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TMI Blog2022 (2) TMI 791X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to be used in the manufacturing activity and it was held that whether the user test is applied, or the test that they are the integral part of the capital goods is applied, the Assessees, in these cases, should get the benefit of Cenvat Credit, as they fall within the scope and ambit of both Rule 2(a)(A) and 2k of the 2004 Rules. An amendment was introduced in the definition of capital goods with effect from 7.7.2009 which restricted the availment of credit of MS Angles, MS Channels etc. used for support structures of capital goods and for laying foundation. The Larger Bench of the Tribunal in the case of VANDANA GLOBAL LTD. VERSUS CCE [ 2010 (4) TMI 133 - CESTAT, NEW DELHI (LB) ] held that the said amendment has retrospective application. The adjudicating authority has heavily relied upon the said decision to give retrospective application to the amendment. The period involved in the present appeal is from April 2005 to December 2006. The amendment of the definition of capital goods was introduced only with effect from 7.7.2009. There was nothing in the amendment which suggested that it applies retrospectively - The Larger Bench (Vandana Global case) took the view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd for imposing penalties was confirmed. The appellant filed appeal before the Tribunal against such order. 2. The Tribunal vide Final Order No. 449/2012 dated 3.5.2012 remanded the matter to the adjudicating authority directing to verify the quantum of steel items used either as supporting structures or in the manufacture of capital goods and adjust the appellant s duty liability in view of the Larger Bench decision of the Tribunal in the case of Vandana Global Ltd. reported in 2010 (253) ELT 440 (Tri. LB). 3. The appellant filed an application for rectification of mistake of the Final Order as E/ROM/42/2012 and vide Misc. Order No. 913/2012 dated 11.12.2012, the Tribunal held that the impugned final order has to be rectified and read along with the following paragraph:- It is made clear that the original authority shall address all other issues also and render a decision in accordance with law after giving the assessee an opportunity of being heard . 4. In the denovo proceedings, the adjudicating authority vide the order impugned herein dated 15.12.2014 disallowed the credit holding it to be ineligible and confirmed the duty demand along with interest and impose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned counsel submitted that the appellant had used the MS Angles, MS Channels, MS Pipes, Joists etc. for fabrication of capital goods. The details of fabrication, erection, installation and commissioning of machineries and equipments was submitted before the adjudicating authority. The appellant also submitted a Chartered Engineer s report dated 25.11.2013. He referred to page 102 of the appeal paper book which contains the report filed by the Chartered Engineer. The learned counsel submitted that the Chartered Engineer had visited the premises and inspected the fabrication works done by the appellant. A report has been submitted wherein the Chartered Engineer has reported the use of MS Angles, MS Channels, MS Pipes, Joists etc. used for fabrication of capital goods correlating with the invoices. It can be seen from the report that MS Angles, MS Channels, MS Pipes, Joists etc. were used for fabrication of capital goods in the nature of blast furnace, gas duct with inspection platform, BRM chimney, fabrication and erection of proportionate house hopers, bins, hoods, conveyors, ducts, circular cooler, operating platform, sinter plant, conveyor, girders / rails for cranes, pipe racks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.246 5511.806 386.520 2927.622 297.696 34.900 212.700 21345.401 3139.895 Total Quantity 24485.296 10. He submitted that the total quantity of impugned goods used by the appellant was 24485.296 MTs. Out of this, 21345.401 MTs were used for fabrication of capital goods. The appellant has availed credit only on such quantity of impugned goods and has not availed credit of 3139.895 MTs of impugned goods which was used for civil works. 11. The learned counsel submitted that the report was called for from the Range Officer to verify the correctness of the report given by the Chartered Engineer. A further report was called from the Assistant Commissioner also. However, the adjudicating authority did not consider any of these reports as noted in paragraph 21.7 of the impugned order, which reads as follows:- 21.7 As far as the verification report called for from the jurisdictional departmental officers is concerned, I observe that the report of the Assistant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins for storage of raw materials are specifically covered by the definition of capital goods. 