Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  The GSTN has issued an Advisory dated 21.04.2026 about the introduction of an Offline Tool for the Invoice Management System (IMS)  *  CBIC extends due dates for filing of FORM GSTR 3B  for the month of April 2026 *  Interest cannot be imposed in adjudication order, if not demanded/quantified in show cause notice : Allahabad HC *  Wheelchairs with toileting facility eligible for exemption: CESTAT affirms customs duty exemption to importer *  Industries urge GST council to allow inverted duty refunds on input services *  Tamil Nadu GST dept introduced virtual hearing facility for GST appeals under under section 107 of the TNGST act: detailed guidelines  *  CIC urges authorities to implement GST evasion complaint tracking system *  Even if the assessee opts "NO" for personal hearing in form DRC-06 ,The mandatory requirement under section 75(4) to grant opportunity of hearing cannot be waived:Gujarat High Court  *  Glufosinate imports curbs imposed by govt *  Government extends Re-import period for exported cut & polished diamonds *  CIC flags lack of tracking system for tax evasion complaints,urges GST authorities to improve transparency *  No Custodial Interrogation needed in GST fraud case based on documentary evidence already in Department's Possession : Chattisgarh HC *  Orders under section cannot be sustained if passed without considering the taxpayer's objections and without granting a personal hearing:Gujarat High Court *  Mere cancellation of supplier's registration cannot,by itself,justify denial of ITC or cancellation of the recipient's registration:Bombay High Court *  High Court sets aside GST notice citing factual errors and natural justice violations *  Provisional Bank Attachment under Section. 110 of Customs Act Unsustainable Beyond Statutory period without Extension order: Bombay HC orders to defreeze accounts *  Post Clearance MRP Alteration by Distributor Does not attract Differential Customs Duty: CESTAT *  DGFT Expands scope of 'Screws' classification under RoDTEP Scheme  *  E-way bills surze to all time high of 140.6 million in March *  GST Exemption Allowed on Pure Labour Services for Standalone Houses: AAR  *  GST Payable Only on Margin in Second-Hand Car Sales, Subject to Strict Conditions and No ITC Claim: AAR *  DGFT rolls out procedure for allocation of calcined coke *  GST portal update : Pre-deposit amount now editable in Appeals *  J&K HC declared TMT scrap a 'Specified Good' eligibile for GST refunds under Support Scheme  *  Pigmy agents are employees of banks; no GST can be levied on commission  paid to them : Karnataka HC *  DGFT Revises HS Code Description for Screws Under RoDTEP *  GST Registration Cancellation Invalid Without Proper Service of Notice: Allahabad High Court. *  Bengaluru CGST | GST Backlog Appeals Deadline Fixed at June 30, 2026 *  No Time Bar on Refund of Service Tax for Services Not Rendered: CESTAT  Remands Indiabulls Case for Unjust Enrichment Check. *  Supreme Court Holds Renewable Energy Incentive Must Benefit Generators, Not Be Adjusted in Tariff
Subject News *   Delhi HC Quashes Order, Says Reminder Cannot Validate Improperly Served GST SCN *  KARNATAKA HIGH COURT REMANDS GST SHORTFALL MATTER DUE TO ABSENCE OF PERSONAL HEARING   *  CESTAT cancels confiscation and penalties on imported computer cabinet cases: Custom duty restricted to 111 surplus units *  Deposit of tax during search or investigation cannot be treated as 'Voluntary Payment' : Bombay High Court *  Section 76 of the CGST cannot be invoked where the tax has already been duly deposited, even if through another registration of the same entity: Madras High Court *  Sec 74 allows use of material regardless of source; illegality or flaws in section 67 search do not vitiate valid adjudication: HC *  Inter-State transfer of ITC on Amalgamation permissible as given under section 18(3) read with rule 41 of the CGST rules, 2017: Gujarat High Court *  HC: No GST on commisson paid to Pigmy Agents *  IGST refund denial on illegible bill of lading invalid absent chance to furnish docs; merit reconsideration in appeals directed: HC *  ITC is not admissible on GST paid on leasehold rights of land used fpr setting up an air seperation plant: AAAR,Tamil Nadu *  GST: No penalty under Section 74 after voluntary ITC reversal due to non-existent supplier : High Court *  TN AAAR denies GST ITC on Land Lease under Sec. 17(5)(d) for setting up plant and machinery *  GST proceedings quashed as notices sent to old address, despite updated address in registration *  Importer Can’t Be Penalised for Alleged IGCR Procedural Lapses Without Evidence of Departmental Error: CESTAT *  Structured Healthcare Training Not ‘Charitable Activity’, 18% GST Payable: AAR  *  CESTAT As The Appellate Authority For Central Sales Tax Disputes: A Paradigm Shift Under Finance Act, 2023 *   Rs. 25K Cost Imposed On SGST Joint Commissioner for Attaching Bank  Accounts Without Forming Mandatory “Opinion”: Bombay HC *   Ex-Parte GST Order Without Hearing Violates Natural Justice: Karnataka  High Court Quashes Adjudication and Bank Attachment.  *   Retrospective GST Cancellation Can’t Invalidate Genuine Transactions:  Jaipur Commissioner (Appeals) Quashes Rs. 95,670 ITC Demand. *   GST Pre-Deposit Non-Compliance: Allahabad High Court Allows Appeal  Subject to Rs. 30 Lakh Balance Deposit, Recognises Offline Filing. *  Documentary Nature of Evidence: Allahabad High Court Grants Bail in Rs. 32.66 Crore Fake ITC Fraud Case *  Supreme Court Flags Systemic Bias in Army’s Permanent Commission Process for Women Officers *  Re-Determination of Land Compensation Can Be Based on Appellate Court Awards, Clarifies Scope of S. 28-A: Supreme Court. *  Supreme Court Imposes Rs. 5 Lakh Costs On Rent Authority Officer For Acting Beyond Jurisdiction. *  DGGI Meerut | Court Denies Bail to Accused in Claiming Fake ITC And Export Refunds *  Denial of GST Rate Revision Benefit to Contractor Violates Article 14: Rajasthan HC *  GST Registration Cancellation for Non-Filing of Returns: Gauhati High Court Directs Restoration on Compliance. *   Supreme Court Quashes FEMA Adjudication Orders, Revives Proceedings at  Show Cause Stage. *   Higher Rank, Harsher Punishment Justified: Supreme Court Restores Dismissal  of Bank Manager in Misappropriation Case. *   Limitation for Export Refund to Be Counted from Foreign Exchange Realisation,  Not From Export Invoices Issuance: CESTAT  

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