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TMI Blog2007 (12) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2,06,81,846/- and denying credit of Rs. 156,85,011/- as detailed below Allowed CHN RS. 1. Angles channels joists, beams, plates, sheets, coils, flats, strips, rails, foundation bolts, hex bolts and nuts 72 15939256 2. MS structure 7216 522638 3. Tubes, pipes & fittings. 73 1408506 4. Goods used as paint 3208 200639 5. Lubricating oils 2710 204669 6. Electricity transmission structure 7308 632995 7. Aluminium wires/cables for electricity transmission 7614 540054 8. Welding electrodes/welding 8311 545517 Wires 9. Hydraulic_loader & spares 8429 362031 .10. Hydra 10 (mobile crane 8426 54400 11. Other miscellaneous items 271137 20681846 Disallowed 1. CTD_bars_(tor steel)_& other bars 72 7151538 2. Cement! shrinkomp cement 25/38 4059916 3. GPCC core/trap sheet, blendster (roofing material) 72/39 3284787 4. Excavator & spares 8429 746469 5. Tipper & spares 8708 202061 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where the process requires dust free environment and con trolled temperature for various process involved in the making of finished goods, for constructing supporting structures for machine, machinery, plant and mills, etc. in the factory, various plant processes require chilled water, coolants, steam, hydraulic oils, which are supplied through pipelines all over the plant at required temperature. (iv) Excavator & Spares - Credit on the same has been disallowed on the ground these are used before starting of production. Even though these are used before production for other activities these are now used for movement of steel from one Mill to other Mill where EOT cranes are not available. (v) Tipper & Spares - Credit has been denied on these items as these are used before starting of production in other activities. These tippers are used for movement of materials i.e. inputs and scrap which can not be moved with the help of EOT cranes inside the plant and from one Mill to other Mill where EOT crane facility is not available. (yi) Polyester resin - It is an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; GI Earthing Strips - M.S. Flats/G.I. Flats/G.I. Earthing strips are used for earthing purposes for the protection of mills, and other machines in compliance with Electricity laws. (xix) Hot Dip Kal. Flats - same as above (xx) GI Flats - same as above (xxi) SS Sink Accessories - These are accessories for guiding the Sink Rolls of molten zinc bath in rotation, which keep the strip constantly dipped in the molten zinc while the process of coating of Zinc on cold rolled strips is on, and as such integral part of galvanising line. (xxii) Castings - These are mechanical parts used in cold rolling mills, galvanising lines and' other machines and equipments (xxiii) Hook Anchor sheet - These are electro mechanical part of annealing furnace used in annealing the cold rolled coils/sheets. (xxiv) Fabricated steel component, PVC sheet - these are covered by invoice No. 823 dated 10-11-2002 of M/s Paharpur Cooling Towers Ltd. and are G.P. components, PVC formed sheets, GRP s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.2 The Commissioner in para 12.1 of the impugned order allows credit on structural items like angles, channels, beams, joists, rails, sheets, plates, coils, foundation bolts/hex bolts and nuts, holding them to be parts and components of capital goods. Likewise, the Commissioner in para 12.2 of the impugned order allows credit on MS Structures used as supports for machinery in various mills. Therefore, the same reasoning and the factual position considered by Commissioner for allowing credit on the said items would support the appellants' contention of admissibility of credit on cement and CTD/other Bars. 5.3 We find that Cement/steel bars are used in making of foundation for machine, machinery, plant, EOT Crane legs structure etc. all over the various plants situated in the factory, and are also used in making Storage Tanks for water, oils, coolants and other liquid inputs received, and are also used for cellars beneath the floor of the factory where all hydraulic and utility equipments of various mills are installed and are also used for constructing chimney of 110 Mtrs height attached to DG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h & Low Pressure Hydraulic Systems - high pressure Hydraulic System is required for Rolls movement & low pressure Hydraulic System is required for coil cars movement. The hydraulic oil pressure is generated with the help of specially designed & precise hydraulic pumps. The Hydraulic oil has to be collected in reservoirs, installed underneath the mill for filtration and recycling. The reservoirs and other hydraulic equipments are technically required to be installed beneath the mill for operation of the CR mill because of heavy volume of oil to be discharged within few seconds, (c) In Cold Rolling Mill, there are big gear boxes, which are required to be lubricated continuously. For this, a big reservoir, oil filter unit, pumping unit & piping network is technically required to be in stalled, beneath the mill. The lubricating oil is continuously sprayed inside the gear boxes, which has to go back to the reservoir by gravity flow for cleaning and recycling. (d) In response to a query from the Bench as to why Cellar is a necessity, it was submitted that in order to maintain gravitational flow of coolants, lubricant & hydraulic oils there is a tech ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnical requirement and is an integral part of the operating system of the CR Mill. 5.7 The functioning of the Plant, as above, was seen by the Bench and Advocates/Representatives from both sides, during the plant visit, and that Cellars, trenches and tunnels are found to be technically necessary for a Steel Rolling Mill. We, therefore, hold that credit on cement and steel used therefor is admissible, being in the nature of component of the Plant, as "machine" inter-alia means plant and metal rolling mills are covered under heading 84.55 of first Schedule to CETA and are covered for Cenvat under Rule 2(b)(iii) of CCR, 2001 /2002. 