1. The Revenue is in appeal against the order dated 8/2/2006 of Commr. of Central Excise, BBSR-II.
2. The Respondent is engaged in the manufacture of Sponge Iron and other products liable to Central Excise Duty. They have commissioned four Nos. of 100 TPD Sponge Iron Plant. The respondent availed CENVAT credit of duty amount on various Iron Steel items used in the course of setting up of the said Sponge Iron Plants during the period May, 2004 to August, 2004. The dispute in the present appeal relates to eligibility of the respondent to avail duty credit on such items classified under Chapter 72. The Revenue entertained a view that these items cannot be at all categorised as inputs or capital goods in terms of CENVAT Credit Rules, 2002 and initiated proceedings against the respondent to recover the credits already availed by them. Accordingly, Show Cause Notice dated 7/06/2005 was issued to deny CENVAT Credit of Rs. 1,20,61,289/-. The show cause notice covered credits availed on welding electrodes also (Rs. 1,01,983/-) and the balance is credit on iron steel of Rs. 1,00,19,000/-. The case was adjudicated resulting in the impugned order. The Ld. Commissioner held that credit on various iron steel items are available to the respondent. However, he disallowed the credit on welding electrodes. Aggrieved by this order the Revenue preferred this appeal.
3. The Ld. A.R. elaborated the grounds of appeal. He submitted that the iron and steel items falling under Chapter 72 are essentially used in the fabrication of support structures and cannot be considered as parts and accessories of any capital goods. It is further submitted that the capital goods as defined under CENVAT Credit Rules are identified by their classification. In the present case, the credits were allowed on items which are classified under Chapter 72 which are of general nature and not identified as parts and accessories of any identifiable capital goods. He also relied on various cases to support his submissions.
4. The Ld. Counsel for the respondent supported the findings recorded by the original authority. He submitted that the nature and usage of these iron and steel items have been elaborately discussed in the impugned order. In fact, the various capital goods like conveyor belt, hopper, cooler, boiler etc. Have been specifically examined by the original authority. On such factual appreciation, applying the principle of user test and as laid down by Hon'ble Supreme Court in Commr. of C. Ex., Coimbatore Vs. Jawahar Mills Ltd. Reported in: 2001 (132) ELT 3 (S.C.), the original authority arrived at these findings. Ld. Counsel also submitted various decided case laws by the Tribunal, High Courts and Hon'ble Supreme Court, in support of his submissions.
5. We have heard both the sides and perused the appeal records. Only point of dispute in this case is the eligibility of respondent to avail CENVAT credit on various iron and steel items procured by them in connection with setting up of Sponge Iron Plant. We have perused the impugned order which allowed the credit on these items. We note that the usage of these items in various capital goods/parts and components of such capital goods fabricated inside the plant of the respondent, has been examined by the original authority. We note that, in fact, the original authority taken into consideration the basic objection against the credit raised in the show cause notice. He also examined the factual application of these various iron and steel items as certified by the chartered engineer. We have examined the submissions of the Revenue which contested these findings. As already recorded, the main thrust of the argument of the Revenue is that the iron and steel items like angles, sheets, plates etc. were mainly used in the support structure of these heavy capital fabrications and will not satisfy the criteria of parts and components or accessories of such machinery. We find that such observation has to be supported by material facts. The same is not available in the present appeal. Further, it is to be noted that whether iron and steel item is to be considered as part or component or accessory of capital goods can be decided by applying user test as decided in Jawahar Mills Ltd. (supra) and elaborated in CCE Vs. Rajasthan Spinning & Weaving Mills Ltd. reported in : 2010 (255) ELT 481 (S.C.). In fact, the ratio evolved by the Hon'ble Supreme Court has been consistently followed by various High Courts as well as this Tribunal while deciding the disputes of similar nature. Admittedly, in large number of cases, the Tribunal as well as various High Courts allowed credit in similar set of facts. A reference can be made in the recent decisions of Tribunal in the case of M/s. Singhal Enterprises Pvt. Ltd. Vs. CCE : 2016-TIOL-2451-CESTAT-DEL and in M/s. Lafarge India Ltd. Vs. CCE [2016-TIOL-2875-CESTAT-DEL]. In Lafarge, the Tribunal observed:
6. We find that apart from the various other case laws relied upon by the appellant as above, the decisions of Hon'ble Madras High Court in India Cements Limited : 2012 (285) ELT 341 (Mad.) : 2011-TIOL-558-HC-MAD-CX : 2014 (310) ELT 636 (Mad.) : 2014-TIOL-1185-HC-MAD-CX and : 2014 (305) ELT 558 (Mad.) : 2012-TIOL-1118-HC-MAD-CX all on the same set of facts, though with reference to erstwhile Rule 57Q are also relevant. The Hon'ble Supreme Court in Jayaswal Neco Limited : 2015 (319) ELT 247 (SC) allowed cenvat credit on railway track materials used for handling raw material processed goods. The Tribunal in Bellary Steel and Alloys Limited Vs. CCE, Belgaum 2005 (180) ELT 92 (Tri. Bang.) : 2005-TIOL-290-CESTAT-BANG held that cenvat credit is available on HR sheet, angles, channels etc. used in fabrication and erection of technological structure and blast furnace and material handling system. Such supporting structure are also capital goods and the fact that they are embedded to earth is no reason for denying credit/credit on input usd. The Hon'ble Punjab & Haryana High Court in CCE, Jalandhar Vs. pioneer Agro Extracts Ltd. 2008 (230) ELT 597 (P & H) held that channels and angles, joint of iron steel used for installation of batch vessel or essential plant and machinery and are eligible for credit as capital goods. The Hon'ble Madras High Court in Thuru Arroran Sugar-2015-TIOL-1734-HC-Mad.CX held that credit on M.S. Plates, angles, channels utilized in construction/erection of plant were eligible for credit. The High Court observed that the principle laid-down by the Hon'ble Supreme Court in Rajasthan Spinning and Weaving Mills Ltd. (Supra) is applicable to such situation.
