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TMI Blog2023 (6) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... . The GP sheets and GP coils etc. used as ducts for the humidifier machine also fall within the definition of inputs as given in Rule 2 (k) of the Rules, 2004 which says that input includes goods used in the manufacture of capital goods which are further used in the factory of the manufacturer. Learned counsel for the revenue had vehemently argued that this explanation was no more available to the appellant in view of amendment dated 07.07.2009 in Explanation 2 of Rule 2 (k). As per this amendment, the inputs only include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer but does not include cement, angles, channels, Centrally Twisted Deform bar (CTD) or Thermo Mechanically Treated bar (TMT) and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods. On applying the user test also, the case of the appellant can be stated to be squarely covered with the ratio of law as laid down in the above cited authorities. As such, there cannot be any hesitation to hold that the GP coils, GP sheets or aluminum sections which were used for preparing air ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how cause notice dated 03.08.2010 was issued against it. The appellant responded to the same. The adjudicating authority vide order dated 12.12.2011 confirmed demand of a sum of Rs. 15,16,552/- against the appellant besides imposing penalty of equivalent amount and claiming interest. The appellant preferred an appeal before the First Appellate Authority. The same was partly allowed vide order dated 04.02.2013 and demand of a sum of Rs. 7,67,824/- was disallowed whereas the remaining demands along with order of imposition of interest and penalty were upheld. The appellant still being aggrieved by the same, filed an appeal before the Tribunal wherein, it restricted its prayer to the cenvat credit of a sum of Rs. 5,93,453/- taken by it on GP coils, GP sheets, aluminum sections etc. that were used by it in making duct for air humidification machine to carry and extract the air from its factory premises so as to regulate humidity in the production area. The Tribunal dismissed the appeal filed by the appellant by passing order dated 20.02.2017. 3. The instant appeal has been filed by the appellant on the ground that the cenvat credit was taken by it on GP coils, GP sheets, aluminum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise, Jaipur v. Rajasthan Spinning Weaving Mills Ltd., 2010 (255) E.L.T. 481 (S.C.). 4. Per contra, it was argued by learned counsel for the revenue that the impugned order was well reasoned and did not warrant any interference. The appellant had claimed benefit of cenvat credit on GP sheets and aluminum sections on the plea that humidification plant was machinery as a whole and not a plant and GP sheets etc. used for making duct for the same, were to be treated as capital goods though infact these goods were not used in or in relation to manufacture of final products or manufacture of capital goods which were further used in factory of the appellant and hence were neither inputs under Rule 2 (a) nor were covered under Rule 2 (k) Explanation 2 of the Rules, 2004 as amended w.e.f. 07.07.2009. To fortify his argument, learned counsel relied upon the authority cited as CCE, Chandigarh v. Modern Steels Ltd., 2007 (219) E.L.T. 423 wherein it was observed by Delhi Tribunal that by omitting plant as well as components, spare parts and accessories thereof, from the definition of capital goods in Rule 57Q of the Central Excise Rules, 1944 (for short Rules, 1944 ) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as petrol and motor vehicles, used for providing any output service; Explanation 1:- The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2:- Inputs include goods used in the manufacture of capital goods which are further used in the factory of the manufacturer 8. It is relevant to mention here that the Rules, 2004 were amended w.e.f. 07.07.2009 and the Explanation 2 of Rule 2 (k) was also amended to include as follows:- Input includes goods used in the manufacture of capital goods which are further used in the factory of the manufacturer but shall not include cement, angles, channels, Centrally Twisted Deform bar (CTD) or Thermo Mechanically Treated bar (TMT) and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods; 9. It is also relevant to mention here that the term capital goods was also defined in Explanation to Rule 57Q of the Rules, 1944 which reads as under:- Explanation. - For the purposes of this section, - (1) capital goods mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which fell under Chapter 72 could not be considered as spare parts, components or accessories and were not eligible for cenvat credit. 12. On perusal of the order passed by the Tribunal, it has been revealed that the judgment pronounced in Rajasthan Spinning Weaving Mills Ltd. s case (Supra) by Hon ble Supreme Court had not been placed before and brought to the notice of the Tribunal. In that case, modvat credit had been claimed by the assessee on steel plates and MS channels that were used for fabrication of chimney for diesel generating set of the assessee company which was engaged in the business of manufacturing yarn. The revenue had issued a show cause notice alleging that these items were not capital goods though there was no dispute that the chimney was attached to the generating set which fell under the definition of capital goods. The Hon ble Supreme Court had allowed the claim of the assessee company by observing that the goods which were used for producing or processing of any goods or for bringing about any change in the substance for the manufacture of final product may that be machines, plant, equipments, tools, appliances or apparatus, would fall within the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as inputs as these items supported the plant and machinery that was used in manufacturing process and were an integral part of the plant and machinery. Accordingly, the assessee was held entitled to get benefit of cenvat credit on the same as they fell within the scope and ambit of Section 2 (a) (A) and 2 (k) of the Rules, 2004. Similar observations were made by the High Court of Chhattisgarh in M/s Vandana Global Limited s case (Supra), by High Court of Gujarat at Ahmedabad in Mundra Ports Special Economic Zone Ltd. s case (Supra) and by High Court of Madras in Commissioner of Central Excise Service Tax, Tiruchirapalli v. CESTAT, Chennai s case (Supra). 14. In the instant case, the GP sheets etc. are required for proper functioning of air humidifiers machine which ultimately supports the working of machinery and plant etc. of the appellant Company used in manufacture of cotton yarn and, therefore, they are integral part of the machinery as well as capital goods, as these ducts hold the air humidifier machine in position which ultimately helps in proper manufacturing of final product. It is not the case of the revenue that these items were not required to be used for m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication whereby the amendment dated 07.07.2009 had been brought into force, there is no mention that it was either clarificatory in nature or retrospective in operation. Hence, we find no force in the argument that the Explanation 2 as which existed prior to the amendment dated 07.07.2009 and which included goods used in manufacture of capital goods which are further used in factory of the manufacturer as inputs should not be considered. On applying the user test also, the case of the appellant can be stated to be squarely covered with the ratio of law as laid down in the above cited authorities. As such, there cannot be any hesitation to hold that the GP coils, GP sheets or aluminum sections which were used for preparing air ducts for the humidifier machine installed in the factory premises of the appellant were not only inputs but could also be treated as components or accessories of the humidifier machine and as falling within the definition of Rule 2 (a) (A) (iii) of the Rules, 2004 and were entitled to cenvat credit. 16. In view of the above discussion, it is held that the Tribunal was not justified in rejecting the claim of the appellant for availing cenvat credit in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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