Utpadak Karkhana Maryadit vs Cce, Raipur

[Arising out of Order-in-Appeal No. 38 /RPR-II/20013 dated 15th July, 2013 passed by the Commissioner (Appeals-II) Customs, Central Excise & Service Tax, Raipur]

For approval and signature:

HONBLE 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. Bhoramdeo Sahakari Shakkar

Utpadak Karkhana Maryadit Appellant

Vs.

CCE, Raipur  Respondent

Present for the Appellant : Ms. Surbhi Sinha, Advocate

Present for the Respondent: Shri Devender Singh, DR

Coram: HONBLE MR. S.K. MOHANTY, MEMBER (JUDICIAL)

Date of Hearing/Decision: 12.06.2015

FINAL ORDER NO. 51903/2015

PER: S.K. MOHANTY

The brief facts of the case, leading to this present appeal, are as follows:-

1.2 The appellant is engaged in the manufacture of sugar and molasses. The appellant avails cenvat credit of various duties and taxes paid on the inputs, input services and capital goods used in the factory for manufacture of the said final products. During the disputed period, the appellant had availed cenvat credit of Central Excise Duty paid on the structural steel items, namely, MS beams, channels, angles, flats, Plates, joist etc., treating the same as input for manufacture of plant and machinery installed within the factory. Cenvat credit taken on the said goods had been denied by the Central Excise Department on the ground that the said goods cannot be considered as input, since were used in fabrication of the supporting structure of the capital goods, which cannot be considered as capital goods as such. The show cause proceedings initiated by the Central Excise Department culminated in the adjudication order, wherein the duty demand attributable to the structural steel items had been denied to the appellant. Appeal filed against the said adjudication order was upheld by the ld. Commissioner (Appeals), Raipur vide the impugned order dated 15.07.2013. Hence, the present appeal before this Tribunal.

2. Ld. Advocate, Ms. Surbhi Sinha appearing for the appellant submits that the disputed goods are inputs for manufacture of the capital goods installed in the factory. Ld. Advocate refer to the definition of term input contained in Rule 2 (k) of the Cenvat Credit Rules, 2004. In explanation 2 appended to said definition, it has been explained that input include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. According to the ld. Advocate, since the disputed goods are used for manufacture/erection of the capital goods, which are further used in the factory of the appellant for manufacture of the final products i.e. sugar and molasses, the said disputed goods shall be considered as input for the purpose of taking cenvat credit. Thus, according to the ld. Advocate, since the duty paid nature of the disputed goods, their receipts in the factory premises and the eligibility of the said goods as input are not in dispute, the orders passed by the Lower Authorities in denying the benefit of cenvat credit is not legal and proper. To substantiate the stand that cenvat credit is available on the disputed goods, ld. Advocate relies on the following decisions:-

1. Bajaj Hindustan Ltd. Vs. CCE, Lucknow reported in 2014 (313) ELT 563 (Tri.Del.)

2. LSR Speciality Oils Pvt. Ltd. vs. CCE, Belapur reported in 2014 (313) ELT 426 (Tri.Mum.)

3. CCE, Jaipur vs. Rajasthan Spinning Mills ltd. reported in 2010 (255) ELT 481 (SC)

4. CCE, Vishakapatanam-II vs. APP Mills Ltd. reported in 2011 TIOL 1378 - CESTAT-Bangalore

3. Ld. Advocate further submits that issuance of show cause notice beyond the period of one year from the relevant date is barred by limitation, in absence of any specific findings regarding the involvement of appellant in any fraudulent activities involving suppression of facts, wilful miss-tatement, collusion etc. with intent to evade payment of Central Excise duty. She also submits that there are divergent views by the judicial forum with regard to the eligibility of cenvat credit on the disputed goods and thus, in view of ambiguity in interpreting the provisions of law, the extended period of limitation as per the proviso to section 11A cannot be invoked for confirmation of the duty demand. With regard to the submissions that the proceedings are barred by limitation of time, the ld. Advocate has relied on the decision of the Tribunal in the case of CCE, Raipur vs. Baldev Alloys Pvt.Ltd. reported in 2012  TIOL - 388 (CESTAT-Del.), CCE, Raipur vs. Orion Ferro Alloys Pvt. Ltd. reported in 2010 (259) ELT 84 (Tri.Del.) , CCE, Lucknow vs. D.S.C.L. Sugar 2012 (280) ELT 89 (Tri. Del.), Continental Foundation Joint Venture vs. CCE, Chandigarh-I reported in 2007 (216) ELT 177(SC) and High-tech Equipments Spares Pvt. Ltd. vs. CCE, Raipur (Final Order No.A/58186 /2013-SM (BR) dated 05.11.2013.

