Products (P) Ltd vs C.C.E. & S.T. Raipur

[Arising out of Order-in-Appeal No. 28/RPR-II/2012 dated 15.10.2012 by the Commissioner of Customs, Central Excise & Service Tax (Appeals), Raipur].

For approval and signature:

Honble Shri 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. Tankeshwari Metal Powder

Products (P) Ltd. .Appellants

Vs.

C.C.E. & S.T. Raipur .Respondent

.

Appearance:

Shri Naveen Mullick, Advocate for the Appellant

Shri M. S. Negi, DR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Date of Hearing: 02.07.2015

FINAL ORDER NO. 52102/2015-EX(SM)

Per Ashok Jindal:

The facts leading to filing to this appeal are in brief as under:-

1.1 The appellant are manufacturer of Aluminium Flake/Powder, Atomised Aluminium Powder and Aluminium Paste chargeable to Central Excise Duty under various headings of the Central Excise Tariff Act, 1985. They availed Cenvat Credit of Excise Duty paid on inputs and capital goods. The period of dispute is from Oct.2007 to April 2009 as is clear from the Annexure to the Show Cause Notice. During this period the appellant took Cenvat Credit of Rs. 8,86,375/- in respect of MS Angles, Channels, Beams etc. which according to them were used in the manufacture of tanks. It appears that the use of steel items for fabrication of tanks and availment of Cenvat Credit was declared by them in the ER-1 Returns filed by them. In course of scrutiny of ER-1Returns when the Assessing Officers found that the above mentioned Cenvat Credit has been taken they were of the view that the appellant would not be eligible availing credit on steel items as the same appear to have been used in erection of permanent supporting structure used mainly for making the machinery of vibration fee. Accordingly the Show Cause Notice dt. 13.05.2010 was issued for recovery of this credit along with interest and imposition of penalty on the appellant. The Show Cause Notice was adjudicated by the Additional Commissioner vide order-in-original dt. 21.11.2011 by which the above mentioned Cenvat Credit demand was confirmed along with interest and penalty of equal amount was imposed. The demand was confirmed by invoking longer limitation period under Proviso to Section 11A(1) by holding that the appellant have suppressed the relevant fact from the Department. On appeal being filed to Commissioner (Appeals), the above order of the Additional Commissioner was upheld vide order-in-appeal dt. 15.10.12 against which this appeal has been filed.

2. Heard both the sides in respect of stay application.

3. Sh. Naveen Mullick, learned counsel for the appellant, pleaded that the steel items, in question, have been used for fabrication of tanks which are capital goods, that hence the same steel items would be eligible for Cenvat Credit as inputs, that just because the tanks being installed become fixed to earth, Cenvat Credit in respect of steel used for fabrication of tanks cannot be denied, that in any case, the Show Cause Notice dt. 13.05.10 seeking recovery on Cenvat Credit availed for the period from Oct. 07 to April 09 is time barred, as from para 2 of the Show Cause Notice itself, it is clear that the appellant had declared the availment of Cenvat Credit on the steel items for the fabrication of the parts of the capital goods in the ER-1 Returns, that in view of this the appellant cannot be accused of suppressing the relevant facts from the Department and hence neither longer limitation period would be applicable nor penalty under section 11AC would be imposable. He, therefore, pleaded that the impugned order be set aside.

4. Sh. M.S. Negi, LD. DR, opposed the contentions of the Ld. Counsel by reiterating the findings of the Commissioner (Appeals) and drawing attention to para 5.2 of the order-in-appeal, he pleaded that the appellant in course of proceedings before the Additional Commissioner did not produce any fact in support of their claim regarding use of the steel items for fabrication of capital goods or parts thereof, that no Certificate of the Chartered Engineer was submitted giving the drawings and designs of the capital goods, name and description of the capital goods manufactured and the quantity of the raw material used etc, that in view of this, just on the basis of mere mention in ER-1 Return regarding use of the steel item for fabrication for capital goods, their claim in this regard cannot be accepted, that in terms of Rule 9(5) of Cenvat Credit Rules, 2004, a manufacturer availing Cenvat Credit in respect of any inputs is required to maintain proper records regarding receipt and disposal of the inputs and the burden of proving that the Cenvat Credit in respect of any inputs have been correctly taken is on him, that in this case no records have been maintained by the appellant and hence the Commissioner (Appeals) has correctly upheld the denial of Cenvat Credit.