7. We note that the Tribunal has been consistently following the ratio that the steel items when they are used in fabrication of capital goods and their accessories inside the manufacturer premises are eligible for credit by applying user test as evolved by the Hon'ble Supreme Court in Rajasthan Spinning and Weaving Mills Ltd. (Supra). A reference can be made to latest decision of the Tribunal in Singhal Enterprises Pvt. Ltd. Vs. CC & CE, Raipur vide final order No. 53013/2016 dated 12.08.2016 : 2016-TIOL-2451-CESTAT-DEL. The findings of the Tribunal are as under:-
13. Now we turn to the question, whether credit is admissible on various structural steel items, such as, MS Angles, Sections, Channels, TMT Bar etc., which have been used by the appellants in the fabrication of support structures on which various capital goods are placed? The same stands denied by the lower authority. The learned DR has sought disallowance of the same by citing the decision of the Larger Bench in the case of Vandana Global Ltd. (Supra) and other judgments. Further, he has brought to our notice and emphasized the amendment carried out in Explanation-II to Rule 2(a) which defines the term input w.e.f. 07.07.2009. It has further been pleaded that the cenvat credit claimed for the period prior to this will be covered within the decision of the Larger Bench in the case of Vandana Global Ltd. (Supra).
14. The larger Bench decision in Vandana Global Ltd.'s case (Supra) laid down that even if the iron and articles were used as supporting structural s, they would not be eligible for the credit, considering the amendment made w.e.f. 07.07.2009 as a clarification amendment and hence to be considered retrospectively. However, we find that the said decision of the Larger Bench was considered by the Hon'ble Gujarat High Court in the case of Mundra Ports & Special Economic Zone Ltd : 2015 (04) LCXO 197, wherein it was observed that the amendment made on 07.07.2009 cannot be held to be clarificatory and as such would be applicable only prospectively.
15. We find that the controversy can be laid to rest by making a reference to the decision of the Apex Court in the case of CCE, Jaipur Vs. Rajasthan Spinning & Weaving Mills Ltd : 2010 (255) ELT 481 (SC) : 2010-TIOL-51-SC-CX, wherein the Hon'ble Supreme Court has considered an identical issue of steel plates and MS channels used in the fabrication of chimney for diesel generating set. The credit stands allowed in the light of Rule 57Q of the erstwhile Central Excise Rules, 1944. In the said judgment, the Apex Court has referred to the use test evolved by the Apex Court in the case of CCE, Coimbatore Vs. Jawahar Mills Ltd : 2001 (132) ELT 3 (SC) : 2002-TIOL-87-SC-CX, which is required to be satisfied to find out whether or not particular goods could be said to be capital goods. When be apply the user test to the case in hand, we find that the structural steel items have been used for the fabrication of support structures for capital goods. The appellants have argued that the various capital goods, such as, kiln, material handling conveyor system, furnace etc. cannot be suspended in mid air. They will need to be suitably supported to facilitate smooth functioning of such machines. It is obvious that the structural items have been suitably worked upon for this purpose. Accordingly, the goods fabricated, using such structurals, will have to be considered as parts of the relevant machines. The definition of Capital Goods includes, components, spares and accessories of such capital goods. Accordingly, applying the user Test to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of Capital Goods as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit.
8. On careful examination, we also rely on decision of Hon'ble Madras High Court in CCE, Salem Vs. Madras Aluminium Co. Ltd : 2017 (349) ELT 133 (Mad.) which also deals with the scope of credit on similar items and also application of the concept of support structure while deciding the dispute.
9. Ld. A.R. also relied on the decision of Hon'ble Supreme Court in the case of Saraswati Sugar Mills Vs. Commr. of C. Ex., Delhi-III [2011 (270) E.L.T. 465 (S.C.) and also the decision of Hon'ble Allahabad High Court in the case of Daya Sugar Vs. Commr. of Central Excise, Meerut-I [2015 (316) E.L.T. 394 (All.). We note that the decision of the Hon'ble Supreme Court
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in Saraswati Sugar Mills dealing with provisions of erstwhile Rule 57Q and Notification of 65/95-CE were also examined by the Hon'ble Madras High Court in the case of India Cements Ltd. [2011-TIOL-558 HC-MAD-CX. The observation of the Tribunal in the Lafarge India Pvt. Ltd. (supra) is relevant in this regard. 10. The Ld. A.R. also relied on the decisions relating to Telecom Towers passed by Hon'ble Bombay High Court in the case of Bharti Airtel Ltd. Vs. CCE, Pune-III reported in: 2014 (35) S.T.R. 865 (Bom.). We note that the present case we are dealing with the eligibility of a manufacturer for credit on iron steel and items which are in fact found to be used in the fabrication of identifiable capital goods which are in turn used for manufacture of excisable goods. Bharti Airtel Ltd. deals with service service provider and the facts are not applicable to the case at hand. 11. In view of above discussion and analysis, we find that the impugned order has examined the issues in detail and had arrived at sustainable conclusion in line with the ratio adopted by the Hon'ble Supreme Court, various High Courts and by this Tribunal also. Accordingly, we find no reason to interfere in the said order. The appeal is dismissed.