2004 (97) ECC 84 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

South Zonal Bench -- Chennai

Shri S.L. Peeran, Member (J) and Shri Jeet Ram Kait, Member (T)

Commissioner of Central Excise, Trichy and M/s. India Cements Ltd.

Versus

India Cements Ltd. and
Commissioner of Central Excise, Trichy

Appeals No. E/1392 & 1393/1998 (Dept.)
E/1659/1998 and E/415/2003 (Assessee)

[Arising out of Order-in-Appeal No. 25 & 26/1998 (TRY) dated 17.3.98; Order-in-Appeal No. 25 & 26/98 (TRY) dated 17.3.98 and Order-in-Appeal No. 139/2003 (SCN) (TRY-II) dated 10.3.2003 passed by Commissioner of Central Excise (Appeals), Trichy]

Final Order No. 404 to 407/2004, dated 14.5.2004, Certified on 18.5.2004

Modvat Credit

Cement -- Assessee can avail credit in respect of that quantity of rebar coils, CTD Bars, TOR steel, Joists and cement which were used for civil construction of their office premises, godown etc. by applying liberal explanation to Rule 57Q(1) of CER.

Modvat Credit

Bulldozer, Loader -- Used to transport lime stone form mine to crusher unit -- Whether mines are approved within the ground plan of the factory' as per the registration granted by department is not clarified -- Hence, matter remand back -- Rule 57Q(1) of CER.

PRESENT :

Shri A. Jayachandran, DR for the Revenue.

S/Shri Murugappan, Adv. & V. Ravindran, Cons. for the Assessee.

Cases Cited :

1. Adarsh Industries v. CCE, 2002 (147) ELT 407................................................. [Para 4]

2. BHEL v. CCE 2001 (47) RLT 1057................................................................... [Para 4]

3. CCE v. ACC Ltd., 2001 (135) ELT 178............................................................. [Para 4]

4. CCE v. Jawahar Mills Ltd., 2001 (77) ECC 1 (SC)............................................. [Para 4]

5. Hindustan Zinc Ltd. v. CCE, 2002 (147) ELT 1185............................................ [Para 4]

6. Jaypee Rewa Cements v. CCE, 2001 (77) ECC 457 (SC)................................... [Para 4]

7. Lloyds Metals & Engineers Ltd. v. Addl. CCE, 2003 (90) ECC 381 (T)................. [Para 4]

8. Lloyds Metals & Engineers Ltd. v. CCE, 2002 (150) ELT 638............................. [Para 4]

9. Malabar Cements Ltd. v. CCE, 2002 (149) ELT 751.......................................... [Para 4]

10. New J.K. Cement Works v. CC 1999 (133) ELT 428........................................ [Para 4]

11. Scientific Engineering House (P) Ltd. v. Commissioner of Income Tax (SC), AIR 1986 SC 338 [Para 4]

12. Shakumbari Sugars & Allied Industries Ltd. v. CCE, 2002 (148) ELT 1138........ [Para 4]

13. United Phosphorous Ltd. v. CCE, 2002 (150) ELT 650..................................... [Para 4]

14. Vishwakarma Refractories Ltd. v. CCE 2002 (148) ELT 122............................. [Para 4]

Per : Jeet Ram Kait (Oral)

There are four appeals in all and Appeals Bearing No. E/1392 & 1393/1998 are filed by the revenue and are directed against Order-in-Appeal No. 25 & 26/1998 (TRY) dated 17.3.98. Appeal bearing No. E/1659/98 is preferred by M/s. India Cements Ltd. against Order-in-Appeal No. 25 & 26/1998 (TRY) dated 17.3.98 and another appeal Bearing No. E/415/2003 is also preferred by M/s. India Cements Ltd. against Order-in-Appeal No. 139/2003 (SCN) (TRY-II) dated 10.3.2003 passed by the Commissioner (Appeals) Trichy, since the issue involved in all the four appeals are common and relate to the same appellant-assessee, all the four appeals are taken up together for disposal as per law.

