[Order per : V. Padmanabhan, Member (T)]. - The present appeal is filed against the Order of Commissioner, Raipur dated 28-3-2013. The appellant is a manufacturer of Sponge Iron. The raw materials mainly used by them were coal, iron ore and dolomite. The appellant was availing the Cenvat credit of duty paid on inputs and input services. The main raw materials did not have any excise duty levied on them. The inputs on which credit was taken were mostly structural items and welding electrodes. Structural steel items such as HR Plates, M.S. Channels, M.S. Beam, TMT Bar, CTD Bar, etc. and welding electrodes were used by them in the manufacture of capital goods, and also components and accessories of capital goods which were further used in the manufacture of final product. Revenue sought to disallow the Cenvat credit taken on these items and vide the impugned order, the Cenvat credit amounting to Rs. 2,78,63,693/- was ordered to be recovered along with interest and equal amount of mandatory penalty. The period for which demand was made was from 2006-2007 to 2010-2011 (upto September, 2010) and the show cause notice was issued on 29-4-2011. The Cenvat credit was disallowed in the impugned order on the ground that these were not inputs/capital goods and therefore, Cenvat credit taken thereon was inadmissible.

2. The appellant has challenged the impugned order on merits as well as on time bar. On merits, their arguments are mainly as follows :-

(i)      Cenvat credit on structural steel items used by them classified to be considered as capital goods inasmuch as their components and accessories of capital goods for which credit will be available in respect of their classification. Several High Courts and Tribunal Benches have laid down that credit could be available even if components manufactured and erected have become integral part of immovable structure.

(ii)    In order to prove utilization of impugned goods in the manufacture of the components of capital goods and erection thereafter, they have submitted a certificate from an independent Chartered Engineer which clearly states that the quantity on which Cenvat credit has been availed was used in the manufacture of components and machines which were subsequently attached to concrete foundation. Such machines include kiln, cooler, material handling system, sponge iron furnace, the E.O.T. crane. Such machines cannot function unless they are securely attached to the ground with structural support. And, hence, the structural support is an inherent component of the machines. Eligibility of Cenvat credit on welding electrodes has been settled in their favour in several judicial pronouncements.

3. On the issue of time bar, their main contentions were as follows :-

(i)      They have regularly confirmed in their ER-1 Returns that they are availing Cenvat credit on structural steel and welding electrodes. Hence, it cannot be alleged that they have suppressed this information from the Revenue. Their books of accounts have been audited periodically by the Officers of Revenue. Before the issuance of show cause notice, audit was conducted on 21-4-2010. Consequently, the suppression clause cannot be invoked against them and the show cause notice is hit by limitation under Proviso to Section 11A of the Central Excise Act, 1944.

(ii)    As early as 2003, Revenue raised a dispute about the classification of certain capital goods manufactured by them out of structural steel items, mainly chute, hopper and other structures which were claimed to be parts of material handling conveyor systems. The issue was settled in their favour by the Commissioner (Appeals) ordering such goods for classification under 8431. Since the practice has continued on the part of the appellant, they claimed that such demand is hit by time bar.

4. We have heard, Shri H.V. Ghirnikar, the ld. Counsel for the appellant and Shri R.K. Manjhi, the ld. DR for the department.

5. Both, the appellants as well as the DR have submitted written notes summarizing their arguments. The appellants in their note have re-emphasized all the points already urged in the appeal memorandum as well as during the hearing before the Bench. He has submitted that the credit was taken by the appellants during the period 2006-07 to September, 2010 well before the decision of the Larger Bench in the case of Vandana Global Ltd. v. Commissioner of Central Excise, Raipur-I, (Tri.-LB).

6. The learned AR has reiterated the view taken by the adjudicating authority. They have further placed reliance on the following case laws :

(a)     Vandana Global Ltd. v. CCE, Raipur, (Tri.-LB);

(b)     Daya Sugar v. Commissioner of Central Excise, Meerut-I, (All.);

(c)     Dwarikesh Sugar Industries Ltd. v. Commissioner of Central Excise, Meerut, (All.);

(d)    Tower Vision India Pvt. Ltd. v. Commissioner of Central Excise (Adj.), Delhi, (Tri.-LB);

(e)     Bharti Airtel Ltd. v. Commissioner of Central Excise, Pune-III, (Bom.);

(f)      Commissioner of Central Excise, Chandigarh v. Doaba Steel Rolling Mills, (S.C.);

(g)     Commissioner of Customs & Central Excise, Ghaziabad v. Rathi Steel & Power Ltd., (All.);

(h)    Tigrania Metal & Steel Industries Pvt. Ltd. v. Commissioner of Central Excise, (Bom.);

(i)      Balmer Lawrie & Co. Ltd. v. Commissioner of Central Excise, Belapur, (Tri.-Mumbai);

(j)      Sunrise Industrials v. Commissioner of Central Excise, Bangalore, (Tri.-Bang.).

