M/s. Emami Agrotech Limited (Formerly known as Emami Biotech Limited) @Hash Commissioner Of Central Excise And Service Tax, Haldia

This appeal is directed against the impugned Order dated 26 May 2016 passed by the Commissioner, Haldia Commissionerate, whereby recovery of

Cenvat Credit of Rs.3,00,47,898 alleged to have been wrongly availed was confirmed along with interest and equivalent penalty.

The facts of the case in brief are that the Appellant is engaged in the manufacture and clearance of dutiable goods from its factory at Haldia, West

Bengal, operating under the Cenvat Credit Scheme. Pursuant to an audit objection, proceedings were initiated against the Appellant alleging irregular

availment of Cenvat credit of Rs.3,00,47,898/- on Cement and Steel items such as Angles, Channels, Joist etc. classifiable under Chapter 72/73 of the

Central Excise Tariff Act (in short, disputed items) as capital goods, during the relevant period from 2010-11 to 2012-13. The Adjudicating Authority

confirmed the entire demand proposed in the Notice dated 27 March 2015 on the premise that the disputed items did not per se qualify as “capital

goodsâ€​ or as “inputsâ€​ under Rule 2(a) or Rule 2(k) of the Cenvat Credit Rules by invoking the extended period of limitation.

Shri Arvind Baheti, the learned Counsel appearing for the Appellant, has assailed the Order on the following grounds:

(a) The disputed credit of Rs.3,00,47,898/- does not pertain to cement and steel items alone. The Notice has generalized the observations of audit for

the year 2010-11 so as to deny the entire capital goods credit claimed by the Appellant during 2011-12 and 2012-13. That the Cenvat credit of

Rs.2,42,49,485/- out of the disputed credit of Rs.3,00,47,898/- pertains directly in respect of plant, machinery, equipment and other items classifiable

under Chapter 84, 85 & 90 of the Central Excise Tariff Act and is therefore explicitly covered by the definition of capital goods. Although, the

Adjudicating Authority has recorded this contention of the appellant assessee, yet refrained from taking any cognizance of the said fact. The

certificate dated 23 August 2016 from an independent Chartered Accountant also corroborates this assertion of the Appellant.

(b) That the Cenvat credit in the instant case was taken on the disputed items only to the extent these were used in fabrication of storage tanks, which

is specified as capital goods under Rule 2(a)(A)(vii) of the Cenvat Credit Rules and the said use is supported by a certificate dated 1 June 2015 from

the Chartered Engineer, M/s. Associated Services. The adjudicating authority has not refuted the certificate of the chartered engineer in any manner

and in the absence of any contrary evidence, the Certificate of the expert could not have been disregarded in view of the following decisions: - Â

· Rav S. Steel Pvt. Ltd. Vs. CCCE & ST, Guntur â€" 2018 (363) ELT 468 (para 7); Â

· Inter Continental Vs. UOI â€" 2003 (154) ELT 37 (para 19); Â

· M/s. Harinagar Sugar Mills Vs. CCE & ST, Patna â€" 2019 (9) TMI 1378

(c) That the total purchase of the disputed items during the period from 2010-11 to 2012-13 was substantially higher but the Appellant had refrained

from availing any credit in so far as the disputed items were used for fabricating structures to support capital goods or for laying foundation of

platform or for the purposes specifically excluded under Explanation 2 to the definition of inputs under Rule 2(k) of the CCR with effect from 7 July

2009. The C.A. Certificate dated 23 August 2016, also corroborates this fact.

(d) That the credit of the disputed items also qualify as capital goods applying the user test as reiterated by the Hon’ble Supreme Court in

Rajasthan Spinning and Weaving Mills case - 2010 (255) ELT 481 which shall apply with full force even in the context of the Cenvat Credit Rules.

(e) Immovability or movability of storage tanks is not germen to the issue of eligibility or otherwise of Cenvat credit as held in the following cases:

· SLR Steels Ltd. Vs. CCE â€" 2012 (280) ELT 176 (refer para 8); Â

· Vodafone Mobile Services Ltd. Vs. Commissioner of Service Tax, Delhi â€" 2019 (27) GSTL 481; Â

· M/s. API Ispat & Powertech Pvt. Ltd. Vs. CCE, Raipur â€" 2017 (3) TMI 1130;

(f) The demand is also hit by limitation as the credit claimed stood disclosed in the returns filed by the Appellant and in any event, the issue involved

was an interpretational one not warranting the invocation of the extended period.

The learned Authorized Representative appearing on behalf of the Revenue supports the Order-in-Original and reiterates the findings of the

Adjudicating Authority.

Heard both sides through video conferencing and perused the appeal records.

We find that the following two issues arise for our consideration in this appeal.

(i) Whether the disputed capital goods credit of Rs.3,00,47,898/- availed during the period from 2010-11 to 2012-13 was entirely in respect of cement

and steel items classifiable under Chapter 72/73 of the Central Excise Tariff Act, 1985.

