2019 (10) TMI 953 - AT - Central Excise

CENVAT credit - inputs - capital goods - period April 1994 to December 1994, period January 1995 to June 1995 and period June 1998 to July 1999 - irregular availment of Cenvat Credit - ineligible documents. CENVAT credit - capital goods or not - Air Cooler, Air conditioner, Ventilation systems, water cooler - denial on the ground that these are not integrally connected in the production and processing of the goods - HELD THAT - These items have been used in plant to be provided desired environment than in production in the factory. We find that air conditioner have been used in the control room where computers are installed to monitor the production - as per Rule 57Q the capital goods used for producing or processing, although is not directly used and indirectly used, the same will satisfy the requirements of Rule 57Q, therefore, the appellant is entitled to avail Cenvat Credit on Air cooler, air conditioner, ventilators and water coolers. Bulldozer and excavators - Denial on the ground that these equipments do not satisfy the explanation 1(A) of Rule 57Q nor the said items qualify as components, spare parts and accessories of the machines - HELD THAT - The said items are specified capital goods which are used as handling equipments in the sintering plant, coal handling plant etc. for feeding various raw materials during the course of the manufacturing of final product and it is integrally connected with the manufacturing process - the said bull dozers and excavators are integral part of the plant and machinery. Therefore, appellant is entitled to apply for Cenvat Credit. Electric Tele communication signals, telephone push bottons, telecom A.V. Aids, Video Amplifier Cord, telecom parts, telephone cables and telecom cords - denial on the ground that they were not used for producing or processing any goods or bring about change in the final product - HELD THAT - The items in question were used in control system and various production shops like blast furnace, steel melting shop, blooming and billet mills, etc. for communicating transfer of raw material and intermediate goods to the next process and also for communicating the production process data to the next stage users so that production process be carried on without interruption for manufacturing of final product - the said items in question have been integrally used by the appellant for the manufacturing process of final goods. Therefore, the same are entitled to Cenvat Credit in terms of Rule 57Q of the Central Excise Rules 1944. CTD Bars and forged blanks and GC Sheet - denial on the ground that these have been used for civil construction work therefore, they are not used for producing or processing any goods or for bringing any change in any substance for the manufacture of the final product, hence, not entitled of Cenvat Credit - HELD THAT - This CTD Bars were used to form the bed to put sinter material, therefore, it is clear that they are used as part of capital goods and eligible for credit. The forged blanks are used as parts of various capital goods throughout the plant in the blast furnace, steel melting shop, blooming mills etc. and therefore, qualify as parts and accessories of the specified capital goods, for which direct use is not a requirement. The GE sheets were also used as structures which are part of the various capital goods in the production area, therefore, to be treated as part of capital goods. Hence Cenvat Credit cannot be denied - further, the steel items have been used in fabrication/manufacture of various plant and machinery installed inside the factory premises which ultimately contribute in manufacture of final product - the appellant is entitled to avail Cenvat Credit on the said items. Carbon Tetra Chloride, Bell Cleaning System, Cleaning chemical and floor cleaning machine - sole allegation is that said items did not contribute to manufacturing activity - HELD THAT - The said items have been used in various production mills for removing carbon which is accumulated in the machines. The removal of carbon is essential for the manufacture of the dutiable products as it affects the quality of the goods. The floor cleaning machine is used for recovery and collection of waste in the floors and to ensure smooth and uninterrupted production activity. Further, these items are to be considered to be pollution control equipments under section 57Q of the Central Excise Rules - thus, on the said items appellant are entitled to avail Cenvat Credit. Lamp tube / sodium vapour lamp - allegation is that these are lighting equipments or spares for illuminating the factory and not used in the manufacturing process - HELD THAT - The lighting fittings are essential as they illuminate the factory area in order to maintain continuity in manufacturing process round the clock without any hindrance, especially in darkness when natural light is not sufficient and also not available at night, in various areas of the plant - the said lighting fittings are essentially a pre-requisite for manufacture of goods therefore, entitled to Cenvat Credit