Cce v. J K Synthetics Ltd

Per Dr S.L. PEERAN This appeal arises from Order in Appeal No 322/05-CE dated 9.12.05 by which the Commissioner (Appeals) has confirmed the OIO No 4/2005 (ADC) dated 31.8.05 wherein demand of Rs 32,73,904/- along with interest and penalties has been confirmed for wrongly availing cenvat credit in respect of 111 numbers of disputed items. 26 Nos. of items were used for construction of steel structure of the factory shed. In the appeal memo in para 14 of the facts of the appeal, the appellants conceded that an amount of Rs 4,70.801/- in respect of items which are used for construction of steel structure of factory shed is not contested by them. The revenue may verify this fact and in case if the credit has not been reversed on these 26 items, then it is recoverable. Learned counsel submits that the other disputed items have all gone into the manufacture of capital goods. He further submits that this very issue pertaining to the subsequent period came up for consideration before this Bench and this Bench after due consideration of various judgments on this issue by Final Order No 49/07 dated 30.11.06 has allowed the appeal in assessees favour. The Final Order No 49/07 dated 30.1.07 is reproduced herein below. This appeal has been filed against OIA No 146/06 dated 18.5.06 passed by the Commissioner of Central Excise Mangalore. The issue is availability of capital goods Cenvat credit on structural items classifiable under Chapter 72 & 76. The lower authority denied the Cenvat credit on structural items used in the manufacture of capital goods to the tune of Rs 4,48,983/- plus education cess of Rs 1528/-. He ordered recovery of the Cenvat credit availed. Interest under Section 11 AB was demanded. He imposed penalty equal to the duty demanded under Rule 13 (2) and 15(2) of Cenvat credit Rules 2002 & 2004 read with Section 11 AC of the Central Excise Act. The appellants were aggrieved over the order and approached the Commissioner (Appeals) for relief. The Commissioner (Appeals) in the said order has observed that the adjudicating authority has placed reliance on the decision of the Apex Court in M/s Vikram Cement case as reported in 2005 (187) ELT 145) wherein it was held that the term capital goods is not an inclusive definition and an item can be treated as capital goods under Cenvat Credit Rules only if it is satisfied that the goods fall under one of the specified chapters or headings of the tariff or it is spare parts, components, accessories or that it falls under one of the specified item. He has held that in the present case, general use of structural items classifiable under Chapter 72 & 76 are definitely not identifiable as parts accessories and components of capital goods falling under Chapter 82,84,85,90 heading 6802 and sub-heading 6801.10 and with above observations he has upheld the denial of credit and payment of the same. The appellants are aggrieved over the impugned order.

2. Shri V.B. Gaikwad, learned advocate appeared for the appellants and Shri Anil Kumar learned JDR appeared forr the revenue. The learned advocate urged the following points.

1) Shri Gaikwad pointed out that the Assistant Commissioner of Central Excise Belgaum has held that the impugned items are not capital goods but are inputs in view of the Apex Courts decision in the case of Vikram Cements Vs CCE (2005(187) ELT 145 (SC). However, he has refused to allow them credit on the said items in spite of holding the items as inputs by relying upon the Tribunals decision in the case of Jai Hind Industries Ltd., Vs CCE (2005 (179) ELT 246).

2) The grievance of the appellant is in case, it is held that the item cannot be considered as capital goods atleast the eligibility of the items for modvat as inputs should have been considered by the Commissioner (Appeals). Unfortunately he has not considered this issue at all. In the following case laws it has been established that the structural items are components, spares, accessories of the sugar manufacturing equipment.

1) Simbhaoli Sugar Mills Ltd., (2002 (139) EL-A294(SC)

2) Lime Chemicals Ltd., Vs CCE (2004 (64) RLT 535

4) Rajasthan Spg & Wvg Mills Ltd., (2002 (150) ELT 343

6) Bellary Steel & Alloys Ltd., Vs CCE (2005 (180) ELT 92)

7) Mukand Ltd., Vs CCE (2005 (182) ELT 61)

8) Lloyd Metals & Engg Ltd., Vs CCE (2002 (150) ELT 638)

9) Travancore Cochin Chemical Ltd., Vs CCE (2002 (147) ELT 992) 10) Siel Sugars Vs CCE (1998 (99) ELT 54) 11) CCE Vs Seksaria Biswan Sugar Factory Ltd., (2005 (187) ELT 49) 12) Divis Laboratories Ltd., Vs CCE (2006 (73) RLT-255) 13) Ispat Industries Ltd., Vs CCE (2006 (195) ELT 164) 14) CCE Vs India Cement Ltd., (2004 (64) RLT 63) 15) Lloyds Steel Industries Ltd., Vs CCE (2004 (64) RLT 732

3) In the light of the above decisions, the appellants are rightly entitled for modvat credit on capital goods.

