Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  GST registration cancellation without reasons amounts to ‘Economic Death’ of business: Supreme Court. *  No GST refund if appeal before GSTAT is filed late: Gujarat High Court. *  Mere upload of GST notice on portal not valid service, appeal limitation won’t start: Punjab & Haryana High Court. *  Taxpayer can’t be penalised for missing notices hidden under ‘Additional Notices/Orders’: Calcutta High Court allows fresh adjudication. *  State tax officer can’t issue GST SCN beyond CBIC-assigned jurisdiction: Bombay High Court stays recovery proceedings. *  Earlier 7.5% Pre-Deposit must count towards mandatory 10% for Appeal: Uttarakhand high court quashes CESTAT Order. *  Third Parties can’t challenge GST Advance Rulings merely due to financial impact: Karnataka HC *  GST SCN generated using AI tool quashed: Punjab & Haryana High Court *  Bank Attachment Quashed as Madras HC Quashes GST Order Issued Against Deceased Person *  ITC Blocking Order for Failure to Record ‘Reason to Believe’ U/R 86A Quashed: Allahabad High Court *  Govt Extends GSTAT Appeal Filing Deadline From 30 June to July 31, 2026 *  GST Demand on RWA Stayed: Allahabad High Court Questions Taxability of Electricity Distribution to Flat Owners *  CBIC Clarifies Jurisdiction After GST Registration Transfer: Earlier Proceedings Remain Valid, New Officer to Continue Action *  GST authorities’ certification not mandatory for reimbursement, but tax payment must be proven: Karnataka HC *  Contractor can’t seek gst reimbursement through writ when contract has arbitration clause: Karnataka HC *  Unsigned Order Is No Order in Law: AP HC Quashes GST Assessment Order for Want of Officer’s Signature *  Customs Can’t Levy Rs. 1.36 Crore Cost Recovery Charges Without Proof of Full-Day Officer Deployment: CESTAT  *  12% IGST Payable On Imported Dialysis Machine Parts: CESTAT *  Bombay High Court Admits Challenge to GST Limitation Extension Notifications; Grants Protection Against Coercive Recovery *  Criminal Case Can’t Run Parallel to GST Proceedings on Same Facts: Allahabad High Court *  Allahabad High Court Stays GST Detention Order; Directs Release of Vehicle and Goods on Deposit of Rs. 1.44 Lakh *  Service Tax Can’t Be Levied on Loss-Making Contracts: Gujarat High Court *  GSTN Mandates Ship-to GSTIN in e-Invoice and e-Way Bill APIs; Introduces Voluntary e-Way Bill Closure Facility from August 1, 2026 *  GST Appeal Can’t Be Rejected as Time-Barred When Taxpayer Was Pursuing Rectification Remedy: Telangana High Court *  Absence of E-Way Bill and Transport Documents Justifies Customs Seizure U/s 110: Gauhati HC *  Madras High Court Upholds GST Late Fee and Penalty for Non-Filing of Annual Return, Dismisses Challenge  *  GST Records, Purchase Documents Sufficient to Discharge Burden Under Customs Act: CESTAT Orders Release of 3.65 Kg Gold  *  No Sugar Cess Payable on Sugar Exported Out of India: CESTAT *  Road Construction Services Exempt and SCN Time-Barred: CESTAT Quashes Service Tax Demand Based Solely on Form 26AS  *  ITC Freeze Upheld After GST Dept Find Suppliers Were Allegedly Fake Bill-Trading Entities: Madras HC 
Subject News *  Input service benefits can’t be denied: CESTAT allows export refund despite MMTC acting as Canalising agency. *  No service tax demand without proof of service of SCN: CESTAT. *  Service tax demand quashed as dept. fails to prove service of SCN: CESTAT *  GST : Mere allegation of inadequate consideration of reply not enough to invoke writ jurisdiction: Delhi High Court *  Onerous conditions imposed for provisional release of seized imported goods shouldn’t amount to virtual denial of relief: CESTAT. *  GST SCN without alleging fraud cannot invoke sec. 74: Karnataka High Court quashes adjudication order. *  Extended Limitation Can’t Be Invoked Merely on Form 26AS Data: CESTAT *  Revenue-Sharing with Restaurants Not Taxable as Business Support Service: CESTAT *  R. 6(3) Option Can’t Be Forced on Taxpayer; CESTAT Quashes Rs. 12.36 Crore CENVAT Credit Demand *  Excise Duty | Power Consumption Alone Can’t Prove Clandestine Manufacture: Karnataka High Court *  Madras High Court Examines DGGI’s Authority to Issue GST Penalty Orders Under Section 122, Adds DGGI as Party *  Proceedings under omitted r. 96(10) can’t survive without saving clause: andhra pradesh high court quashes gst refund recovery *  Excise duty power consumption alone can’t prove clandestine manufacture: karnataka high court *  Madras high court rules GST show cause notices must disclose grounds for invoking extended limitation *  Court Can’t Direct Extension GST Return Deadlines or Waive Interest and Penalties: Karnataka High Court *  GST Notifications Can’t Go Beyond GST Council Recommendations: Madras High Court Quashes SCN on Branded Pulses *  Appeal Can’t Be Dismissed for Delay When Dept’s Own Order Mis-states Limitation Period: CESTAT *  No Evidence of KYC or Due Diligence Breach By Customs Broker: CESTAT Quashes Licence Revocation in Export Overvaluation Case *  Glucometers Are Chemical Analysis Instruments Classifiable Under Tariff Heading 9027: CESTAT *  Validity of Post-GST Service Tax Proceedings Upheld: Gujarat High Court Dismisses Challenge to S. 73 SCN *  Rectified GST Refund Applications Can’t Be Rejected as Time-Barred If Original Refund Claim Was Filed Within Limitation: Gujarat HC *  Service Tax Refund Can’t Be Denied as Time-Barred When Levy Itself Is Unconstitutional: Gujarat High Court *  Same Officer Can’t Act As Auditor & Adjudicator: Karnataka High Court *  Karnataka High Court Condones 324-Day Delay, Revives Customs Appeal in Jewellery Pilferage Case  *  Madras High Court Quashes GST Assessment Order Passed Ex Parte Despite Prior ITC Reversal; Lifts Bank Attachment *  Tobacco Process Doesn’t Amount to Manufacturing: Madras High Court Quashes Rs. 1.32 Crore Compensation Cess Demand  *  Recovery Notice Unsustainable After Voluntary Reversal of Unutilised Credit: CESTAT  *  GST | ‘System Generated’ SCN Without Officer Details Invalid: Allahabad HC  *  Electronic Records Without Statutory Certification Requirements Can’t Justify Undervaluation Allegations: CESTAT *  Madras High Court Stays GST Order, Finds Prima Facie Merit in Plea Against S. 74 Proceedings Based on S. 73 Intimation  