in terms of Rule 57Q and Rule 57A of Central Excise Rules. Amonia Plaper/ photo chemical/ ammonia printing machine/ photocopying apparatus - It is alleged that these items were used in preparation of drawing and designing and thus does not find its use in production or processing - HELD THAT - The ammonia paper is used for preparation of drawing and designing of final products and blue prints of various spare, components etc. which are manufactured in the various workshops within the factory of the appellant, without which the manufacture of goods is hindered. Hence, by applying the user-test principle, the said item qualify as capital goods under rule 57Q of the Excise Rules. Monoblock Concrete Sleepers and body crossing etc. - denial on the ground that they are not capital goods - HELD THAT - The items have been used as part of transportation and material handling equipments within the factory of production and the credit has been availed in respect of those items which have been used within the factory. The use of these materials is essential for manufacture of finished goods. Thus it fall within the scope of equipment defined under Rule 57Q in as much as it has been used in or in relation to manufacture of final product. Therefore, said items are specified clearly under which are used as handling equipments in the sintering plant, coal handling plant etc. for feeding various raw materials during the course of manufacturing of final product and is it integrally connected with the manufacturing process - credit allowed. Safety and firefighting equipments, toughned glass, safety glass - denial on the ground that Safety and firefighting equipment do not bring about any change in any substance for the manufacture of the final product process - HELD THAT - The items in question are essential in view of high temperature involved in various production areas. Therefore, it is considered to be used for production or processing final goods. The toughned glasses are used in cranes, furnace and rolling mills areas handling hot metal and semi finished goods in hot conditions. They are part of the material handling equipment and control rooms operating the machines. In view of this, the appellant is entitled to file Cenvat Credit on the said items. Bunker wide bracket / forklift truck part /rail brage, clamp plate, elastic rail. - denial on the ground that do not bring any change in any substance for manufacture of final product - HELD THAT - The items have been used as material handling equipment for storing / mixing /transporting the raw material in ore handling plant, sintering plant, coal handling plant, steel melting shop and other workshops. Further, without the internal transport of raw material, manufacture cannot take place, hence, is entitled to avail Cenvat Credit on the above said items. Motor Vehicle parts - denied on the grounds that these parts are meant for general transportation of vehicle and does not fall under Rule 57Q - HELD THAT - These items are used as part of ingot metal, bogie cars and fork lift trucks which are used for transportation of various raw materials within the factory and is integrally and essentially connected with manufacture of final products. Hence, qualify as capital goods under Rule 57Q. Therefore, the appellant is entitled to avail cenvat credit on the above items. Diesel oil engine - Denial on the grounds that although the said item is used in water treatment plant of the appellant, it is not a specified capital goods item - HELD THAT - The diesel oil engine is used in various places like water treatment plants, coke oven etc. for the purpose of recycling of waste water. It is further observed that the cenvat credit was allowed on caustic soda, water treatment chemical etc. as input as it is essentially used in relation to manufacture of final product. Hence, the said item is eligible for Cenvat Credit as input if not eligible for credit under the category of capital goods - credit allowed. Drilling Machine - denial on the ground that the said machine did not fall under the specified category of Rule 57Q - HELD THAT - The said machine is used as parts, components, etc. of various machine, shops and other engineering shop for the purpose of manufacturing of various capital goods and also used for maintenance of various capital goods in workshop. Therefore, the appellant is entitled to avail Cenvat Credit on the above said items. CENVAT CREDIT - Credit disallowed on account of invalid documents - HELD THAT - The learned Commissioner in the impugned order has not discussed and given the finding how the documents are invalid and why the appellant is not entitled to avail Cenvat Credit on these documents. The said aspect is required to be seen by the adjudicating authority on the explanation / supportive defense produced by the appellant - Therefore, for denial of cenvat Credit of ₹ 4,30,31,449/-, we remand the matter back to the Adjudicating Authority to pass a detailed order either denying or holding appellant entitled for Cenvat Credit on the basis of documents - Matter on remand. Appeal disposed off.

