M/S. Jindal Drugs Ltd vs Commissioner Of Central Excise

[Arising out of Order-In-Appeal No. JNK-EXCUA-000/APP-147-13-14 dated 16/08/2013 passed by Commissioner of Customs, Central Excise (Appeals), Chandigarh ]

For approval and signature:

Honble Mr Ashok Jindal, 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. Jindal Drugs Ltd. Appellants

Vs.

Commissioner of Central Excise Respondent

Jammu

Appearance:

Ms Shashi Mathews, Advocate for the Appellants

Shri Rajiv Tondon, AR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Date of Hearing /decision: 12.2.2015

FINAL ORDER NO. A/ 50559/2015-Ex(SM)

Per Ashok Jindal :

The appellant is in appeal against the impugned order wherein Cenvat credit on ASTM, shapes and sections, joists, MSI beam, MS angle, channel, welding rods and black sheet as capital goods stand denied on the premise that these items do not fall under the definition of Capital goods as per Rule 2A of the Cenvat Credit Rules, 2004.

2. The brief facts of the case are that appellant is manufacture of cocoa powder and cocoa butter in their factory in the area of Jammu and claiming area based exemption under notification No. 56/2002. The appellant procured the items mentioned in para 1 hereinabove and taken Cenvat credit on these items during the period 2006-2007 to 15.2.09. The unit of the appellant was searched and in the course of scrutiny of records, it was found that the appellant has taken Cenvat credit on items mentioned hereinabove in para 1 which are neither capital goods nor the inputs. Therefore, a show cause notice was issued to the appellant to deny the Cenvat credit on these items. Adjudication took place. Cenvat credit was denied. Therefore, duty of Rs.40,14,364/- was demanded along with interest and equivalent amount of penalty was also imposed. Aggrieved from the said order, appellant is before me.

3. Learned Counsel for the appellant submits that the items in question were used by the appellant as capital goods. As without support of these items, machinery cannot work and for the support and to run the machinery these items were required and these were structurals, these items were used for structures a for running the machine. Therefore, they are part of machines and they are entitled to take Cenvat credit as capital goods or in alternative inputs of capital goods to support his contention, he relied on the decision of ITC Ltd. vs. CCE [2012 (285) ELT 292 (Tri-Chennai) which has been affirmed by Honble High Court of Madras in the case of India Cement Ltd. . He further submits that the issue of availment of Cenvat credit on the above items was not disputed till 30.4.2010 when the Larger Bench of this Tribunal in the case of Vandana Global Ltd. reported as 2010 (253) ELT 440 (Tri-LB) held that Cenvat credit on these items is not available if they are being used as being supported structurals which are embedded to earth. As during the period the appellant availed Cenvat credit there are contrary decisions of this Tribunal as well as High Court. In that situation, suppressions cannot be alleged. Consequently extended period of limitation is not invokable as in this case show cause notice has been issued on 28.4.2011 by invoking extended period of limitation. To support this contention, he relied on the decision of CCE vs. Jindal Steel and Power [2011 (263) ELT 557 (Tri-Del)]; CCE vs. Lloyds Metals and Engg. Ltd. [2014 (309) ELT 533 (Tri-Mum)]; Premier Iron and Metal Industries vs. CCE [2013 (298) ELT 602 (Tri-Mum)]. He further submits that as the appellant is located in Jammu and availing the benefit of notification No. 56/2002 wherein whatever the duty appellant is paying he is entitled to refund of the same. Therefore, he submits that if they have not availed the Cenvat credit, whatever they paid more duty and they are entitled to take refund of the same. In that situation, it is the case of revenue neutrality. In that case, suppression cannot be alleged. In these circumstances, he prayed that impugned order be set aside. Appeal be allowed with consequential relief.

4. On the other hand, learned AR opposed the contention of the learned Counsel and submits that appellant has not explained the usage of all these items before the lower authorities. Therefore, it cannot be ascertained that items used by the appellant for fabrication of capital goods or accessories thereof. Therefore, on merits the appellants have no case to take the support of decision of Apex Court in the case of Saraswati Sugar [2011 (270) ELT 465 (SC)]. He further submits that in the case of Jagdamba Power& Alloys Ltd. [2012 2 ECS 68 (Tri-Del)], this Tribunal held that as the Tribunal have not given the details of use of these items in question, therefore suppression can be alleged and show cause notice was issued in time. He further submits that in this case appellant has not disclosed availment of Cenvat credit to the department at the time of availment of Cenvat credit. It came in the knowledge of the department only at the time of scrutiny of the records. Therefore, it cannot be said that extended period is not invokable as there is suppression of availment of Cenvat credit on the items in question.

5. Heard the parties. Considered the submissions.

6. I will deal the issue on merits. In reply to the show cause notice, the appellant has stated the uses of the items as under:

.. iron and steel item used in errection of machinery and supporting structures are also used in or in relation to manufacture of final product since without these, it is impossible for them to function in any manner. Hence, these are also used in or in relation to the manufacture of final product since without the use of these items, dutiable end product namely cocoa butter / powder could not have been manufactured by us.

They have significant role to play in the mainstream manufacturing process of finished goods and without the use of which finished product will never come into being. 

7. Further more, the usage test can be examined at any time. During the course of hearing, learned counsel of the appellant produced certain pictures obtained from the website of the appellant to show the usage of the items in question. The photographs shown by the learned counsel clearly explained the usage of the items in running the machines for manufacturing the final product. Therefore, the appellant has passed the usage test, therefore the appellant is entitled to avail Cenvat credit on the disputed items on merits.

8. Further, I find that in this case Cenvat credit on the items in question was availed by the appellant during the period 2006-2007 up to 15.2.09 and in their show cause notice, it has been recorded that appellant vide their letter dated 3.3.2010 contended that the Cenvat credit on the subject goods is admissible to them as input of capital goods under the category of input of capital goods have been used for supporting errection of plant and machinery. Further, I find that show cause notice has been issued on the basis of decision of Tribunals decision in the case of Vandana Global (supra) to say that Cenvat credit on these items is not available. As during the impugned period availment of Cenvat credit on the items in question was in dispute as there were contrary decision of this Tribunal. Therefore, this Tribunal held in such a situation, extended period of limitation is not invokable in the case of Jindal Steel & Power (supra) and Lloyds Metal (supra) and Premier Iron and Metal Industries (supra).

9. In this case also, I hold that the extended period of limitation is not invokable. Further, I find that in this case, the appellant is located in Jammu and availing the exemption under notification No. 56/2002 wherein whatever duty paid by the appellant from PLA, he is entitled to refund of the same. If in this case appellant has not taken the Cenvat credit therefore, whatever duty they would have paid and they could claim the same as refund. Therefore, I hold that it is a case of revenue neutral situation and in that case also the allegation of suppression cannot be alleged against the appellants.

10. In the light of above observation, I hold that appellants succeeds on merits, on time bar and revenue neutrality. Therefore, I set aside the impugned order and allow the appeal with consequential relief if any.

(dictated and pronounced in the open court )

( Ashok Jindal ) Member(Judicial)

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