2. The facts in brief are M/s. India Cements Ltd. Dalavoi (The Respondents in Appeal Nos. E/1392 & 1393/1998 and the appellants in Appeal Nos. E/1659/98 and E/415/2003) are manufacturers of cement falling under Chapter 25 of the CETA, 1985 and have been availing the credit of duty under Rule 57A/57Q of the CE Rules, 1944 (as they existed at the material time). In respect of certain credits of duty availed on capital goods under Rule 57Q during the period from 8/1995 to 3/1996, proceedings were initiated against the appellant-company, orders were passed by the adjudicating authority by allowing certain credit and disallowed the rest. On appeal, the Commissioner (Appeals) decided the issues vide Order-in-Appeal No. 25 & 26/1998 (TRY) dated 17.3.98 and 139/2003 (SCN) (TRY-II) dated 10.3.2003 resulting in further appeals by both the appellant-company and the revenue. Commissioner (Appeals) vide Order-in-Appeal No. 25 & 26/1998 (TRY) dated 17.3.98 allowed the credit on Bull Dozer as material handling equipment to the tune of Rs. 6,60,000 and revenue has come in appeal against this portion of the order passed by the Commissioner (Appeals) vide Appeal No. E/1392/1998. Similarly Commissioner (Appeals) has also allowed modvat credit on Loader to the tune of Rs. 1,95,300 as material handling equipment and revenue has come in appeal vide Appeal No. E/1393/1998. Whereas the Appellant vide Appeal No. 1659/1998 have come in appeal against the denial of modvat credit to the tune of Rs. 42,61,239 on cement, rebar coils, CTD Bars and TOR steel on the ground that these items were considered as used for civil construction. Similarly the appellant-company has come in appeal vide Appeal No. E/415/2003 against the Order-in-Appeal No. 139/2003 (SCN) (TRY-II) dated 10.3.2003 by which modvat credit to the tune of Rs. 51,20,140 has been denied on rebar coils, cement, joists and TOR steel as these items were considered as used for civil constructions.

3. Appearing on behalf of the revenue, Ld. DR Shri A. Jayachandran reiterated the ground in the revenue appeals and brought to our notice para 2 & 4 of the impugned Order-in-Appeal No. 25 & 26/1998 (TRY) dated 17.3.98. It was contended by the DR that Bull Dozer and Loader are entitled to the credit of duty if and only if they are used within the factory but in the present case the facts clearly confirmed that these two items are used only in mines. It was submitted that in view of the facts on record, the Bull Dozer and Loader do not satisfy the explanation of the definition of capital goods under Rule 57Q and therefore not eligible for credit of duty. The Ld. DR cited the Apex Court judgment in the case of Jaypee Rewa Cements v. CCE 2001 (133) ELT 3 (SC) in support of his submissions. Ld. DR therefore prayed that the impugned order may be set aside so far as it related to extending of credit of duty to Bull Dozer and Loader.

4. Shri S. Murugappan, Adv. and Shri V. Ravindran Consultant appearing for the respondent-company submitted that the Dalavoi plant of the respondent-company is an exception in the sense that the `factory' premises include the mines also and this has been clearly brought out as per the declaration of boundaries in their application for registration and the approval of the ground plan thereof under Rule 174 of the CE Rules, 1944 at the time of giving the registration certificate to the respondent-company. They therefore submitted that it is not appropriate for the department to adopt different norms viz., one for registration purposes by treating the factory as inclusive of mines and for extending modvat credit on capital goods by treating the factory as independent of mines. Since the Bull Dozer and Loader are material handling equipment they are therefore eligible for credit of duty as capital goods. Ld. Advocate Shri S. Murugappan emphasized that the Loader used for transport of lime stone from the mines to the crusher unit and that this fact was on record. In their defence they relied on the decision rendered by CCE v. ACC Ltd., 2001 (135) ELT 178 wherein it has been held that Bulldozers used as earth moving equipment and for bulk shifting of raw material before feeding the same in grinding or shaping units are capital goods and are covered under Rule 57Q of the CE Rules, 1944. In this connection he invited our attention to paras 2 and 3 of the said judgments. He also pressed into service the judgment rendered by the South Zonal Bench, Bangalore in the case of Malabar Cements Ltd. v. CCE, 2002 (149) ELT 751 wherein it was held that modvat credit is eligible on dumpers as they are material handling equipment. Learned Advocate also pressed into service the judgment rendered by the Tribunal in the case of Hindustan Zinc Ltd. v. CCE, 2002 (147) ELT 1185 wherein it was held that only those areas which are comprised in the ground plan approved under Rule 44 of the CE Rules, 1944 would form part of the `factory' as defined under Section 2(e) of the CE Act, 1944.

