M/S. Ultra Tech Cement Limited vs Commissioner Of Central Excise, Raipur

[Arising out of Order-in- Original No. Commissioner/RPR/08 TO 25/2005 dtd. 31/3/2005 passed by the Commissioner of Central Excise & Customs, Raipur]

For approval and signature:

Honble Mr Ramesh Nair, Member(Judicial)

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1. Whether Press Reporters may be allowed to see : No 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 : seen of the Order?

4. Whether Order is to be circulated to the Departmental: Yes authorities? =======================================================

M/s. Ultra Tech Cement Limited : Appellants

VS

Commissioner of Central Excise, Raipur : Respondent

Appearance

Shri. Rajesh Oswal, Advocate and Akrit Jain, Consultant for the Appellant Shri. V.K. Shastri, Asstt. Commissioner(A.R.) for the Respondent

CORAM:

Honble Mr. Ramesh Nair, Member (Judicial)

Date of hearing: 11/5/2015 Date of decision: /2015

ORDER NO.

Per : Ramesh Nair

This appeal is directed against Order-in- Original No. Commissioner/RPR/08 to 25/2005 dtd. 31/3/2005 passed by the Commissioner of Central Excise & Customs, Raipur wherein following order was passed:

(i) Modvat Credit amounting to Rs. 1,19,180/- in respect of the items used in the factory premises is allowed.

(ii) Modvat Credit of Rs. 25,97,350/- in respect of the items of capital goods used in the mines and outside the factory is disallowed.

(iii) Modvat Credit of Rs. 4,34,188/- in respect of the items used within the factory which are not eligible as capital goods is disallowed.

(iv) No penalty is imposed for the reasons recorded above.

The fact of the case is that the appellant M/s. Ultra Tech Cement Limited availed Cenvat Credit on various capital goods and material used in manufacture of capital goods in their factory. By the impugned order, the Cenvat Credit was disallowed on the following items:

Sr. No. Item in dispute Amount of Credit (in Rs.)

1.

Capital goods used in the captive mines 19,74,075

2. Diesel Locomotive 6,23,275

3. Tyre Protection Chain 1,09,968

4. CTD Bars, Angles, Channels, etc. 3,24,220/-

Aggrieved by the said order inasmuch as credit of Rs. 30,31,538/- disallowed on the above items the appellant is before me.

2. Shri. Rajesh Oswal, Ld. Counsel and Akrit Jain, Ld. Consultant appeared on behalf of the appellant and made following submissions:-

(a) As regard disallowance of Cenvat Credit of Rs. 19,74,075/- on capital goods used in the captive mines, capital goods were admittedly used within the factory premises and mines is captive mines located in the factory premises only, therefore credit is allowed. In this support he placed reliance on following case laws:-

(i) Vikram Cement Vs. CCE [2006(197) ELT 145(SC)].

(ii) Madras Cements Ltd. Vs. CCE [2010-TIOL-59-SC-CX]

(b) As regard credit on Diesel Locomotive, he submits that Diesel Locomotive was used for movement of the material from one part of the plant to another therefore it is used in relation to the manufacturing final product. In support, for admissibility of Cenvat Credit on Diesel Locomotive, he placed reliance on following case laws:

(i) Aditya Cement Vs. UOI [2008(221)ELT362(Raj.)]

(ii) CCE, C & ST Vs. Bhusan Steel Ltd.[2012(286) ELT 754]

(iii) M/s Jayaswal Neco Ltd Vs. Commissioner OF Central Excise, Raipur [2015-TIOL-70-SC-CX].

He submits that all the above judgments are related to Railway tracks utilized for handling of material in the factory and the credit was allowed, Diesel Locomotive runs on the same railway tracks for handling of the material therefore the use of railway tracks as well as Diesel Locomotive one and the same. Hence when credit is admissible on railway tracks the same should be allowed on the Diesel Locomotive also.

(c) As regard claim of Cenvat Credit on Tyre Protection Chain. The said item is used to protect tyre of the wheel loader used in cleaner handling for wear and tear. He submits that on the very same item, this Tribunal has allowed the Cenvat Credit in the case of Commissioner of C. Ex. Chandigarh Vs. A.C.C. Ltd. [2000(119) ELT 82(Tribuanl)] which was upheld by the Honble High Court of Himachal Pradesh as reported in [2008(230) ELT 44 (H.P.)].

(d) Regarding Cenvat Credit of Rs. 3,24,220/- in respect of CTD Bars, Angles, Channels, etc., he submits that this inputs were used for construction of clinker silo i.e. Tank. It is his submission that since the silo constructed in the factory is capital goods, these items such as CTD Bars, Angles, Channels, etc. used for construction the tank is eligible for Cenvat Credit as same was used in the manufacture of capital goods. In support of his submissions he relied upon following judgments:

(i) CCE Vs. Rajasthan Spinning & Weaving Mills Ltd. [2010(255) ELT 481 (SC).

(ii) Bannari Amman Sugar Ltd. Vs. CCE [2010 (250) ELT 326(Kar.)]

(iii) Commissioner Of Central Excise, Nagpur Vs M/S Lloyds Metals & Engg Ltd [2014-TIOL-1517-CESTAT-MUM] He submits that in view of above judgments which deals with identical goods, on all the four items Cenvat credit is admissible.