16. The learned counsel submitted that the appellants have availed credit only on the structural steel (MS Angles, MS channels etc.) used for fabrication of capital goods. They have not availed credit on structural steel used in the construction of building, sheets, roofs, foundation etc. which is quantified at 3139.895 MTs. 17. The adjudicating authority has heavily relied upon the decision of the Larger Bench in Vandana Global reported in 2010 (253) ELT 440 (Tri. LB). The said decision held that the amendment brought forth on 7.7.2009 in the definition of capital goods restricting the availment of credit on MS angles, MS channels etc. for fabrication of support structures of capital goods and laying of foundation is applicable retrospectively. The adjudicating authority relied upon this decision to hold that the credit is not eligible though the period involved is prior to 7.7.2009. The principle laid down by the Larger Bench in the case of Vandana Global (supra) is no longer good law as held by the Hon ble Gujarat High Court in the case of Mundra Port SEZ Vs. CCE reported in 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is further clarified that since these structural components are nothing but the parts and accessories of the Boiler, they would be covered by the definition of inputs under Rule 2(k)(iii) of the CENVAT Credit rules, 2004 (i.e. all goods for generation of electricity steam). Further these structural components shall not be hit by the exclusion clause to the said definition of inputs, as these are not used for laying of foundation or making of structures for support of capital goods, but are essentially the part of said Boilers. 20. It is also argued that the chimney, conveyor, ducts, pies etc. cannot stand by themselves and has to be given support. When the machine / equipment by itself cannot work without such support, the credit availed on the MS items used for fabricating such support is eligible for credit. The use of the support has to be looked into. The decision of the Hon'ble Supreme Court in the case of CCE, Jaipur Vs. Rajasthan Spinning and Weaving Mills Ltd. reported in 2010 (255) ELT 481 (SC) was heavily relied by the learned counsel for appellant. He submitted that steel plates, MS channels used for fabrication of chimney for diesel generating set was he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013 (288) ELT 161 (SC) to argue that unless there is some positive act of suppression established against the assessee, the department cannot invoke the extended period. He prayed that the appeal may be allowed. 24. The learned AR Ms. Sridevi Taritla appeared for the department. She supported the findings in the impugned order. She adverted to the definition of capital goods as defined under Rule 2(a) of CENVAT Credit Rules, 2004 to argue that MS Angles, MS Channels etc. do not fall within the definition of capital goods. The appellant has used the MS Angles, MS Channels etc. for fabrication of support structures of capital goods. The Commissioner has correctly denied the credit and confirmed the duty demand. She adverted to the discussions made by the Commissioner in para 17 and 18 of the impugned order. She prayed that the appeal may be dismissed. 25. Heard both sides and perused the records. 26. The issue is whether the appellants are eligible for the credit availed on MS Angles, MS Channels, etc. under the category of capital goods . 27. The definition of capital goods under Rule 2(a) of CENVAT Credit Rules, 2004 is as under:- 2(a) Capital goods means: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered Engineer had infirmities. A small extract of the said report has already been reproduced above. The report contains details of the capital goods fabricated in the nature of ladle furnace vacuum degreaser, blast furnace etc. which have been stated in the earlier paragraphs. The appellant has also furnished the photographs of the capital goods fabricated by them using the impugned goods. Some of the photographs are as under:- 30. The Hon'ble Supreme Court in the case of Rajasthan Spinning and Weaving Mills (supra) had occasion to apply the user test evolved in Jawahar Mills Ltd. (supra). In the said case, it was held that steel plates and MS channels used for fabrication of chimney which was integral part of the diesel generating set was allowed for credit. The relevant part reads as under:- 11. In Jawahar Mills Ltd. (supra), heavily relied upon by the learned counsel for the assessee, the question which came up for consideration was whether the claim of modvat credit by some manufacturers in respect of certain items by treating them as capital goods in terms of Rule 57Q was in order. Some of the items under consideration were power cables, capacitors, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... column (2) of the Table below Rule 57Q. 14. We are, therefore, of the opinion that the Tribunal was correct in law in holding that the assessee was entitled to avail of modvat credit in respect of the subject items viz. steel plates and M.S. channels used in the fabrication of chimney for the diesel generating set, by treating these items as capital goods in terms of Rule 57Q of the Rules. 