Comments

Print   |    |  Comment

PJ/CASE LAW/2015-16/2813

Whether Cenvat credit is admissible for steel items?

Case:-DHAMPUR SUGAR MILLS LTD. VERSUSCOMMISSIONER OF C. EX., MEERUT-II
 
Citation:-2015 (323) E.L.T. 397 (Tri. - Del.)

Brief facts:-The appellant are manufacturers of Sugar, molasses and other chemicals chargeable to central excise duty. The period of dispute in appeal No. E/2015/2009 from March 1995 to August 1995 and January 1997 to March 1997. The period of dispute in appeal No. E/2016/2009 is from September 1995 to June 1996 and Period of dispute in appeal No. E/2017/2009 is July 1995. The appellant, during this period were availing Modvat Credit of Central Excise duty paid on inputs and capital goods as per the provisions of Central Excise Rules, 1944. In appeal No. E/2015/2009, the dispute is about admissibility for Cenvat credit in respect of angles, joists, shapes, sections, HR Plates, HR coils, GP Sheets, SS Plates, HR Sheets, CI Frames, MS Plates for base frames, Black Steel tubes, ERW Steel tubes, MS Channels, MS Pumps and nuts, nickel screen, etc., which, according to the appellant, had been used as component to various sugar mills machinery as well as supporting structure for machinery. Nickel Screen is used in centrifugal machine as its parts. While Modvat credit in respect of nickel screen was disallowed on the ground that the appellant did not file declaration as required under the Rules, the Modvat credit in respect of the other items was disallowed on the ground that the items are neither covered by the definition of input nor are covered by the definition of capital goods. The total Cenvat credit disallowed in this appeal is Rs. 18,88,658/- and beside this penalty of Rs. 15 lakh has been imposed. In appeal No. E/2106/2009, the dispute is in respect of admissibility for Modvat credit of various items of iron and steel of MS Angles, Channels, Joists shapes and sections, HR Plates, HR Coils etc., which according to the appellant had been used either as parts of the machinery or as supporting structure for machinery. The credit of Rs. 25,24,741/- for the period from September, 1995 to June, 1996 in respect of these items was disallowed and its demand was confirmed on the ground that these items are neither covered by the definition of input nor covered by the definition of capital goods, beside this penalty of Rs. 10 Lakh has been imposed.
In appeal No. E/2017/2009, the period of dispute is July 1995 and the disputed items for the Cenvat credit are the steel items mentioned above, copper winding wire and also gunny bags for declaration. The Cenvat credit in respect of gunny bags was disallowed on the ground that the same was not covered by the declaration filed under Rule 57G and the credit was disallowed in respect of the other items on the ground that the same are neither covered by the definition of input nor covered by the definition of capital goods. The Cenvat credit demand confirmed in this appeal is Rs. 1,48,507/- for July 1995 and besides this penalty of Rs. 25,000/- has been imposed.
 