He submitted that the lower appellate authority ought to have been a finding on the above question of fact and if the mines are approved within the ground plan of the factory, modvat credit is required to be granted to them and the same cannot be denied. As regard Bulldozer, the same was used only in mines. However the impugned order does not specifically confirm the fact as to whether or not the `factory' included the mines as per the Registration granted by department to them and as per the ground plan approved by the department. They further submitted that it is well settled position in law that the capital goods to be eligible for credit must be used within the factory premises and this legal position has been confirmed by the Apex Court judgment rendered in the case of Jaypee Rewa Cements v. CCE, 2001 (77) ECC 457 (SC) : 2001 (133) ELT 3 (SC) which was relied by the revenue. He further submitted that in the case of Hindustan Zinc Ltd. v. CCE 2002 (147) ELT 1185 a similar issue was considered and matter was remanded for decision after due verification. They further submitted that the matter needs to be remanded for verification of the fact as to whether the appellant's `factory' includes mines also as per the approved ground plan and depending upon the facts the eligibility to the credit of duty on the bulldozer will have to be considered based on the above decisions. As far as the Loader is concerned it is a material handling equipment to transfer materials like limestone which is a raw material for manufacture of cement in the factory and this fact is not disputed. Therefore credit is undoubtedly admissible on loader being material handling equipment. In this connection, appearing on behalf of the assessee, Ld. Advocate and Ld. Consultant also produced phototype/model of the appellant plant at Dalavoi and explained in detail the various equipments and machineries constructed and set up in the said plant.

They further submitted that Rebar coils, CTD Bars, TOR Steel, Joists and Cement were used as components of the said plant comprising of Concrete Foundations, Concrete Soils for storing raw materials, Clinker and Cement, Pre-heater Tower Structure, Load Centres, etc. and in the Load Centres, Electrical Penals are housed and the entire process of manufacture of cement is controlled from the Control Room. They further explained in detail as to how each of the said equipments comprised in the plant contributed to the various processes of manufacture of cement in a sequence. They also brought on record a certificate issued by the National Council for Cement and Building Materials, New Delhi explaining the technical details of the appellant's plant and function. They also categorically confirmed that appellants had not availed of the credit of duty in respect of that quantity of Rebar Coils, CTD Bars, TOR Steel, Joists and Cement which were used for civil construction work of their office premises, godown, etc. and finally submitted that the Rebar Coils, CTD Bars, TOR Steel, Joists and Cement satisfy the explanation `capital goods' for the purposes of Rule 57Q of the rules ibid and the appellants would be rightly entitled to the credit of duty. They therefore prayed that the impugned orders may be set aside so far as it relates to the denial of credit of duty on the Rebar coils, CTD Bars, TOR Steel, Joists and Cement. In this connection they relied on the Apex Court judgment rendered in the case of Scientific Engineering House (P) Ltd. v. Commissioner of Income Tax (SC), AIR 1986 SC 338 wherein it has been held that `plant' includes any article or object fixed or movable, live or dead, used by businessman for carrying on his business and it is not necessarily confined to an apparatus which is used for mechanical operations or processes or is employed in mechanical or industrial business. They also relied on the judgment rendered by the Apex Court in the case of CCE v. Jawahar Mills Ltd., 2001 (77) ECC 1 (SC) : 2001 (132) ELT 3 (SC) wherein it was held that the language used in Explanation (1) of Rule 57Q is very liberal. They also pressed into service the judgment rendered by the Tribunal in the case of New J.K. Cement Works v. CC 1999 (133) ELT 428 wherein it was held that supporting structures of steel, power pack voltage relay and choke cables used in the manufacture of clinkers and cement are capital goods entitled for modvat credit under Rule 57Q. They also relied on the judgment rendered by the Tribunal in the case of Global Sugar Ltd. v. CCE 2000 (119) ELT 611 herein it was held that modvat credit on capital goods is available for plates, white lead, shapes and sections, M.S. Angles, M.S. Channels, steel structure for boiling house, electric wires and cables and main lighting distribution board under Rule 57Q of the CE Rules.

