Cenvat Credit on Angles, Channels etc as Capital Goods

PJ/Case Laws/2011-12/1151

Case: U.G. Sugar & Industries Ltd. Vs Commissioner of C. Ex., Meerut-II

Citation: 2011 (266) E.L.T. 339 (Tri. – Del.)

Issue:- Credit on Angles, Channels etc as capital goods – mere raising of plea that said items used in making pipelines & storage tanks not enough – cogent evidence of such use to be produced by the Assessee.

Photographs which are secondary evidence not acceptable as proof of content – Examination of person who had clicked them necessary.

Credit taken on angles, channels etc due to divergent views of various benches of the Tribunal – no intention to evade payment of duty – penalty cannot be imposed.

Brief Facts:- Appellants are engaged in manufacture of Industrial spirit, denatured spirit ad absolute alcohol. They have taken Cenvat Credit on capital goods namely Plates, channels, angle, M.S. bar and H.R. coil during the period from December 2005 to March 2006. The department issued Show Cause Notice dated 03.10.2006 to the appellants on the grounds that the said items did not fall in the category of capital goods as defined under Rule 2 (a) of the CCR, 2004.

The Adjudicating Authority confirmed the demand along with interest and also imposed penalty under Rule 15 of the Rules. The appeal before Commissioner (Appeals) was dismissed. Hence, the appellant filed appeal before the Tribunal.

Appellant’s Contentions:- Appellant placed reliance on the decision of the Apex Court in CCE, Jaipur v/s Rajasthan Spinning & Weaving Mills Ltd [2010 (255) E.L.T. 481(S.C.)] and submitted that the items in question were not only used in fabrication but were also used for making pipeline and various other equipments like storage tanks. The appellant submit that the authorities below without ascertaining this fact should not have denied the credit in relation to the duty paid on all the items.

The appellants further submitted that some of the items were also used for making pipelines and other equipments like storage tanks and, therefore, it was necessary for the Authorities below to enquire into the matter and ascertain as to the quantity of the items utilized for making of the equipments on which the Cenvat credit would be available to us and to grant the same. The respondents have failed to do so. The appellant submitted that they had submitted photographs which have shown that they have used the said goods for making pipelines and other equipments like storage tanks.

The appellant placing many cases in contending that in view of divergent views expressed by different benches of the Tribunal there was no justification for imposition of penalty.

Respondent’s Contentions:- Revenue placed reliance on the decision of the Larger Bench of the Tribunal in Vandana Gobal Ltd v/s CCE, Raipur [2010 (253) E.L.T. 440 (Tri. LB)] and submitted that the finding in the impugned order that the impugned goods were used for making shed on the factory besides at various stages the supporting structures were also fabricated and there is no challenge to the said finding and therefore the case is covered by the decision of the Larger Bench in Vandana Global.

Reasoning of Judgment:- The Tribunal held that the appellant have made specific defence that that various items were also used for making pipelines and other equipment like storage tank but the appellant has not given any proof regarding the said goods used for making pipelines and other equipment like storage tank. Mere raising of defence in itself does not amount to producing the proof in that regard. Once the defence was raised by the appellants, it was essentially for the appellants to lead necessary evidence in that regard but the appellant have failed to do so.

It was held that though the appellant did produce the photograph of various items in that regard. Mere production of photographs does not amount to proof in support of such plea. Firstly, the photographs are secondary proof. Secondly, photographs are always required to be proved by examining the person who had clicked the photographs. The law in that regard is well settled.

The Tribunal further held that the decision of the Apex Court in Rajasthan Spinning & Weaving Mills case relates to the period prior to 2002. And it was in terms of the provisions of law comprised under Rule 57Q of the Central Excise Rules, 1944. Besides the Apex Court in the said case had clearly observed that capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances if any of these goods is used for producing or processing of any goods or for bringing about any change in the substance for the manufacture of final product but the “user test” will be applicable.

Reference was made to the judgment of Vandana Global wherein the Larger Bench had held that the goods like cement and steel items used for laying foundation and for building supporting structures can not be treated either as inputs for capital goods or as inputs in relation to the final products and therefore no credit of duty paid on the same can be allowed under the Cenvat Credit Rules for the impugned period. It was held therein that the capital goods have to be goods first and that the foundation and supporting structure being embedded to earth are in the nature of immovable property and are not goods or excisable goods.

The Tribunal on merit held that the items were used for making sheds in the factory besides under various supporting structures were fabricated, and the same being clearly borne out from the record and the appellants having merely raising the plea about utilization of such items for making other items pipes without producing any cogent material in that regard, no interference required with impugned order.

However, the Tribunal set aside the penalty imposed on the appellant on the ground that divergent views were expressed by different Benches of the Tribunal and intention to evade payment of duty cannot be concluded from facts. Impugned order to this extent set aside.

Decision:- Appeal disposed of accordingly.

Comment:- This decision is following the Larger Bench decision in case of Vandana Global. This is to be challenged in High Courts. Let us wait and watch. This is not a final decision.

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Comments

S.L.Bansal on 06 May, 2011 wrote:

The definition of input was changed by inserting a explanation whichhas ben relied in Vandana Global judgment. Said amendment in explanation was prospective because in the Notification(by which the explanation was insertd) itself it has been writtten that it will effective from the date of publication in Gazatte. Inview of abovepast cases cannot be opened. Moreover for the cases covered after amendment also no penalty can be imposed as there were divergent views. Moreover after the Supreme court judgment in CCE, Jaipur v/s Rajasthan Spinning & Weaving Mills Ltd the Vandana Global judgment requires reconsideration by CESTAT and for which large number of cases are pending with CESTAT bench headed by the President KhandekaR.

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PJ/Case Laws/2011-12/1151

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