Appellant’s contention:- Shri Aalok Arora, Advocate, the ld. Counsel for the appellant, pleaded that the period of dispute in appeal No. E/2016/2009 and 2017/2009 is for the period prior to 23-7-1996 and in appeal No. E/2015/2009, the part of the period of dispute i.e. from March 1995 to August 1995 is prior to 23-7-1996, that during period prior to 23-7-1996, the definition of ‘capital goods’, as given in Rule 57Q of the Central Excise Rules, 1944, covered ‘machines, machinery, plant, equipment, apparatus, tools or appliances used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final products’, components, spare parts and accessories of the aforesaid machines, machinery, plants, equipment, apparatus tools or appliances used for the aforesaid purpose, moulds and dies, generating sets used in the factory of the manufacture and also certain goods of chapter 84, 85, 90 & 69 mentioned in the definition, that interpreting the definition of capital goods as the same existed during period prior to 23-7-1996, the Tribunal in the case of Shakumbari Sugar and Allied Industries Ltd. v. CCE, Meerut-I reported in 2013 (294)E.L.T.28 (Tri.-Del.) has held that during the period prior to 23-7-1996, since the definition of capital goods also covered plant, the MS Angles, Channels, Sections, Bars etc., used for making and erecting, even supporting structures for machinery would be eligible for Cenvat credit, that this decision of the Tribunal was based on Larger Bench Judgement of the Tribunal in the case of Jawahar Mills v. CCE, Coimbatore reported in 1999 (108)E.L.T. 47 (Tri.-Del.), which had been upheld by the Apex Court vide judgement and also the Apex Court’s judgment in the case of Scientific Engineering Houses Pvt. Ltd.v. Comm. of Income Taxreported in AIR-1986-SC-338, that in view of this for the period prior to 23-7-1996, the steel items like MS Angles, Channels, Joists Plates, Steel Tubes, ER Wire Tubes etc., used in the manufacturing plant even if, used for supporting structure, would be eligible for Modvat credit, that in any case, all these items as certified by the Chief Engineer of the appellants’ factory have been used either as part of the Sugar Mill Machinery or in some cases as supporting structure, that in view of this, the denial of credit in respect of steel items for the period prior to 23-7-1996 is not correct, that the denial of Modvat credit in respect of nickel screen and gunny bags is incorrect as the required declaration has been made, that in any case since, the receipt of these items has not been denied, merely for not filing the declaration, the credit cannot be denied and in this regard he relied upon the judgment in the case of J.B.M. Tools Pvt. Ltd. v. CCE, Pune reported in 2002 (144) 561 (Tri.-Mum.) which is based on Larger Bench Judgement of the Tribunal in the case of Kamakhya Steels Pvt. Ltd. v. CCE, Meerutreported in 2000 (121)E.L.T. 247 (Tri.-LB), that as regards the Modvat credit of about Rs. 10,85,705/- taken in respect of various steel items during January 1997 to March 1997 period and which is the subject matter of dispute in the appeal no 2015/09, steel items, as certified by the Chief Engineer, had been used as parts of the machinery and that he has no objection to remand of the matter to the Original Adjudicating Authority for considering the appellants’ claim regarding their use. He, therefore, pleaded that the impugned order is not correct. He also pleaded that since during the period of dispute on the issue of admissibility of Modvat credit on steel items used as structural support, there were conflicting judgments of the Tribunal, till this issue was decided by the Larger Bench in the case of Vandana Global Limited, in case of denial of Modvat credit, imposition of penalty is not called for. He, therefore, pleaded that the impugned order is not correct.
 
Respondent’s contention:- Shri R.K. Grover, the ld. DR defended the impugned order by reiterating the findings of the Commissioner (Appeals) and pleaded that in these appeals, the appellant’s claim regarding use of the steel items is not backed by Chartered Engineer’s certificate and in this regard, the certificate produced by the Chief Engineer is of no value.
 
