M/S Diamond Cements vs C.C.E. & St Bhopal

[Arising out of Order-In-Original No. BPL-EXCUS-000-APP-256-13-14 &

Arising out of Order-In-Original No. BPL-EXCUS-000-APP-257-13-14 dated: 21.02.2014 passed by Commissioner (Appeals) Bhopal]

For approval and signature:

Hon'ble Mr. S.K. Mohanty, Member (Judicial)

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

2 Whether it should be released under Rule 27 of the 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?

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

M/s Diamond Cements. ...Appellant

Vs.

C.C.E. & ST Bhopal Respondent

Appearance:

Mr. B L Narsimhan, Advocate for the Appellants

Mr. Devender Singh, DR for the Respondent

CORAM:

Hon'ble Mr. S.K. Mohanty, Member (Judicial)

Date of Hearing.05.06.2015

FINAL ORDER NO. 53142 /2015

Per S. K. Mohanty:

This appeal is directed against the impugned order dated 21.02.2014 passed by the Commissioner (Appeals) Central Excise-Bhopal wherein Cenvat Credit denied on the locomotive in the Adjudication Order has been upheld.

2. The brief facts of the case are that the appellant is manufacturing cement and avails cenvat credit of Central Excise Duty paid on inputs and capital goods used in or in relation to manufacture of the said final product. The dispute involved in the present case is with regard to denial of cenvat credit on locomotive taken by the appellant in the month of November, 2010. The reason for denial of the Cenvat benefit is that the said disputed item does not qualify either as inputs or capital goods for the purpose of taking cenvat credit.

3. The Ld. Advocate, Sh. B. L. Narsimhan, appearing for the appellant submits that the locomotive is used to transportation of raw materials and finished goods within the factory of production. According to him, without continuous and timely supply of raw material to the plant, the manufacture of cement would not be commercially viable. He further submits that locomotive used by the appellant for transportation of raw materials and finished goods are in relation to manufacture of final product. Thus, according to the Ld. Advocate, the central excise duty paid on the locomotive is eligible for cenvat credit to the appellant for utilization towards clearance of the final product. To justify his above stand, the Ld. Advocate has cited the judgment of Honble Supreme Court in the case of Jayaswal Neco Ltd. vs CCE Raipur, reported in 2015-TIOL-70-SC-CX and also the decision of this Tribunal in the case of CCE & ST BBSR-I vs. Bhushan Steel Ltd, reported in 2012 (286) ELT 745 (Tri.) Kolkata & Banco Products (India) Ltd vs CCE Vadodara-I reported in 2009 (235) ELT 636 (Trib. LB).

4. Per contra, the Ld. Jt. CDR for the Revenue Sh. R. Singh submits that the locomotive is not confirming to the definition of capital goods because of its tariff classification. According to him, since locomotive is classified under chapter 86, which is neither capital goods by itself, nor the component, accessory or spare parts of any eligible machine, the said disputed item cannot be considered as capital goods as per the definition contained in Rule 2(a)(A) of the Cenvat Credit Rules, 2004. He further submits that since the locomotive is being used for shunting of the wagons at the railway siding for dispatch of cement, clinker etc., the same will also not qualify as input for the purpose of cenvat credit. With regard to the decisions cited by the Ld. Advocate for the appellant, the Ld. Jt. CDR submits that the said decision in the case of Jayaswal Neco Ltd.(supra) will have no application to the facts of the present case because the period involved in the said decided case is prior to year 2000, when the Cenvat Credit Rules were not in vogue and the definition of capital goods contained in the erstwhile Central Excise Rules was very broad and extensive to take within its ambit almost all the goods used by the manufacturer. To justify his above stand, the Ld. Jt. CDR cited the decision in the case of Hindustan Zinc Ltd. vs Commissioner of Cus. & C. Ex Jaipur, reported in 2009 (235) ELT 289 (Tri. Del).

5. Heard the Ld. Counsel for both the sides and perused the records.

6. The short issue involved in the appeal for consideration by this Tribunal is, as to whether, the locomotive should be considered as an eligible item for the purpose of taking cenvat credit. The term Capital Goods has been defined in Rule 2(a)(A) of the Cenvat Credit Rules, 2004. As per the definition, goods falling under chapter 82, 84, 85, 90 and the components, spares and accessories of the goods of the said chapters are considered as capital goods, on which the assessee is permitted to take cenvat credit. Since locomotive is classified under chapter 86, and the same is not fitted to any machine(s) of the above specified chapters, as component, spares or accessories, in my opinion, locomotive is not confirming to the definition of capital goods. Thus, cenvat credit on locomotive as capital will not be available to the appellant. In this regard, I find support from the decision of this Triubnal in the case of Hindustan Zinc Ltd. vs CCE Jaipur reported in 2009 (235) ELT 289 (Tri-Delhi).

7. The term input has been defined in Rule 2(k) of the Cenvat Credit Rules, 2004. All goods (excepting certain few) used, in or in relation to manufacture of final products, whether directly or indirectly and whether contained in the final product or not, are considered as input for the purpose of taking cenvat credit. The fact is not under dispute that the locomotive in the present case, is used by the appellant for transportation of raw materials and finished goods within the factory and that without continuous supply of raw material in the manufacturing process, the manufacture of cement would not be commercially viable. Further, the disputed goods are also used for movement finished goods upto the destination point for sale. Thus, the activities carried out in the factory of the appellant with the help of locomotive, has a nexus with the manufacturing process, and as such, as per the clear and unambiguous definition of input, the locomotive cannot be denied the cenvat benefit. The case of the appellant gets support from the decision of larger bench of this Tribunal in the case of Banco Products (India) Ltd, wherein it has been held that Plastic crates used for transporting/ storing of goods in the factory will be considered as input for the purpose of Modvat credit, because in absence of proper storage and efficient movement of gods under the cover of plastic crates, the manufacturing activity will be affected. In view of the principles decided by the Larger Bench of the Tribunal, use of locomotive by the appellant for the intended purpose within the factory, will qualify for availment of cenvat credit under the head input.

8. In view of foregoing, the impugned order is set aside and the appeal is allowed in favour of the appellant.

(Dictated and pronounced in open court)

(S.K. Mohanty)

Member(Judicial)

Neha

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