4) In a catena of decisions, it is laid down that when an item on which the assessee has availed credit is not falling within the definition of capital goods but is falling within the definition of inputs then, the credit therein is not deniable to the assessee. The following decisions are relied on:-

a) CCE Vs Modi Rubber Ltd., (2000 (119) ELT-197 (T-LB)

b) CCE Vs Mukand Ltd., (2003 (153) ELT-63 (T) &

c) CCE Vs J.K. Synthetics Ltd., (1999 (107) ELT-761 (T)

5) There is a specific provision made by way of explanation to Rule 2 G declaring the items used in the manufacture of capital goods which are further used within the factory of production as inputs. Hence there is no question of denying the credit on items admittedly used in the manufacture of sugar manufacturing equipments/ structures thereof which are eligible capital goods.

6) In the following cases, it has been specifically laid down that the credit on the inputs used in the manufacture of capital goods which are further used within the factory of production is admissible. The following case laws are relied on:-

a) Hindustan Zinc Ltd., Vs CCE (2005 (188) ELT-313)

b) CCE Vs Jindal Steel and Power Ltd., (2005 (183) ELT 406)

c) CCE Vs Groz Backert Asia Ltd., (2000 (116) ELT 495)

d) CCE Vs Star Paper Ltd., (1999 (111) ELT 637

e) Star Paper Mills Ltd., Vs CCE (1999 (107) ELT 241)

3. The learned SDR reiterated the OIA.

4. We have gone through the records of the case carefully. The impugned items are as follows:

i) M.S. angles ii) MS plates iii) Channels iv) rods

v) beams vi) beams vii) HR plates viii) HR coils ix) AI coils The appellants availed Cenvat credit on them for the period from June 2004 to December 04. The above items are used by the appellants in the fabrication of the following sugar manufacturing equipment and structures:

i) juice clarifier ii) bagasse handling system iii) various tanks iv) sugar elevators

v) sugar hoppers vi) cane carrier vii) boiler viii) bagasse carrier ix) power house panel board structure The appellants have cited large number of case laws in their support. This bench in the case of Divis Laboratories Vs CCE Visak (2006 (73) RLT-255) has held that various technological structures used for supporting machinery are entitled for modvat credit. In the case of Ramala Sahakari Chini Mills Ltd., Vs (2006(77) RLT 251) Channels Joists etc., used in the construction of supporting structure for machinery and equipments are held to be entitled to modvat credit. In the case of Ispat Industries Ltd., Vs CCE Mumbai (2006 (195) ELT 164), it was held that structural items such as angles channels, plates, rods required to make machines function without any vibration or movement cannot be said to be used in the construction of building but linked with machinery used in the production of final products. Thus the modvat credit in respect of such structurals was allowed. In the case of Dalmia Cements Ltd., Vs CCE (2006 (77) RLT 190), the Tribunal has held that Steel angles used in fabrication of conveyor system are entitled for modvat credit as capital goods. The Tribunal in the case of Vikram Ispat Vs CCE (2006)(76) RLT 862) has held that M.S Plates, M.S. Angles, M.S. Channels, Aluminium sheets which are not used as construction material are entitled for modvat credit as Capital goods. There are still many more decisions holding that structurals used for machinery are entitled for modvat credit as capital goods. If the lower authority has held that the impugned items are inputs in that case also, the benefit of modvat credit should have been extended. In these circumstances, we do not find any merit in the impugned order. Therefore, we allow the appeal with consequential relief.

2. Learned counsel points out from the impugned order, that the Commissioner did not grant the benefit on the ground that the items were classified under Chapter 72 which deals with general structure items. He noted that they are not in the nature of specifically manufactured structures for housing machinery such as storage tank, material handling equipments etc. He submits that they had produced enormous evidence to show that the items had gone into the manufacture of sugar manufacturing equipment and structures and they have become part and parcel of the machinery and in view of the cited judgments noted in the Final Order No 49/07, they are eligible for the credit. He points out that the previous order pertains to the period June 04 to December 04 while in the present case the period is from July 01 to March 04. He submits that the facts are identical and appeal is required to be allowed.

3. Learned SDR submits that the assessee has not produced any evidence to show that the said items have gone into the manufacture of sugar manufacturing equipment and structures. She points out to their admission that they were used in the manufacture of supporting structures of the machinery in the factory as well in fabricating material handling equipments. She also refers to the Chief Engineers statements which has been noted by the Commissioner in the impugned order. She points out that the majority of the items have gone in to the manufacture of the structures and they are not eligible for the benefit of Cenvat credit.

4. We have carefully considered the submissions. We notice that all these points raised by SDR was subject matter of previous order in assessees own case which is extracted supra. We have already held in the opening paragraph that the asessee is not eligible for cenvat credit in respect items which have gone into the manufacture of factory shed. The amounts are said to have reversed. This can be verified by the Department. In so far as the items in question are concerned, the ratio of the earlier judgments will apply to the facts of the case. Respectively following the same we allow the appeal with consequential relief if any. (Pronounced and dictated in open court) (T.K. JAYARAMAN)Member (T) (DR S.L.PEERAN) Member (J) /pnr/