Reasoning of judgment:- They have considered the submissions from both the sides and perused the records. So far as the Modvat credit in respect of Steel items, namely, MS Angles, HR Coils, Black Steel Tubes, ER Wire Steel Plates etc., is concerned, the appellant’s claim backed by the certificate given by their Chief Engineer is that these items have been used either as parts of the Sugar Mill Machinery or as supporting Structure for the machinery and that in both the cases during period prior to 23-7-1996, the capital goods Cenvat credit would be admissible, as during period prior to 23-7-1996, the definition of capital goods also covered “plant” and the Tribunal in the case of Shakumbari Sugar and Allied Industries Ltd. v. CCE, Meerut-I reported in 2013 (294)E.L.T. 28 (Tri.-Del.) has held that since for the period prior to 23-7-1996, the definition of capital goods, as given in Rule 57Q of the Central Excise Rules, 1944 covered “plant”, MS Angles, Channels, Section, Bars etc., used for making supporting structures for machinery would also be covered by the definition of capital goods and would be admissible for Cenvat credit. They find that this judgment of the Tribunal is based on the Larger Bench of the Judgment in the case of Jawahar Mills v. CCE, Coimbatore reported in 1999 (108)E.L.T. 47 (Tri.-Del), which had been upheld by the Apex Court and also the Apex Court’s judgment based on its judgment in the case of Scientific Engineering Houses Pvt. Ltd. v. Comm. of Income Tax reported in AIR-1986-SC-338, wherein it has been held that the term ‘Plant’ covers whatever apparatus is used by a businessman for carrying on his business including all the goods and chattels fixed or movable, live or dead which he keeps for permanent employment in a business. Following the Tribunal’s judgment in the case of Shakumbari Sugar and Allied Industries Ltd. v. CCE, Meerut-I (supra), they hold that denial of Modvat credit in respect of steel items during March 1995 to August 1995 period in Appeal No. E/2015/2009 and denial of Modvat credit during period from September, 1995 to June 1996 in Appeal No. E/2016/2006 and denial of Modvat credit for July 1995 in Appeal No. E/2017/2009 is not correct and as such the impugned order has to be set aside. However, as regards denial of Modvat credit from period January 1997 to March 1997 in Appeal E/2015/2009, since during this period, the definition of capital goods, as it existed during period prior to 23-7-1996, has been substituted by a new definition which covered the goods of certain specified chapter headings and as such for this period the iron and steel items would be eligible for credit as inputs only if the same had been used for manufacture of capital goods or their parts and would not be eligible for credit if the same had been used as foundation or as supporting structure for machinery, the matter would have to be remanded to the Original Adjudicating Authority after examining the appellants’ plea on the question regarding their usage. The Cenvat credit for this period would be admissible only in respect of that quantity of iron and steel which had been used for fabricating sugar mill machinery or its components.
As regards denial of Cenvat credit in respect of nickel screen in Appeal No. 2015/2009 and denial of Cenvat credit in respect of gunny bags in appeal No. E/2017/2009, the credit has been denied only on the ground that the same are not covered by the declaration. However, on going through the records, it is seen that this ground for denial is not factually correct as both the items are covered by the declarations filed by the appellant. Therefore, the denial of Modvat credit in respect of these items is set aside.
In view of the above discussion, the impugned order passed by the Commissioner (Appeals) denying the Modvat credit in respect of Steel items for the period prior to 23-7-1996 and in respect of nickel screen and gunny bags is set aside. The part of the order denying the Modvat credit in respect of Steel Items for period January 1997 to March 1997 is also set aside and this matter is remanded to Original Adjudicating Authority for de novo decision after hearing the appellant regarding the use of steel items.
In the de novo proceedings for the period from January 1997 to March 1997, if any amount of Cenvat credit is found to be not admissible, penalty would not be imposable. The appeals stand disposed of as above. The Miscellaneous Application No. E/MA/55357 & 55358/2014 in respect of Appeal No. E/2015 & 2016/2009 for extension of stay also stands disposed of.
 
Decision:-Appeal disposed of.

Comment:-The analogy of the case is that the iron and steel items would be eligible for credit as inputs only if the same had been used for manufacture of capital goods or their parts and would not be eligible for credit if the same had been used as foundation or as supporting structure for machinery. The Cenvat credit would be admissible only in respect of that quantity of iron and steel which had been used for fabricating sugar mill machinery or its components.

Prepared by:- Monika Tak

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com