4. Per contra, the ld. DR Shri Devender Singh appearing for the respondent, while reiterating the findings recorded in the impugned order, submits that the manufacture/erection of capital goods in the factory as claimed by the appellant have not been reflected in the monthly ER-I return and thus, the show cause notice issued within one year from the date of knowledge by central excise officials cannot be considered as time barred.

5. I have heard the ld. Counsel for both the sides and perused the records.

6. The period involved in the present case is from June, 2002 to January, 2006 and show cause notice has been issued on 15th February, 2008, seeking disallowance of cenvat credit on the ground that the disputed goods are not conforming to the definition of inputs, as these are used for manufacture of the capital goods which are fixed to earth and are also exempted from payment of duty. I find that the receipt of the disputed goods, their duty paid nature and utilization within the factory premises have not been disputed by the authorities below. With regard to utilization of the disputed goods, I find from the certificate of the Chartered Engineer dated 02.03.2009 that the said goods have been utilized for manufacturing of capital goods only. I also find that upon verification of the detailed accounts maintained by the appellant, the Chartered Engineer has certified the quantum of usage of the disputed goods for the said intended purpose. The documents available in the case record prove beyond any shadow of doubt that the fact regarding taking of cenvat credit by the appellant on the disputed goods were known to the Department beforehand.

Such fact is evident from the SCN, wherein the duty demand has been computed based on the records maintained by the appellant. In view of the fact that the activities of the appellant regarding taking of cenvat credit on the disputed goods and use of the same for manufacture of the capital goods within the factory was known to the department way back in 2002, the show cause notice ought to have been issued within one year from the relevant date (i.e. taking of credit and furnishing of information by way of filing the ER-I return). Since the show cause notice has been issued in 2008, covering the period from June, 2002 to January, 2006, and no specific findings have been recorded regarding the involvement of the appellant in any fraudulent activities concerning fraud, collusion, miss-appropriation etc. with intent to evade payment of duty, the proviso to section 11A, in my opinion, cannot be invoked, justifying issuance of show cause notice, beyond the limitation period of one year. Further, the issue regarding taking of cenvat credit on the disputed goods is contentious one, because there are divergent views by different Benches of the Tribunal.

According to my view, appellant entertaining a bonafide belief regarding eligibility of disputed goods for the purpose of taking cenvat credit, in view of conflicting decisions, are genuine and justified. In this connection, I find that this Bench of the Tribunal in the case of High-tech Equipments Spares Pvt. Ltd. (supra) has allowed the appeal on the ground of limitation by relying on several decisions of the Tribunal. The relevant paragraphs in the said decision are extracted herein below:-

2. Without going into the merits of the case I find that the demand in the present case is hopelessly barred by limitation having been issued beyond the normal period of limitation as provided under Section 11A. Admittedly, during the relevant period, there was decision in favour of the assessee laying down that such iron and steel items are entitled to cenvat credit. Law was declared to the contrary subsequent to the decision of the Tribunal in the case of Vandana Global Ltd. (Supra).

3. The Tribunal in a number of cases involving identical issue has held that longer period of limitation is not available during the relevant period, there are divergent views of the higher Courts. Reference can be made to the following decisions:-

(a) CCE, Raipur vs. M/s. Baldev Alloys (P) Ltd.  2012  TIOL  368 CESTAT- DEL.

(b) CCE, Raipur vs. Orion Ferro Alloys (P) Ltd.  2010 (259) ELT 84 (Tri-Del.)

(c) CCE, Raipur vs. Raja Ram Maize Products  2010 (258) ELT 539) (Tri-Del.)

(d) CCE, Lucknow vs. DSCL Sugal  2012 (280) ELT 89 (Tri. Del.)

7. In view of the above position of law, I am of the opinion that the proceedings initiated by the Department for recovery of the cenvat amount is barred by limitation of time and, accordingly, the impugned order is set aside on the ground of limitation and the appeal is allowed in favour of the appellant.

(Dictated and pronounced in the open Court)

(S.K. MOHANTY)

MEMBER (JUDICIAL)

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