5. I have considered the submissions from both the sides and perused the records. The appellants claim is that they are eligible for Cenvat Credit in respect of steel items, in question, as the same have been used by them for fabrication on capital goods/parts of capital goods namely tanks and accordingly the steel items would have to be treated as inputs used in the manufacture of capital goods and would be eligible for Cenvat Credit. It is also seen that para 2 of the Show Cause Notice itself states that on scrutiny of the said returns filed by the appellant, it was revealed that they have taken Cenvat Credit on the structural steel items like Angle, Channel, Beam used by them in manufacturer of parts of capital goods and that Cenvat Credit was availed appears to be inadmissible. In this regard para 2 of the Show Cause Notice is reproduced below:-

On scrutiny of the said return filed by the notice, appeared to reveal that the Notice ehad availed Cenvat Credit on the Structural items like Angle, Channel, Beam etc. mostly falling under Chapter 72 of the Central Excise Tariff Act, 1985, and used by them in the manufacture of parts of capital goods in the factory of production, as detailed in Annexure A enclosed to this notice. Besides they had also availed Cenvat Credit on other goods viz. Oxygen Gas. The Cenvat Credit so availed by the notice appears to be inadmissible in the light of the provisions of Cenvat Credit Rules., 2004 in as much as:-

(a) The said structural items appeared to have been used by them for erection or construction of permanent supporting structure (mainly for making capital goods vibration free), which are immovable in nature, hence it cannot be termed as goods. The structures that are not goods cannot be brought under the definition of Capital goods. Thus, it appears that various structural steel items as covered in Annexure-A have not been used in manufacture of capital goods as stated by the notice, on the contrary these items appear to have been used either in manufacture of supporting structures or for erection of the factory shed.

(b) The items covered in Annexure A on which the notice have been taken Cenvat Credit cannot be treated as input as said items do not appear to be covered within the ambit of definition of inputs which as per Rule 2 k of the Cenvat Credit Rules reads as under, inputs 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 products, goods used as paint, or as a packing material, or as fuel, or for generation of electricity or steam 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.

As all the items covered in Annexure-A have not been used in or in relation to the final products as explained in para 2(a) of this notice, said items do not appear to be covered by the above definition and hence cannot be considered as input.

(c ) The item covered in Annexure-A on which the notice have taken Cenvat Credit also not to be considered as capital goods as the said items do not appear to have been covered within the ambit of definition of capital goods as defined under Rule 2(a) of Cenvat Credit Rules 2004 which is reproduced as under:-

(i) All goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading no 6805, grinding wheels and 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 manufacture of the final products, but does not includes any equipment or appliance used in an office; or

(2) For providing output service.

6. Since in this case the availment of Cenvat Credit in respect of Steel items, in question, and their use has been declared for ER-1 Return, it was the responsibility of Jurisdictional Assistant Officer to immediate verify their claim and as such it cannot be said that the appellant did not disclose the availment of Cenvat Credit in respect of the inputs in question of their use. Therefore, the appellant have

A case in their favour on limitation and have disclosed the usage of the items in question for fabrication of stoage tank.

7. In these circumstances, I hold that the appellant has taken Cenvat Credit on the items in question correctly, therefore, the demands against the appellant are not sustainable. Accordingly, the impugned order is set aside and the appeal is allowed.

(Dictated and pronounced in the open court)

(Ashok Jindal) Member (Judicial)

Bhanu

2

E/4131/2012-EX(SM)