WhetherCredit is admissible on MS Angle, Channels, Joists etc used forfabrication of evaporation plant meant to reduce the affluent?

PJ-Case law-2013/14-1591

Case:-M/s BAJAJ HINDUSTAN LTDVsCOMMISSIONER OF CENTRAL EXCISE, LUCKNOW

Citation:-2013-TIOL-718-CESTAT-DEL

Brief Facts:-The appellant are manufacturers of sugar, molasses and alcohol from sugarcane. During the periodfrom January 2009 to May 2009, they took Cenvat credit of Rs.4,78,705/- in respect of MS Angles,Channels, Joists, GP Sheets etc. used in fabrication of a new multi-effect evaporating plant tosubstantially reduce the quantity of affluent in the distillery. The department was of the view that the steel items, in question, arenot eligible for Cenvat credit, issued a show cause notice dated 27.11.2009 for denying the abovementionedCenvat credit, its recovery alongwith interest and imposition on penalty on theappellant. The allegation in the show cause notice was that the items, in question, have been used for repair and maintenance of the existing plant and machinery. The show cause notice was adjudicated by the Assistant Commissioner vide order-in-originaldated 12.3.2010 by which he confirmed the above-mentioned Cenvat credit demand alongwithinterest and imposed penalty of equal amount on the appellant under Rule 15 of the Cenvat CreditRules. In course of proceedings before the Assistant Commissioner, the appellant pleaded that thesteel items, in question, have been used for fabrication of a new multi effect evaporation plantwhich is part of the Pollution Control System and, hence, capital goods, and for this reason, thesteel items, in question, used for fabrication of such capital goods would be eligible for Cenvatcredit as inputs, but this plea was not accepted by the Assistant Commissioner on the ground thatthe plant and machinery assembled and escaped at site cannot be treated as goods for the purposeof excise duty. On appeal to Commissioner (Appeals), the above order of the AssistantCommissioner was upheld vide order-in-appeal dated 15.11.2010. In this order also theCommissioner (Appeals) while accepting that the steel items, in question - MS Angles, Channels,Joists, GP Sheets etc. were used in fabrication of evaporation plant, which is part of pollutioncontrol system, held that the Cenvat credit would not be admissible, as the evaporation plant isimmovable and embedded in the earth and hence not goods. Against this order of theCommissioner (Appeals), this appeal has been filed.

Appellant Contention:-The appellant pleaded that the departmentaccepts that the steel items, in question, have been used in fabrication of evaporation plant meantto reduce the quantity of the affluents and that the evaporation plant is part of the pollution controlequipment, which is specifically covered by the definition of 'capital goods' as given in Rule 2 (a),that just because after fabrication, the pollution control equipment is installed and after installationbecomes fixed to the earth, the Cenvat credit in respect of the inputs used in the fabrication of suchpollution control equipment cannot be denied, that the Apex Court in the case of CCE, Jaipur vs.Rajasthan Spinning & Weaving Mills Ltd.reported in 2010 (255) E.L.T. 481 (S.C.) = (2010-TIOL-51-SC-CX) has held that the steel plates and MS Channels used in fabrication of chimney for the dieselgenerating set is an integral part of the pollution control equipment, that same view has beentaken by the Hon'ble Karnataka High Court in the case of CCE, Bangalore - II vs. SLR Steels Ltd.reported in 2012 (280) E.L.T. 176 (Kar.) = (2011-TIOL-892-HC-KAR-CX) wherein Hon'ble High Courtheld that various items of steel used in fabrication of pollution control equipment in the factorywould be eligible for Cenvat credit and the Cenvat credit cannot be denied on the ground that thepollution control equipment, being embedded in the earth was an immovable property. She,therefore, pleaded the impugned order is not sustainable.

Respondent Contention:-The Respondent defended the impugned order byreiterating the findings of the Commissioner (Appeals) in it and emphasised that in this case thepollution control equipment in whose fabrication the steel items, in question, were used isembedded in the earth and the same is not goods and, therefore, would not be covered by thedefinition of capital goods. He, therefore, pleaded in view of the facts of this case, the judgment ofLarger Bench of the Tribunal in the case of Vandana Global Ltd. vs. CCE, Raipurreported in 2010(253) E.L.T. 440 (Tri. - LB) = (2010-TIOL-624-CESTAT-DEL-LB)would become applicable andaccordingly, there is no infirmity in the impugned order.

Reasoning of Judgement:-Tribunal held that inidentical circumstances Hon'ble Karnataka High Court in the case of CCE, Bangalore - II vs. SLRSteels Ltd. (supra) and the Apex Court judgment in the case of CCE, Jaipur vs. Rajasthan Spinning& Weaving Mills Ltd. (supra) has held that the steel items used in fabrication of pollution controlequipment would be eligible for Cenvat credit and the Cenvat credit cannot be denied just on theground that the pollution control equipment is embedded in the earth. In any case, any item ofmachinery or equipment which has either been fabricated in the factory or has been brought to thefactory, would after installation, become fixed to the earth and, therefore, the Cenvat credit cannot be denied. For considering the eligibility of capital goods Cenvatcredit what is to be seen is as to whether the item of machinery or its component as brought intothe factory or as fabricated in the factory, is movable and hence 'goods' and covered by thedefinition of 'capital goods' given in Rule 2 (a) and it is not material that after installation itbecomes fixed to the earth. In view of this, the impugned order is not sustainable.

Decision:-Appeal is allowed.

Comment:-The crux of this case is that for considering the eligibility of capital goods credit, it is only to be seen that the item has been fabricated in the factory, is movable and hence “goods” and is covered by the definition of capital goods. It is irrelevant that after installation, it becomes fixed to the earth.

Comments

PJ-Case law-2013/14-1591

Post a Comment

Query