Cenvat Credit on MS Angles, Channels etc

PJ/Case Laws/2011-12/1400

Case: THE COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE VISAKHAPATNAM-II Vs M/s APP MILLS LTD

Citation: 2011-TIOL-1378-CESTAT- BANG

Issue:- MS angles, plates and rounds used for fabricating structural support to plant and machinery – whether could be held to be 'capital goods' as defined under Rule 2(a) of CCR, 2004 for purposes of Cenvat credit?

Brief Facts:- Respondent used MS angles, plates and rounds for fabricating structural support to plant and machinery in their factory during the period from October 2006 to April 2007. They took credit on the same by contending that the said items could be held to be 'capital goods' as defined under Rule 2(a) of the Cenvat Credit Rules (CCR), 2004.

The Original Authority denied the benefit to the respondent and ordered recovery of Cenvat credit under Rule 14 of CCR, 2004 read with Section 11 A of the Central Excise Act, 1944. It also imposed penalty under Rule 15 of CCR. In appeal, the Commissioner (Appeals) granted the benefit to the respondent. Hence, Revenue filed appeal before the Tribunal.

Appellant’s Contention:- Revenue submitted that MS angles, plates and rounds were excluded from the ambit of the definition of 'input' by virtue of an Explanation to Rule 2(k) and further that the said items were held to be outside the purview of the definition of 'capital goods' by the Tribunal's Larger Bench in the case of Vandana Global Ltd. Vs. CCE, Raipur [2010 (253) ELT 440 (Tri. -LB)].

Respondent’s Contention:- Respondent relied on the Supreme Court's judgment in CCE, Jaipur Vs. Rajasthan Spinning & Weaving Mills Ltd. [2010 (255) ELT 481 (SC)] and also on the Madras High Court's judgment in CCE, Tiruchirapalli Vs. M/s. India Cements Ltd. [2011-TIOL-558-HC-MAD-CX].

Respondent contended that the view taken by the Supreme Court on the facts of the case of Rajasthan Spinning & Weaving Mills Ltd is squarely applicable to the facts of the present case. In the instant case, MS angles, plates and rounds were used to fabricate structural supports to plant and machinery whereas, in the case considered by the Supreme Court, similar items were used to fabricate a chimney for a diesel generating (DG) set. The chimney was held to be an integral part of the DG set and items used for its fabrication were held to be accessories of the DG set. Similarly the structural support fabricated by the respondent should be treated as an integral part of plant and machinery and therefore the MS angles, plates and rounds used for fabrication of the structural support should be held to be accessories.

Reasoning of Judgement:- The Tribunal held that ratio of Rajasthan Spinning & Weaving Mills Ltd was squarely applicable in case of respondent. The Tribunal noted that in the case of Rajasthan Spinning & Weaving Mills Ltd, the Supreme Court considered the question whether the steel plates and channels used in the fabrication of chimney for DG set would fall within the Sl. No. 5 of the table annexed to Rule 57Q as this Rule stood on or after 01.03.1997. The Tribunal compared the provisions of Rule 57Q with the provisions of Rule 2 (a) of CCR, 2004 and held that clause (i) of Rule 2 (a) (A) is pari material with clause (3) of the table annexed to Rule 57Q. Similarly, clause (iii) of Rule 2 (a) (A) is pari materia with clause (5) of the table annexed to Rule 57Q.

The Tribunal noted that the Supreme Court found that the DG set fall under Heading No. 85.02, Chapter 85 of First Schedule to the Central Excise Tariff Act and ipso facto got covered under Sl. No. 3 of the table annexed to Rule 57Q. The Supreme Court further noted that the chimney attached to the DG set was undisputedly covered by Sl. No.5 of the table annexed to Rule 57Q. On this basis, it was held that the chimney was an integral part of the DG set and, therefore, MS channels, plates, etc., used in its fabrication were to be treated as accessories in terms of Sl. No.5 of the table annexed to Rule 57Q.

The Tribunal held that facts of the present case were perfectly analogous to those of Rajasthan Spinning· & Weaving Mills Ltd. It was held that MS Angles, plates and rounds used by respondent for fabricating structural support for machinery qualify to be capital goods for cenvat credit. Order of the Commissioner (Appeal) sustained.

The Tribunal further held that the view taken by the Larger Bench of the Tribunal in the case of Vandana Global Ltd was taken much before the Supreme Court decided the case of Rajasthan Spinning & weaving Mills Ltd. Therefore, the view of the Larger Bench is no longer valid as it runs contrary to the later judgment of the Supreme Court.

Decision:- Appeal dismissed.

Comments

S.L.Bansal on 18 November, 2011 wrote:

M/s Rajasthan Spining Mill judgment is disputed in view of latest Supreme Court judgment in the case of M/s Sarswati Sugar Mills Ltd Vs CCE, Delhi Dt.02.08.2011 reported at 92011-TIOL-73SC CX].
Rajesh Vyas on 17 November, 2011 wrote:

Verry good judgment and it will help to all industries.

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PJ/Case Laws/2011-12/1400

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