Whether credit is admissible on the M.S. Angles, M.S. Panels, M.S. Beams, M.S. Bars, M.S. Plates, HR/CR Coils used for supporting structures?

PJ/Case law/2013-14/1918

Case:-M/s CETEX PETROCHEMICALS LTD Vs COMMISSIONER OF CENTRAL EXCISE, CHENNAI-I

Citation:-2013-TIOL-1760-CESTAT-MAD

Issue:-Whether credit is admissible on the M.S. Angles, M.S. Panels, M.S. Beams, M.S. Bars, M.S. Plates, HR/CR Coils used for supporting structures?

Brief facts:-The appellant was engaged in the manufacture of "Methyl Ethyl Ketone" (MEK) and "Secondary Butyl Alcohol" (SBA) classifiable under Chapter 29 of the Schedule to the Central Excise Tariff Act, 1985. A Show Cause Notice dated 05.06.2009 was issued denying the Cenvat credit on various articles of iron and steel, namely, M.S. Angles, M.S. Channels, M.S. Beams, M.S. Bars, HR/CR Coils, M.S. Pipes etc. The original authority confirmed the demand of duty along with interest and penalty for the period May, '08 to Apr.'09. Commissioner (Appeals) modified the adjudication order insofar as it has allowed eligibility of credit only on M.S. Pipes. The assessee is in appeal before the tribunal against the order denying the credit on various articles of iron and steel.

Appellant’s contentions:-The learned counsel for the appellant submitted that the said goods were used in the construction of their Bio-mass Fired Boiler, Sulphuric Acid Concentration Unit and Iron and Steel Chemicals Unit. He submitted that those fabricated items were used in support of the pipes and boilers above the ground level. He also submitted that they had placed photographs before the Commissioner (Appeals) to show that the items were made for supporting of the machineries. It was contended that Commissioner (Appeals) decided the appeal on the basis of Larger Bench decision of the Tribunal in the case of Vandana Global Ltd. Vs Commissioner of Central Excise, Raipur reported in 2010 (253) E.L.T.440 (Del) = (2010-TIOL-624-CESTAT-DEL-LB). The Tribunal in the case of Commissioner of Customs & Central Excise, Visakhapatnam Vs A.P.P. Mills Ltd., reported in 2013 (291) E.L.T.585 (Tri.-Bang.) = (2011-TIOL-1378-CESTAT-BANG)allowed the credit on those items after considering the Larger Bench decision in the case of Vandana Global Ltd. (supra). It was further contended that the period of dispute was prior to amendment of Cenvat Credit Rules by Notification No.16/2009-CE (NT) dated 17.07.2009. He further submitted that the Hon'ble Chhattisgarh High Court has admitted the appeal against the Larger Bench decision of the Tribunal in the case of Vandana Global Ltd. (supra) = (2010-TIOL-624-CESTAT-DEL-LB)as reported in 2011(274) E.L.T.A.78 (Chhattisgarh).

Respondent’s contentions:-The learned Authorised Representative for the Revenue submitted that in the present case, the Commissioner (Appeals) already allowed the credit on M.S. Pipes and the other items were used to support the working platform which was the foundation of the platform. It was submitted that the Hon'ble Supreme Court in the case of Saraswati Sugar Mills Vs Commissioner of Central Excise, Delhi-III reported in 2011 (270) E.L.T.465 (S.C.) = (2011-TIOL-73-SC-CX)held that credit on the iron and steel products was not eligible for supporting structures of machineries. He also relied upon the decision of the Hon'ble Allahabad High Court in the case of Upper Ganges Sugar & Industries Ltd. Vs Commissioner of Central Excise, Meerut-II reported in 2013 (293) E.L.T.186 (All).

Reasons of judgment:-After hearing both sides, the Hon’ble Judge found that the issue involved was whether the credit is eligible on the M.S. Angles, M.S. Panels, M.S. Beams, M.S. Bars, M.S. Plates, HR/CR Coils used for supporting structures. He found that the Hon'ble Supreme Court in the case of Commissioner of Central Excise Vs Rajasthan Spinning and Weaving Mills Ltd. reported in 2010 (255) E.L.T. 481(S.C.) = (2010-TIOL-51-SC-CX) had allowed the credit on these items on the ground that these items were used for fabrication of the chimney which was an integral part of the diesel generating machine. The Hon'ble Supreme Court held in the case of Saraswati Sugar Mills (supra) been held that the credit was not admissible on these items used as supporting structures in sugar mills. However, the Hon'ble Chhattisgarh High Court had observed that the eligibility to credit can be allowed on these items based on the user test. In the present case, it was seen from the impugned order that the Commissioner (Appeals) after considering the technical write-up and the photographs submitted by the appellant had come to the conclusion that these items were used as supporting structures. It was also observed that these items were used to support the working platform around the equipment and hand rails for safety purposes.
The Larger Bench of the Tribunal in the case of Vandana Global Ltd.(supra) had held that cement and steel items used for laying foundation for building supporting structures could not be treated either as 'inputs' or 'capital goods' in relation to the final goods. It had further been held that Notification No.16/2009-CE (NT) (supra) had retrospective effect. In the present case, he found that these items were used for supporting structures of the working platform and, therefore, the case laws replied upon by the learned Authorised Representative on behalf of the Revenue would squarely apply herein.

The case of A.P.P. Mills Ltd.(supra) as relied upon by the learned counsel was in respect of structural support, fabricated by the assessee treated as integral part of the plant & machinery and, therefore, M.S. Angles, Plates and Rounds for fabrication of the structural support should be made necessary. In the present case, it had already been held that these items were not integral part of the plant & machinery, and, therefore, the said decision would not apply herein.

In view of the above discussion, Hon’ble judge found no reason to interfere with the order of Commissioner (Appeals). However, it was a case of interpretation of the rules and, therefore, penalty was not sustainable. Accordingly, penalty was set aside.

Decision:-Appeal was partly allowed.

Comment:-The analogy drawn from the case is that since the M.S. Angles, M.S. Panels, M.S. Beams, M.S. Bars, M.S. Plates, HR/CR Coils used in the construction of their Bio-mass Fired Boiler, Sulphuric Acid Concentration Unit and Iron and Steel Chemicals Unit that were used as supporting structures, credit would not be allowed on the same in view of the larger bench decision in the case of Vandana Global Ltd. However, as the issue under consideration has been a constant matter of litigation, penalties were set aside as interpretation of law is required in these issues.

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PJ/Case law/2013-14/1918

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