(ii) Whether Cenvat credit on cement and steel items is not available in the instant case in view of Explanation 2 to the definition of inputs inserted

with effect from 7 July 2009.

In so far as issue No. (i) is concerned, we find that no item-wise break up has been provided for the year 2011-12 and 2012-13 as is evident from

the annexures to the Notice dated 27 March 2015. The Appellant had furnished item wise detail of their capital goods credit (reflecting the description

of goods, corresponding invoices, tariff classification, credit involved etc.) aggregating Rs.3,00,47,898/- in the course of adjudication with a summary of

the item-wise credit availed during the relevant period, which is also recorded in the adjudication order at para 10.1. (iv) & (v) thereof. However, the

adjudicating authority has completely glossed over this factual aspect. The Appellant has taken us through the sample invoices, which can be traced to

the line item wise details and wherefrom it is evident that the credit in respect of goods classifiable under Chapter 84, 85 & 90 of the CETA is also

included within the disputed amount. The Appellant has also enclosed a Chartered Accountant Certificate dated 23 August 2016 certifying that the

credit of Rs.2,42,79,485/- pertains directly in respect of the plant, machinery, equipments and other goods squarely covered by the definition of capital

goods. Therefore, cenvat credit of Rs.2,42,79,485/- does not at all pertain to cement and steel items falling under Chapter 72/73 but explicitly covered

by the definition of capital goods under Rule 2(a) of the Cenvat Credit Rules and the demand to that extent does not survive.

In so far as issue no (ii) is concerned, we find that there is no blanket or absolute bar in claiming credit on the disputed items, unless used for the

purposes specifically excluded in Explanation 2 to the definition of inputs. The Appellant had placed a Certificate dated 1 June 2015 from the

Chartered Engineer, M/s. Associated Services in support of their contention that the disputed items were used in the fabrication of the storage tanks

within the factory premises. The adjudicating authority has not disputed the said Certificate from an expert and does not disclose any basis either to

come to the conclusion that the disputed items were used for the specifically excluded purposes. Infact, no independent enquiry has been made by the

adjudicating authority while blindly following the contested audit objection for the period 2010-11. We find force in the contention of the Appellant that

the Certificate of the Chartered Engineer could not have been disregarded and it was incumbent upon the adjudicating authority to either contradict the

Chartered Engineer’s Certificate or accept the same and the glossing over of the said Certificate was not in consonance with law. That Cement

and Steel items when used in the fabrication of storage tanks is eligible for credit as inputs even after insertion of the Explanation 2 in July 2009 as has

already been decided in favour of the assessee by the Hon’ble Karnataka High Court in the SLR Steels case where it was held in para 7 & 8 as

under:

“7. A perusal of the aforesaid provision makes it very clear though storage tanks may be immovable property and the pollution control

equipment are included within the definition of ‘‘capital goods’’, input as defined in Rule 2(k) makes it clear that

‘‘input’’ includes goods used in the manufacture of capital goods which are further used in the factory of the manufacturer.

Therefore, the input is not necessarily to be used in the manufacture of final product. By virtue of explanation 2 - goods used in the

manufacturer of capital goods which are further used in the factory of the manufacture also falls within the definition of input. In 2009, this

explanation has been amended to the following effect :

“but shall not include cement, angles, channels Centrally Twister Deform bar (C.T.D.) or Thermo Mechanically Treated bar (TMT) and

other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods.â€​

Therefore, the notification of the Legislature is very clear that it is only the ‘‘inputs’’ used in the manufacture or

construction of capital goods which is construed as input and cenvat credit is available on the duty paid in purchase of such inputs. If the

cement, angles, channels, Centrally Twister Deform bar (C.T.D.) or Thermo Mechanically Treated bar (T.M.T.) and other items are used in

the construction of factory shed, building or laying of foundation, the duty paid on such items the assessee would not be entitled to cenvat

credit. Similarly, though the assessee is entitled to cenvat credit of cement and steel used in the manufacture of capital goods viz., storage

tank, if any structure for support of capital goods is constructed and steel and cement is used for such support, the assessee is not entitled to

the benefit of cenvat credit on the duty paid on such cement and steel. Therefore, there is no ambiguity in any of these provisions. When once

a storage tank and pollution control equipment constitutes capital goods and any raw material purchased for construction of those goods, the

duty paid could be utilized as a cenvat credit by the assessee notwithstanding the fact that the storage tank is an immovable property.â€​

By respectfully following the above decision, we are inclined to take a view that the credit on the disputed items is available as inputs having been

used in the fabrication of storage tanks.

Having allowed the appeal on merits, we refrain from examining the alternate contention of the Appellant on limitation. Accordingly, the appeal is

allowed with consequential relief, if any.

(Order pronounced in the open court on 16 December 2020.)