Eligibility of credit on columns of cranes

PJ/Case Law /2016-17/3424

Case-KALYANI STEEL LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, BELGAUM

Citation- 2017 (345) E.L.T. 252 (Tri. - Bang.)

Brief Facts-Briefly the facts of the present case are that the appellant is a manufacturer of pig iron alloy and non-alloy steels and has been taking Cenvat credit on capital goods, inputs and input services. The Dy. Commissioner of Central Excise, Bellary issued a show cause notice dated 13-12-2011 based on the internal audit report dated 12-7-2011 alleging that the assessee has taken credit of Rs. 3,87,961/- on HR coils, HR sheets, plates, beams, etc., used as columns for erection of EOT crane during the year 2010-2011. The show cause notice further alleges that HR coils, HR sheets, plates and beams are used as support structure for EOT cranes which are fixed on the ground for civil foundation and immovable in nature and not used in relation to manufacture of final products and hence credit is not admissible. The appellant filed a reply and controverted the allegation in the show cause notice but the Dy. Commissioner vide his order dated 27-11-2012 confirmed the demand of Cenvat credit of Rs. 3,87,961/- and also demanded interest and imposed equal penalty under Rule 15 of Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. Aggrieved by the said order, the appellant filed an appeal before the Commissioner who vide impugned order dated 26-2-2013 held that EOT cranes is not placed on parallel girders/rails which are mounted on columns of the factory shed. The EOT crane is used for lateral as also horizontal movement of goods. The girders are essential for horizontal movement of the EOT crane and hence considered eligible for credit. Since the columns are used as support structures for factory shed as well as EOT crane, the credit is not admissible. Thus the learned Commissioner partly allowed the credit and disallowed the credit on columns for the EOT crane. Vide impugned order the Commissioner disallowed Cenvat credit of Rs. 2,55,434/- on steel items used for fabrication of columns. Aggrieved by the impugned order, the appellant has filed the present appeal.
Commissioner denying the Cenvat Credit on HR coils, HR plates, beams used for fabrication of columns

Appellant’s Contention-The learned counsel for the appellant submitted that the findings of the learned for the EOT crane is wrong and illegal. Learned counsel for the appellant also showed the photographs of the EOT crane and its mounting shows that the crane is mounted on girders/rails for lateral or horizontal movement. He also submitted that without the vertical members, the EOT crane cannot be mounted and operated at the required height for handling of goods. The vertical members are essential for facilitating horizontal movement of the crane and are in the nature of components and accessories of the EOT crane. He also submitted that the findings of the learned Commissioner in the impugned order that the vertical members/columns are supporting structure and that they do not support the shed or factory is not correct. In support of his submissions, he relied upon the following authorities.
(1)      CCE v. Jindal Steel & Power Ltd. [2015 (330) E.L.T. 708 (T)]
(2)      Mukund Ltd. v. CCE [2016 (333) E.L.T. 479 (T)]
(3)      UOI v. ACC Ltd. [2011 (267) E.L.T. 55 (Chhattisgarh)]
(4)      Mehra Bros v. Joint Commercial Officer [1991 (51)E.L.T.173 (S.C.)].
Respondent’s Contention-On the other hand learned AR reiterated the findings of the Commissioner and submitted that the columns act as a support structure of shed and therefore cannot be considered as capital goods. He further submitted that the columns do not play any role in the functioning of the machinery of which the appellant had claimed as accessories of the crane.

Reasoning Of Judgement-On a perusal of the records, tribunal find that the learned Commissioner has held that the crane column is only a supporting structure and does not fall in the definition of capital goods for the purpose of claiming Cenvat credit. In fact crane column is used to hold crane girders in position properly while the crane is working. In view of this use, it is essential accessories for EOT crane installed in the appellant’s factory as EOT crane cannot function without the crane column. Moreover, the Division Bench of the Tribunal in the case of CCE v. Jindal Steel & Power Ltd. (supra) where exactly the same issue was involved has held that the columns of the crane are covered in the scope of the term “accessories” in the definition of capital goods and the assessee was entitled to take the Cenvat credit on the same. Therefore keeping in view the decision in the above said case, it was held that the impugned order on which credit has been denied is covered in the scope of the terms “accessories”, in the definition of capital goods at clause (ii) of Rule 2(b) of Cenvat Credit Rules, 2004 because it is specifically designed fabricated/manufactured as per specific technical requirement. Since no evidence has been adduced by the Revenue to establish that these goods have not been used in the factory of the appellant and therefore, the appellant has complied with the condition of Rule 2(b) of Cenvat Credit Rules that such goods should be used in the factory of the manufacturer of final product. In view of the aforesaid, Tribunal is of the considered opinion that the impugned order is not sustainable in law and therefore, the same is set aside by allowing the appeal of the appellant with consequential relief, if any.

Decision- Appeal allowed
Comment- The substance of the case is that the columns of crane provide support for effective functioning of the crane and are to be considered as accessories of EOT crane installed in the factory premises. This view is also supported by decision given in the case of CCE v. Jindal Steel & Power Ltd.and so the credit was held to be admissible.

Prepared By-Prateeksha Jain

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PJ/Case Law /2016-17/3424

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