Summary

Issues Involved:
1. Entitlement to Cenvat Credit on various items claimed as capital goods/inputs.
2. Validity of documents for claiming Cenvat Credit.

Issue-wise Detailed Analysis:

1. Entitlement to Cenvat Credit on Various Items Claimed as Capital Goods/Inputs:

The appellant, engaged in manufacturing iron and steel products, used various items as capital goods/inputs for manufacturing their final products. The adjudicating authority initially denied Cenvat Credit on these items, leading to the current appeal.

(I) Air Cooler, Air Conditioner, Ventilation Systems, Water Cooler:
The adjudicating authority denied Cenvat Credit, arguing these items were not integrally connected to production. However, the Tribunal found that these items were used in control rooms to maintain the environment necessary for uninterrupted production, qualifying them for Cenvat Credit under Rule 57Q.

(II) Bulldozer and Excavators:
The authority claimed these items did not meet the criteria of Rule 57Q. The Tribunal, however, recognized them as essential handling equipment in the manufacturing process, thus qualifying for Cenvat Credit.

(III) Electric Telecommunication Signals, Telephone Equipment:
The denial was based on these items not being used for producing or processing goods. The Tribunal found they were integral to the manufacturing process for communication and data transfer, thus qualifying for Cenvat Credit.

(IV) CTD Bars, Forged Blanks, GC Sheet:
These items were alleged to be used for civil construction. The Tribunal found they were used as parts of capital goods in the manufacturing process, thus qualifying for Cenvat Credit.

(V) Carbon Tetra Chloride, Cleaning Systems:
The sole allegation was non-contribution to manufacturing. The Tribunal found these items essential for maintaining production quality and pollution control, thus qualifying for Cenvat Credit.

(VI) Lamp Tube/Sodium Vapour Lamp:
The denial was based on these being lighting equipment. The Tribunal found they were essential for maintaining production continuity, thus qualifying for Cenvat Credit.

(VII) Ammonia Paper, Photocopying Apparatus:
The denial was based on these items being used for drawing and designing. The Tribunal found them essential for manufacturing blueprints and designs, thus qualifying for Cenvat Credit.

(VIII) Monoblock Concrete Sleepers, Railway Track Materials:
The denial was based on these items being used outside the manufacturing process. The Tribunal found them essential for internal transportation of materials, thus qualifying for Cenvat Credit.

(IX) Safety and Firefighting Equipment:
The denial was based on non-contribution to manufacturing. The Tribunal found these items essential for safety in high-temperature production areas, thus qualifying for Cenvat Credit.

(X) Material Handling Equipment:
The denial was based on these items not bringing any change in the final product. The Tribunal found them essential for internal transportation of raw materials, thus qualifying for Cenvat Credit.

(XI) Motor Vehicle Parts:
The denial was based on these being general transportation parts. The Tribunal found them essential for internal transportation within the factory, thus qualifying for Cenvat Credit.

(XII) Diesel Oil Engine:
The denial was based on this item not being a specified capital goods item. The Tribunal found it essential for recycling waste water in the manufacturing process, thus qualifying for Cenvat Credit.

(XIII) Drilling Machine:
The denial was based on this item not falling under the specified category of Rule 57Q. The Tribunal found it essential for manufacturing and maintenance of capital goods, thus qualifying for Cenvat Credit.

2. Validity of Documents for Claiming Cenvat Credit:

The adjudicating authority disallowed Cenvat Credit of ?4,30,31,499/- on the grounds of invalid documents but did not provide specific findings. The Tribunal remanded this issue back to the adjudicating authority to pass a detailed order after considering the appellant's explanations and documents. The adjudicating authority is instructed to fix a hearing date within 30 days and decide the matter within two months.

Conclusion:

The Tribunal allowed the appellant to avail Cenvat Credit on all items except the ?4,30,31,499/- disallowed due to alleged invalid documents, which was remanded for further adjudication. The appeal was disposed of with these directions.