Whether credit is admissible on MBC sleepers used in laying railway line used for transportation of input and finished goods?

PJ/Case Law /2016-17/3308

Name:-ULTRATECH CEMENT LTD. VersusCOMMISSIONER OF CUS. & C. EX, TIRUPATHI

Citation :- 2016 (339) E.L.T. 127 (Tri. - Hyd.)

Brief facts:-The appellants are engaged in the manufacture of cement and are registered with Central Excise department. They are availing Cenvat credit facility on inputs, capital goods and input services. A show cause notice dated 15-11-2011 was issued to appellants alleging that during the period April, 2007 to April, 2010 appellants had irregularly availed Cenvat credit of Rs. 6,04,320/- in respect of Mono Block Concrete sleepers (MBC) under the category of capital goods and that these items are not connected in or in relation to the process of manufacture of finished goods, i.e., cement.
The appellants defended the show cause notice bothon merits as well as on the ground of limitation. They filed detailed reply explaining the use of MBC sleepers in the factory. MBC sleepers are used for laying railway line which is used for transportation of input materials inside the factory and to carry finished cement outside the factory. The appellants had disclosed the fact of availing credit in their ER-1 returns. After due process of law, the original authority confirmed the demand, interest and imposed equal amount of penalty. The original authority observed that MBC sleepers are used for railway line and is therefore, in the nature of laying foundation and not eligible for credit. The alternative submission of the appellant that the subject goods are inputs was also not accepted and the demand was confirmed relying on the decision laid in Vandana Global Ltd. v. CCE - 2010 (253) E.L.T. 440 (Tri.-LB). Being aggrieved, the appellants filed appeal and vide order impugned herein, the Commissioner (Appeals) upheld the order passed by the original authority. Hence this appeal.

Appellant’s Contention:-The learned consultant Shri Nitesh advanced arguments both on merits as well as on limitation. On merits, he submitted that the issue whether credit is admissible on rail sleepers is no longer res integra. The Hon’ble Apex Court in the case of Jayaswal Neco Ltd. v. CCE reported in 2015 (319) E.L.T. 247 (S.C.), has categorically held that Cenvat credit on Railway track which are used as handling system for raw material is admissible as these are essential and integrally connected to the process of manufacture of final product. Similar view was taken by CESTAT, Kolkata in the case of Tata Steel Ltd. v. CCE in Final Order Nos. FO/A/75016-75022/2016, dated 5-1-2016 [2016 (335) E.L.T. 303 (Tribunal)]. The Tribunal, Delhi in the case of Jindal Steel and Power Ltd. v. CCE by Final Order No. 52441/2015, dated 22-7-2015 [2016 (343) E.L.T. 608 (Tribunal)], has held that concrete sleepers used for laying Railway line within the factory premises is eligible for credit. On the issue of limitation, the learned consultant submitted that the disputed period is 1/2008 to 4/2009 and the show cause notice is dated 15-11-2011. The extended period of 5 years can be invoked only if there is fraud, collusion, wilful suppression of facts, etc. In normal circumstances, the SCN has to be issued within one year from the relevant date. That the appellant has disclosed all the details of availment of credit in ER-1 returns as per statutory requirement. As there is no suppression, the extended period is not invocable. He pleaded that the appeal may be allowed.

Respondent’s contention:-Against this, the learned AR Shri V.K. Shastri vehemently argued that the appellants have suppressed facts and so the show cause notice issued beyond the normal period is correct. He submitted that the fact of availment of credit would not have come to light, except for the scrutiny of records by department. On merits, the learned AR submitted that MBC sleepers do not qualify as inputs as these are not used in manufacture of final products. They are not capital goods as these goods are neither component nor accessories of capital goods. These goods are to be treated as consumable items as they loose their identity and existence after use. He urged that disallowance of credit is legal and proper.

Reasoning of judgement:-.The Tribunal considered the submissions made by either side. The issue is whether credit is admissible on MBC sleepers. The allegation in the show cause notice is that these are used for foundation and therefore, credit is not admissible. The appellants have put forward a consistent plea regarding the use of MBC sleepers within the factory. It is used for transportation of raw material and finished product. The use as explained by the learned counsel makes it clear that these are essential and integrally connected to the process of manufacture. In addition, the judgments relied by the appellant and stated supra have held that credit is admissible on Railway tracks/sleepers used within the factory for transportation of raw materials and finished goods. Following the ratio laid in these judgments, the tribunal held that the appellant has established a case on merits and that credit is admissible on MBC sleepers.
The appellant has also argued on the issue of limitation. They had disclosed the availment of credit in the ER-1 returns. The show cause notice is issued basing on the judgment laid in Vandana Global Ltd. (supra). There is no case for revenue that the appellant has not disclosed the credit details in their accounts or in ER-1 returns. They believed that credit is admissible and maintained proper statutory records reflecting the details of credit. On such score, it cannot be alleged that the appellant has wilfully suppressed facts with intent to evade payment of duty. The Hon’ble Apex Court in Uniworth Textiles Ltd. v. CCE, Raipur - 2013 STPL (web) 69 SC = 2013 (288)E.L.T.161 (S.C.), relying on the judgment in Pushpam Pharmaceuticals Co. v. CCE, Bombay [1995 Suppl (3) SCC 462 = 1995 (78) E.L.T. 401 (S.C.)] has held that “Suppression of facts’ can have only one meaning. That the correct information was not disclosed deliberately to evade payment of duty. On appreciation of facts and evidence placed on records, the Tribunal found that revenue has failed to establish suppression of fact on the part of appellant. No mala fide conduct has been proved against appellant. Therefore, the Tribunal found that the extended period is not invocable. The show cause notice being time-barred is unsustainable. The appellant succeeds on the ground of limitation also.
From the foregoing, the Tribunal held that the impugned order is unsustainable. The same is set aside. The appeal is allowed with consequential reliefs, if any.

Decision:-Appeal allowed.

Comment :-The gist of the case is that since Mono Block Concrete Sleepers for Rail track are used by manufacturer of cement in laying railway line for transportation of inputs and finished goods and hence integrally connected to process of manufacture, so they are capital goods and credit is admissible on them as per Rules 2(a) and 3 of Cenvat Credit Rules, 2004. Further, the assessee duly reflected the credit taken on concrete sleepers in ER-1, showing that he had bona fide belief of admissibility of credit, hence there was no suppression of facts. Accordingly, extended period of demand is also not sustainable.

Prepared by:- Praniti Lalwani

Comments

PJ/Case Law /2016-17/3308

Post a Comment

Query