5.8 The other reason for denying the credit on cement and steel bars viz, that the foundation consisting of RCC cannot be dismantled and transported to any other place is not valid and sustainable, in view of Tribunal's judgment in the case of United Phosphorus v. CCE, reported in 2002 (150) E.L.T. 650 (T), holding that use of goods in manufacture of immovable property cannot be a ground for denial of credit and further, 'plant' would include the buildings which are used by the manufacturer in a factory wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc. used for producing or processing of any goods or for bringing about any change in any substance for manufacture of final products. As against this, under Cenvat Credit Rules, 2001/2002, goods falling under inter-alia Chapters 82, 84, 85 and 90 are treated as capital goods if they are used in the factory of the manufacturer of final products irrespective of whether they are used for manufacturing activity or otherwise. Therefore, the meaning assigned to "capital goods" w.e.f. 23-7-1996 under Rule 57Q(1) and under the present Cenvat credit rules is broader and covers the disputed goods in its ambit. (c) The Larger Bench of Tribunal, even while interpreting the expression employed in 57Q, in vogue prior to 23-7-1996, defining capital goods, has held that it is wide enough to cover factory building in the expression "plant", which view gets substantiated from para 20 & 21 of the judgment in Jawahar Mills Ltd. v. CCE, Coimbatore reported in 1999 (108) E.L.T. 47 (T-LB), as reproduced below: "20. The Supreme Court has farther observed in para 11 that building materials used as raw materials for construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds) is even wider than the expression contained in Section 8(3)(b) of the Central Sales Tax Act. (e) The Apex Court in CIT v. Karnataka Power Corporation [247 ITR 268] has held that power generating station building has to be treated as plant for the purpose of investment allowance as these buildings could not be separated from the machinery and the machinery could not be worked without such special construction. It was further held by Apex Court that generating station building is so constructed as to be integral part of its generating system. Although, the said judgments are under Income Tax law, the ratio thereof would apply to the case on hand as the meaning assigned to "capital goods" under Rule 2(b) of CCR, 2002 is wider than the expression to the "plant" in Income Tax Law. 6.1 It is not the case of Department that the Appellants have taken credit on entire quantity of cement and steel used in factory as dispute relates to credit taken on that much quantity of cement and steel which has been used for providing foundation of machines, structures, tunnels, trenches, cellar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew on the surface of the product, which will create oxides on the surface of the sheets, which is technically not acceptable in finished goods. If any dust or foreign body particle goes to the roll with the sheet under rolling (which is rolled in microns thickness), it would create roll marks on the rolls as well as on the material; therefore Dust free environment is essential. 7.3 The claim of Ld. D.R. that Roofing material may not be a technical requirement as civil work was going on during plant visit gets negated from the fact, as seen, that since civil work in the extension area had started, the manufacturing activity abutting thereto was suspended till completion of such civil work. In a nutshell, a manufacturing line near civil work was suspended and the manufacturing activity in other side of the shed, which has closed covered area was going on. This is because it is technically essential to provide protective cover in and around the mill area to protect it from exposure to environment. 7.4 In the light of above discussions, we hold that credit on roofing materials is admissible to the Appellants. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctors & electricity transmitting tower is challenged by Dept. on the ground that the same cannot be called as inputs for generating electricity or steam and transmission line towers are neither machinery nor apparatus. 10.2 We find that welding electrodes/welding wires were used in making of Machine, Machinery, Plant, Supporting Structures, EOT Crane Legs Structure etc. The ratio of Tribunal judgment in Triveni Engineering does not apply, as in the present case welding electrodes were used for producing or processing of components of capital goods and not for repairs or maintenance. Further, invoking explanation 2 to Rule 2(g) of CCR, credit on electrodes would be admissible. In the light of this settled legal position on the issue, we uphold the impugned order allowing credit on welding electrodes. 10.3 We also find that electricity transmitting tower is a structure made within the factory and installed for transfer of captive power plant generating electricity for captive use in factory. Aluminum Wires/Cable/Conductors are use ..... X X X X Extracts X X X X X X X X Extracts X X X X
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