3. On the other hand, Shri. V.K. Shastri, Ld. Asstt. Commissioner(A.R.) reiterates the findings of the impugned order. He submits that credit on the goods in question are not admissible in view of following judgments(item wise):

(a) Capital goods used in the captive mines

(i) Madras Cements Ltd. Vs. Commissioner of Central Excise, Madras[2003 (158) E.L.T.293(Tri- LB)]

(ii) India Cements Ltd. Vs. CCE Hyderabad-III[2005(180) E.L.T.247(Tri-Bang)]

(b) Diesel Locomotive

(i) India Cements Ltd. Vs. CCE Hyderabad [2004(178) ELT 194(Tri-Bang)].

(c) CTD Bars, Angles, Channels, etc.

(i) Vandana Global Ltd. Vs. CCE, Raipur[2010(253) ELT 440(Tri- LB)]

(ii) J.K. Cement Works Ltd. Vs. CCE, Jaipur[2004(178) ELT. 388(Tri-Del)] He submits that in view of the above judgments the appellant is not entitled for the Cenvat Credit for goods in question.

4. I have carefully considered the submissions made by both sides and perused record.

5. (a) I find that as regard capital goods used in the mines as per the submission of the appellant and ground plan submitted by them it is clear that it is captive mines which is used exclusively for the appellant factory. Honble Supreme Case in the case of Vikram Cement (supra) held that capital goods used in the captive mines, Cenvat Credit is admissible. Following the ratio of the Apex court and being facts identical in the present case, in my considered view, the appellant is entitled for Cenvat Credit in respect of goods used in the captive mines of the appellant.

(b) As regard claim of the appellant in regard to the Diesel Locomotive, I agree with Ld. Counsel that Honble Supreme Court in the case of M/s Jayaswal Neco Ltd(supra) allowed credit on the following findings.

18. We find from the order of the Commissioner that in spite of taking note of the aforesaid use of the railway tracks and accepting the same as correct, the Commissioner denied the relief to the appellant on an extraneous ground, i.e., railway tracks were used for other purposes as well, namely, apart from conveying hot metal and hot pigs, it was used for carrying raw materials and finished goods as well. This can hardly be a ground to deny the relief inasmuch as by incidental use of the railway tracks for some other innocuous purpose, it does not lose the character of being an integral part of the manufacturing process. The Commissioner has further observed in his order that the railway track is not utilised directly or indirectly for producing or processing of goods or bringing about any change for manufacture of final product. This conclusion, obviously, is completely erroneous and amounts to misreading of the process. Such an error has occurred because the Commissioner did not keep in mind the principle of law laid down by this Court in M/s. J. K. Cotton Spinning & Weaving Mills Co. Ltd.'s case, highlighted above.

19. When we read the order of the CEGAT, we find that CEGAT has not even adverted to and examined the issue from the aforesaid angle, which was the only method for arriving at a finding as to whether the railway tracks installed within the plant would come within the definition of capital goods under Rule 57Q of the Rules or not. The order of the CEGAT is stoically silent. It has affirmed the order of the Commissioner by simply observing that the Commissioner has arrived at the conclusion that these goods are not being used directly or indirectly for producing or processing the goods or for bringing about any change for the manufacture of the final product. We have already pointed out that the aforesaid conclusion of the Commissioner is not only factually incorrect and perverse but legally unsustainable as well.

20. Resultantly, we set aside the order of the Commissioner as well as of CEGAT insofar as it pertains to item "railway track material used for handling raw materials, process goods" and hold that the appellant has rightfully claimed for MODVAT credit in respect of this item which credit is wrongly reversed by the authorities below. To that extent, order of the Commissioner as well CEGAT is set aside and the present appeal is allowed in the aforesaid terms. No order as to costs.

In view of the above Honble Apex Court judgment that the credit is allowable on railway track, on the same logic the credit should also be allowed on Diesel Locomotive. Therefore following the ratio of the above judgment, I am of the considered view that the appellant is entitled for Cenvat Credit in respect of Diesel Locomotive.

(c) As regard the claim of Cenvat credit on Tyre Protection Chain, the credit on same item has been allowed in the case of A.C.C. Ltd.(supra) which was passed by the Coordinate Bench of this Tribunal and upheld by the Honble Panjab and Haryana High Court. Following the ratio of the said judgment, I allow the Cenvat Credit to the appellant in respect of tyre protection chain.

(d) As regard the material such as CTF Bars, Angles, Channels, etc., as per the fact of the case as submitted by the Ld. Counsel this materials were used in the erection and construction of RCC Tank(silo). When the said Tank(Silo) is made of cement steel then obviously it is immovable goods unlike other plant machinery such as DG Sets annealing line, pollution control equipment. Once the material is used in the immovable goods, as held by the Larger Bench in the case of Vandana Global(supra) the material used in the manufacture of such immovable goods shall not be eligible for Cenvat Credit. In the judgment of Rajasthan Spinning & Weaving Mills Ltd(supra) of the Honble Apex Court and other judgment cited by the Counsel, the capital goods wherein material was used, the test of immovability was not dealt with. Since admittedly CTD bar and other steel items used for construction of Silo which is immovable goods, the same will not qualified as capital goods. In view of this position, I am of the considered view that appellant is not entitled for Cenvat Credit in respect of material i.e. CTD Bars, Angles, Channels, etc. used for construction of silo.

5.1. In view of my above discussion, appeal is partly allowed inasmuch as Cenvat Credit in respect of capital goods used in captive mines, Diesel Locomotive and Tyre Protection Chain is allowed and Cenvat Credit in respect of CTD Bars, Angles, Channels, etc., amounting to Rs. 3,24,220/- is hereby disallowed. The appeal is partly allowed in above terms.

(Order pronounced in court on _________)

Ramesh Nair Member (Judicial)

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