They also pressed into service the judgment rendered by the this (sic) Bench in the case of BHEL v. CCE 2001 (47) RLT 1057 wherein it was held that modvat credit on capital goods that is to say MS rods and angles used as supporting structure in manufacture of EOT crane and which are entitled for modvat credit. Similarly in the case of Adarsh Industries v. CCE, 2002 (147) ELT 407 it was held by the Tribunal that modvat credit on capital goods namely MS Rods, beam, channel and angles used as support for the furnace in which glass is melted are parts of furnace and modvat credit was allowed. They also pressed into service the judgment rendered by the Tribunal in the case of Vishwakarma Refractories Ltd. v. CCE 2002 (148) ELT 122 wherein it was held that modvat credit on capital goods namely angles, plates and joists used in the kiln are eligible for modvat credit on capital goods. They also relied on the judgment rendered by the Tribunal in the case of Shakumbari Sugars & Allied Industries Ltd. v. CCE, 2002 (148) ELT 1138 wherein it was held that modvat credit on capital goods namely CI Plates used in base boilers ultimately used in manufacture of sugar, cane/bagasse carriers are entitled for modvat credit. In the matter Lloyds Metals & Engineers Ltd. v. CCE, 2002 (150) ELT 638, Ld. Advocate and Ld. Consultant submitted that modvat credit on steel plates and coils, bars, channels and electrostatic precipitator used in the manufacture of storage tanks and conveyance, it was held that credit cannot be denied merely that the impugned goods used in the manufacture of immovable capital goods. Ld. Advocate also relied on the judgment rendered by the Tribunal in the case of United Phosphorous Ltd. v. CCE, 2002 (150) ELT 650 wherein it was held that cement, twisted steel bearing and beams, channels, angles, joints and plates of mild steel are eligible for modvat credit only if used in foundation or machine for housing protective cover for machinery or apparatus under Rule 57Q of the CE Rules, 1944. They also pressed into service the Tribunal's judgment rendered in the case of Lloyds Metals & Engineers Ltd. v. Addl. CCE, 2003 (90) ECC 381 (T) : 2003 (59) RLT 342 wherein it was held that cement used for civil construction work for laying foundation for machines are eligible for modvat credit under Rule 57Q of the rules ibid.

5. Appearing on behalf of the revenue Shri A. Jayachandran reiterated the findings of the Commissioner (Appeals) in the impugned order. He submitted that rebar coils, CTD Bars, TOR Steel, Joists and Cement cannot be considered as components within the meaning of Rule 57Q and argued that the building materials used as raw materials for construction of the cement plant cannot be considered as used in the production of final products so as to qualify for the credit under Rule 57Q of the CE Rules.

6. We have considered the rival submissions and the judgments pressed into service and are of the considered opinion that rebar coils, CTD bars, TOR steel, joists and cement have been used for construction of the plant comprising of concrete foundations, concrete silos for storing raw materials, clinker and cement, Pre-heater Tower Structure, Load Centres, etc. The appellant-assessee have emphasized and confirmed that they had not availed of the credit of duty in respect of that quantity of Rebar Coils, CTD Bars, TOR Steel, Joists and Cement which were used for civil construction of their office premises, godown, etc. It is now well settled legal position and the Apex Court in the case of CCE v. Jawahar Mills Ltd., 2001 (77) ECC 1 (SC) : 2001 (132) ELT 3 (SC) has held that the language used in Explanation (1) of Rule 57Q is very liberal and the capital goods can be machines, machinery, plant, equipments, apparatus, tools or appliances, the components, spare parts and accessories thereof. The various decisions cited by the Ld. Advocate and Ld. Consultant for the appellant-assessee confirm the eligibility to credit in respect of steel structure and various building materials and items such as Rebar coils, CTD bars, TOR Steel, Joists and Cement when used as structural support or in foundation of machineries etc. and therefore these citations are squarely applicable to the facts of their case.

7. We are not in a position to countenance the plea taken by Ld. JDR appearing on behalf of the revenue. Respectfully following the ratio of the said decision cited supra and the discussion, we are of the considered opinion that the credit would be admissible on Rebar coils, CTD bars, TOR Steel, joists and cement. We therefore allow the appeal filed by the appellant-assessee. We also reject the revenue appeal in Appeal No. E/1393/1998 and allow the credit of duty on Loaders under Rule 57Q of the rules ibid. As regards the admissibility of the modvat credit on Bulldozer we remand the case back to the adjudicating authority and we allow the appeal of the revenue by way of remand in respect of eligibility or otherwise of the items namely bulldozer. We also allow the appeal of the appellant in respect of modvat credit on Rebar Coils, CTD Bars, TOR Steel, Joists and Cement with consequential relief, if any to the appellant and it is ordered accordingly.

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