15. For the foregoing reasons, we find no substance in the appeal preferred by the Revenue. The same is dismissed accordingly. Parties are left to bear their own costs. 31. In the case of Jayaswal NECO Ltd. (supra), similar issue came up for consideration as to the eligibility of credit on railway track materials used for handling raw materials. The relevant part reads as under:- 12. In the process, the court also explained that there is no warrant for limiting the meaning of the expression in the manufacture of goods to the process of production of goods only. In the opinion of the court, the expression in the manufacture takes within its compass, all processes which are directly related to the actual production. It noted that goods intended as equipment for use in the manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ological development normally be regarded as equipment necessary to effectually carry on the manufacturing process. We are not prepared to agree with the High Court that in order that electrical equipment should fall within the terms of Rule 13, it must be an ingredient of the finished goods to be prepared, or it must be a commodity which is used in the creation of goods . If, having regard to normal conditions prevalent in the industry, production of the finished goods would be difficult without the use of electrical equipment, the equipment would be regarded as intended for use in the manufacture of goods for sale and such a test, in our judgment, is satisfied by the expression electricals . This would of course not include electrical equipment not directly connected with the process of manufacture. Office equipment such as fans, coolers, air-conditioning units, would not be admissible to special rates under s. 8(1). 14. Applying the aforesaid test to the facts of this case, it is apparent that the use of railway tracks is related to the actual production of goods and without the use of the said railway track, commercial production would be inexpedient. 15. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajasthan Spinning Weaving Mills Limited case, the Court relied upon the user test, enunciated, in its earlier judgment rendered in : Jawahar Mills Limited case. Clearly, the Court held that steel plates and MS Plates, i.e., structurals used in the fabrication of the chimney, which were an integral part of the diesel generating set would fall within the ambit and scope of definition of capital goods. The Court, went on to further hold that such equipment had to be treated as an accessory. As a matter of fact, in Saraswathi Sugar Mills case, the Court, while noticing the view taken in Rajasthan Spinning and Weaving Mills Limited said that as long as it could be shown that the item in issue was an integral part of the machinery, i.e., capital goods, it would fall in the definition of component and thus, by logical extension, come within the ambit of capital goods . 43.1 To be noted, Hon ble Mr. Justice D.K. Jain, (as he then was), was party to both the judgments rendered by the Supreme Court i.e., Rajasthan Spinning and Weaving Mills Limited as well as Saraswathi Sugar Mills Limited case. 43.2 Therefore, quite clearly, the two judgments referred to above cannot be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that the same applies retrospectively. The said decision was held to be not good law by the Hon'ble High Court of Gujarat in the case of Mundra Port SEZ (supra). Further, the Hon'ble High Court of Chattisgarh overruled the decision laid down in Vandana Global Ltd. as reported supra. 35. From the discussions made above after appreciating the facts, evidence and the principle of law laid in the decisions cited above, we are of the considered opinion that the disallowance of credit on the impugned goods cannot sustain and requires to be set aside, which we hereby do. 36. The learned counsel has argued on the ground of limitation also. The department has not produced any evidence to establish that there was willful suppression of facts with intention to evade payment of duty. In fact, the appellant has availed the credit and declared the same in their ER-1 returns. Further, they have taken steps to get a report by a Chartered Engineer as to the details of the quantity of impugned goods used for fabrication of capital goods, parts, accessories and also the quantity of structural steel used for civil work. The Range Officer who conducted physical inspection and verifi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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