7. The present dispute revolves around the question whether Cenvat credit is allowable on various structural items such as M.S. Angles, M.S. Channels, CTD Bar, TMT Bar, etc. and welding electrodes which were used for making structures for support of capital goods. To consider this question, we give below the definition of the term “Inputs” in the Cenvat Credit Rules under Rule 2(k) at the relevant time.

8. The definition of inputs has been given in Rule 2(k) of the Cenvat Credit Rules at the relevant time was as follows :-

“(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 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 stream used in or in relation to manufacture of final products or for any other purpose, within the factory of production;

(ii)     all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service;

Explanation 1. - The light diesel oil high speed diesel oil or motor spirit, 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.”

W.e.f. 7-7-2009, the Explanation 2 was amended to include as follows :-

but shall not include cement, angles, channels, Centrally Twisted Deform bar (CTD) or Thermo Mechanically Treated bar (TMT) and other items used for construction of factory shed, building or laying of foundation or making or structures for support of capital goods;

Further, the term Capital Goods has been defined in Rule 2(a) of the Cenvat Credit Rules, 2004, which reads as under :

“(a)   “Capital Goods” means :-

(A)    the following goods, namely :-

(i)      all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90 [heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804] of the First Schedule to the Excise Tariff Act;

(ii)     pollution control equipment;

(iii)    components, spares and accessories of the goods specified at (i) and (ii);

(iv)    moulds and dies, jigs and fixtures;

(v)     refractories and refractory materials;

(vi)    tubes and pipes and fittings thereof; and

(vii)   storage tank,

used -

(1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office; or

(2) for providing output service,”.

9. We proceed to decide the appeal on the two following issues :

(i)      Entitlement of Cenvat credit on welding electrodes; and

(ii)    Availability of Cenvat credit on various structural items, such as, MS Angles, Channels, CTD bar, TMT bar, etc. which have been used in support structure of the capital goods.

10. As regards the credit of duty on welding electrodes, the appellants have cited the following judicial pronouncements to support the contention that the said credit will be allowable :

(i)      (S.C.);

(ii)    (P&H)

(iii)   (Guj.).

11. On the other hand, the Revenue seeks to disallow the same and specifically cited the case of Dwarikesh Sugar Industries Ltd. v. Commissioner of Central Excise, Meerut, (All.).

12. We have gone through the judgment of the Hon’ble High Court of Allahabad cited by the Revenue. We find that the Hon’ble High Court has considered the claim of Welding Electrodes under the definition of ‘Capital Goods’ under Rule 2(a) of the Cenvat Credit Rules, 2004 and have come to the conclusion that the credit will not be allowable under this Rule. However, we find that the credit of duty paid on Welding Electrodes has been held allowable by several decisions of this Tribunal and hence the issue is no more res integra. We also find that several High Courts have also allowed such credit considering the same as allowable within the definition of “Input” under the Cenvat Credit Rules. One such reference can be made to the decision of the Hon’ble High Court of Chhattisgarh in the case of Ambuja Cements Eastern Ltd. v. Commissioner of Central Excise, Raipur, (Chhattisgarh), wherein welding electrodes used for repair and maintenance purpose were also held to be cenvatable. Similarly, in the case of Hindustan Zinc Limited v. Union of India, (Raj.), the Hon’ble High Court of Rajasthan allowed the Cenvat credit on the welding electrodes. By following said decision, we hold that the appellants are entitled to the credit on welding electrodes considering them as “Inputs”.

13. Now we turn to the question, whether credit is admissible on various structural steel items, such as, MS Angles, Sections, Channels, TMT Bar, 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 = (Guj.), wherein it was observed that the amendment made on 7-7-2009 cannot be held to be clarificatory and as such would be applicable only prospectively.

15. We find that the controversy can be laid to rest by making a reference to the decision of the Apex Court in the case of CCE, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd., (S.C.), wherein the Hon’ble Supreme Court has considered an identical issue of steel plates and MS channels used in the fabrication of chimney for diesel generating set. The credit stands allowed in the light of Rule 57Q of the erstwhile Central Excise Rules, 1944. In the said judgment, the Apex Court has referred to the “user test” evolved by the Apex Court in the case of CCE, Coimbatore v. Jawahar Mills Ltd., (S.C.), which is required to be satisfied to find out whether or not particular goods could be said to be capital goods. When we apply the “user test” to the case in hand, we find that the structural steel items have been used for the fabrication of support structures for capital goods. The appellants have argued that the various capital goods, such as, kiln, material handling conveyor system, furnace, etc. cannot be suspended in mid-air. They will need to be suitably supported to facilitate smooth functioning of such machines. It is obvious that the structural items have been suitably worked upon for this purpose. Accordingly, the goods fabricated, using such structurals, will have to be considered as parts of the relevant machines. The definition of ‘Capital Goods’ includes, components, spares and accessories of such capital goods. Accordingly, applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat credit.

16. In line with the discussions, we set aside the impugned order and allow the appeal.

(Pronounced in the open Court on 12-8-2016)