M/S Bodal Chemicals Ltd vs Commissioner Of Central Excise

[ Arising out of OIA-80/2012-AHD-ICE/AK/COMMR-A-/AHD dtd 28.9.2012 Passed by Commissioner of Central Excise-AHMEDABAD-I ]

M/s Bodal Chemicals Ltd - Appellant(s)

Vs. Commissioner of Central Excise- - Respondent(s)

AHMEDABAD-I

Represented by

For Appellant : Shri N K Tiwari, Consultant For Revenue : Shri L Patra, Authorised Representative

For approval and signature :

Mr. H.K. Thakur, Hon.ble Member (Technical)

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3 Whether their Lordships wish to see the fair copy of the Order?

Seen 4 Whether Order is to be circulated to the Departmental authorities?

Yes

CORAM :

Mr. H.K. Thakur, Hon.ble Member (Technical)

Date of Hearing / Decision : 17/6/2015

ORDER No. A/10872 / 2015 dtd 17/6/2015

Per : Mr. H K Thakur;

This appeal has been filed by the appellant with respect to OIA No 80/2012-AHD-ICE/AK/COMMR-A-/AHD dt 28.9.2012 issued on 1.10.2012. Under this OIA the first Appellate Authority has upheld the OIO dt 29.2.2012 passed by the Adjudicating Authority. A demand of Rs 78,911/- has been confirmed by the Adjudicating Authority by disallowing Cenvat Credit under Rule 14 of the Cenvat Credit Rules 2004 alongwith interest. An equivalent amount of penalty under Rule 15(2) of the Cenvat Credit of 2004 read with under Section 11AC of the Finance Act 1944 has also been imposed upon the appellant.

2. Shri N K Tiwari, Consultant, appearing on behalf of the appellant argued that the issue involved is with respect to taking of Cenvat Credit on items like MS Angles, Channels, Beams and Plates. It was his case that these items are not used in the construction of support structures for the capital goods but are used in the repairs of the capital goods as components or as functional attachments. Learned Consultant made the Bench go through the list of such items duly verified by the jurisdictional Superintendent to argue that use of these items are is in the repair of capital goods or these items are used in making of Ladder etc. which are functional necessities of capital goods. It was firmly argued by the Learned Consultant that if the items are used in the repairs of capital goods then the cenvat credit is admissible as per the judgement of Supreme Court in the case of Saraswati Sugar Mills vs CCE Delhi III [2011(270)ELT.465.SC]. He made the Bench go through Para 23 of this order passed by the Apex Court.

3. On the other hand, Shri L Patra, Learned Authorised Representative, appearing on behalf of Revenue relied upon the case law of Birla Corporation Ltd vs CCE - [2012(276)ELT.376(Tri.Del)] and argued that items like MS Angles, Channels, Joists etc used in making of support structures are not eligible for Cenvat Credit. He also made the Bench go through Para 24 of the judgement of the Apex Court in the case of Saraswati Sugar Mills vs CCE, Delhi III (supra) to bring home the point that the credit of inputs used in making of support structures is not admissible. On a specific query from the Bench, Learned Consultant appearing on behalf of the appellant submitted that no certificate from a Chartered Engineer was produced before the lower authorities to claim as to where is the use of the items for which credit is claimed.

4. Heard both sides and perused the case records. The issue involved in these proceedings is admissibility of Cenvat Credit on items like MS Angles, Channels, etc. in the factory premises of the appellant. It is the claim of the appellant that these items are not used in making Supporting Structures for the capital goods. It is also the argument of the appellant that these items are used as inputs for repair of vessels and also used in making accessories for functional necessities of the capital goods. Learned Authorised Representative has relied upon the case laws of Birla Corporation Ltd Vs CCE, Jaipur (supra). It is observed that this case law in Para 3.1 and 4 it was upheld that Cenvat Credit with respect to MS Plates, Beams, Angles, Channels etc used for repairs and maintenance of capital goods is admissible as Cenvat Credit. Para 3.4 and 4 of the case law has also given observations that the same items when used for making supporting structure of the capital goods are not eligible for Cenvat Credit. Honble apex Court in the case of Saraswati Sugar Mills vs CCE, Delhi iii 2011(270) ELT.465 (SC)], while clarifying the judgement of the Apex Court in the case of CCE vs Rajasthan Spinning And Weaving Mills [2010(255)ELT.481(SC)], made the following observations, in Para 23 & 24.

