apply on all fours to the facts of the present case, in fact, in para 6 of the said judgment, the Court noted the stand of the Learned Additional Solicitor General, appearing for the Revenue, to the effect that the question whether an item falls within the purview of capital goods would depend upon the use it is put to. 13. Applying the user test on the facts in hand, we have no hesitation in holding that the steel plates and M.S. channels, used in the fabrication of chimney would fall within the ambit of capital goods as contemplated in Rule 57Q. It is not the case of the Revenue that both these items are not required to be used in the fabrication of chimney, which is an integral part of the diesel generating set, particularly when the Pollution Control laws make it mandatory that all plants which emit effluents should be so equipped with apparatus which can reduce or get rid of the effluent gases. Therefore, any equipment us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... input and capital goods , the Hon ble Madras High Court in the case of M/s. Thiru Arooran Sugars Ors. (Civil Misc. Appeal Nos. 3814/2011 and 2695 and 2696/2012) has held that steel and cement used for laying of foundation for erection of capital goods should be eligible for the cenvat benefit under the present set of rules. The relevant paragraph in the said order is extracted herein below :- 44. In the facts of this case, we have to conclude that MS structural, which support the plant and machinery, which are, in turn, used in the manufacture of sugar and molasses are an integral part of such plant and machinery. The assessee has clearly demonstrated that structural as well as foundations, which are erected by using steel and cement are integral part of the capital goods (i.e., plant and machinery), as they hold in position the plant and machinery, which manufactures the final product. Therefore, in our opinion, whether the user test is applied, or the test that they are the integral part of the capital goods is applied, the assessees, in these cases, should get the benefit of Cenvat credit, as they fall within the scope and ambit of both Rules 2(a)(A) and 2(k) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement, it is stated that the job worker will be clearing the goods on payment of duty. In our view, there is no justification for extending the longer period, because the period of dispute is from 1-4-2001 to 31-3-2003. The officers visited the unit and carried out search operations on 26-3-2003. However, the show cause notice was issued only on 30-6-2005. There is an enormous delay. Of course, the longer period can be invoked, provided there is suppression of facts with an intention to evade duty. In this case, the appellants have submitted periodical declarations. They have been availing SSI exemption. The audit parties also have visited them several times. So in these circumstances, we cannot accept that they had suppressed the facts with an intention to evade duty. So the longer period is not applicable. Rallis India Ltd 2006 (201) ELT 429 (T) 5. As regards the limitation the demand is clearly time barred. Once the assessee has filed the necessary declaration in November, 1995 and declared their price in RT-12 return and once this difference in price was noticed by the audit and explanation given by the assessee vide their letter dated 26-12-1995 the department ..... X X X X Extracts X X X X X X X X Extracts X X X X
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