 23.?Before we conclude, we must further observe that Shri Lakshmikumaran drew our attention to the judgment of this Court in CCE v. Rajasthan Spinning and Weaving Mills Ltd. - 2010 (255) E.L.T. 481 (S.C.) where the appeal preferred by the Revenue is dismissed. The facts in the said case were that the respondent-assessee availed MODVAT credit on steel plates and M.S. channels, as capital goods in terms of Serial No. 5 of the Table given below Rule 57Q, used for erection of the chimney for the diesel generating set. The parties were ad idem that diesel generating set falls under chapter Heading 85 which is mentioned at Serial No. 3 of the Table and also the chimney is an accessory in terms of Serial No. 5 of the Table given below 57Q. The issue which was agitated before the Court was whether the Steel plates and MS Channels used in the fabrication of chimney are capital goods in terms of Serial No. 5 of the Table below Rule 57Q. This Court, whilst applying the user test, had held that the steel plates and MS Channels used in the fabrication of chimney are capital goods as contemplated by Rule 57Q as the chimney is not only an accessory but also an integral part of the diesel generating set in the light of the Pollution Control laws mandating that all plants emitting effluents should be equipped with apparatus to reduce or get rid of effluent gases. We are afraid that this decision would assist the appellants in support of the contention canvassed. In this instant case, the Court was considering whether steel plates and M.S. Channels used in fabrication of chimney for diesel generating sets are entitled to avail of MODVAT credit by treating them as capital goods in terms of Rule 57Q of the Central Excise Rules. This Court, applying user test, has arrived at a conclusion that Steel Plates and MS Channels are used in the fabrication of chimney which is an integral part of the diesel generating set. Therefore, the test applied by this Court is whether the items that were at issue were integral part of a machinery. If that test is satisfied, there will not be any difficulty to hold a particular item of the machinery is a component part and therefore, will fall within the ambit of the expression capital goods.

24.?In Simbhaoli Sugar Mills Ltd. v. Commissioner of Central Excise, Meerut, 2001 (135) E.L.T. 1239 (Tri.-Del.), the appellant is a manufacturer of sugar and availed a MODVAT credit on the joints, channels, angles and MS Beams used in fabricating supporting structures for installation of equipments such as vacuum pan, crystallizers, sugar grader, elevator, etc., HR plates (black steel) are used in boiler of sugar plant to keep temperature high, MS bars, shapes and sections are used for erection of new cooling tower, chequred plates and ITR plates are used to construct the platforms, the cane carrier chain and spares are used to transfer the raw material/semi processed material from stage to other, as the capital goods in the terms of Rule 57Q, treating these items as the parts and components of the plant. The question which arose before the Tribunal was that whether these items used for fabricating structures to support and install various machineries of the sugar plant are capital goods in terms of the Rule 57Q. The Tribunal while allowing the MODVAT credit found that these items, except MS sections and shapes, used for raising structure to support the various machines, parts of machineries of the plant would be covered by the explanation to Rule 57Q as a capital goods. The Tribunal referred to its own decision in Malvika Steel Limiteds case [1998 (97) E.L.T. 530 (Tribunal)] and without semblance of any discussion, has partly allowed the assessees appeal. In view of our findings and the conclusion in the earlier part of the judgment, we cannot agree with the reasoning of the Tribunal.

5. In view of the above settled proposition of law, items like MS Plates, Beams, Channels, Angles etc., when used in the repair of the capital goods would be eligible for cenvat credit but the same item when used in the making of support structures will not be eligible to Cenvat Credit. On a specific query from the Bench, Learned Consultant submitted that no Chartered Engineers certificate was produced by the appellant in support of their contention. That such items are only used for maintenance and repairs of their capital goods and not for making supporting structures. Reliance placed by the Learned Consultant on the list of items, duly verified by the jurisdictional Central Excise officers also do not throw any light as to where the items like MS Plates, Angles, Channels, TMT Bars etc are used. The matter is, therefore, required to be remanded back to the Adjudicating Authority to ascertain the use of these items and decide the same in view of the law laid down by CESTAT and the Supreme Court in the relied upon cases by both sides. Appellant is at liberty to produce the documents/chartered engineers certificate to the adjudicating authority to the effect that the inputs for which Cenvat Credit is claimed are used only in the maintenance and repair of the capital goods. Needless to say that the Adjudicating Authority shall give an opportunity of personal hearing to the appellant before deciding the case in the remand proceedings.

6. So far as imposition of equivalent penalty upon the appellant is concerned, it is observed that the issue of taking of Cenvat Credit on the impugned items was the subject matter of interpretation and has been answered by the courts as late as 2011. Therefore, no penalty under Rule 15(2) of the Cenvat Credit Rules read with Section 11AC of the Central Excise 1944 is attracted as the period involved in the present proceedings is from 2005-2010.

7. The appeal filed by the appellant is allowed by way of remand as per the observations made herein above.

(Dictated and pronounced in the Court)

(H.K. Thakur) Member (Technical)

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