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Bellary Steel and Alloys Ltd. Vs. Commissioner of Central Excise - Court Judgment

SooperKanoon Citation

Court

Customs Excise and Service Tax Appellate Tribunal CESTAT

Decided On

Judge

Reported in

(2005)(180)ELT92Tri(Bang.)

Appellant

Bellary Steel and Alloys Ltd.

Respondent

Commissioner of Central Excise

Excerpt:


.....ltd., bellary whereas the appeal no. e/1191/2002 is filed by the commissioner of central excise, belgaum.2. the issue relates to the entitlement of modvat credit availed by m/s. bellary steel & alloys ltd. (hereinafter referred to as 'm/s.bellary steel' in short or 'the assessee') in respect of the inputs like hr sheets, angles, channels, joists, rounds, etc. used in the fabrication and erection of technological structure. the final product manufactured by m/s. bellary steel is iron and steel. the deputy commissioner of central excise, bellary division, disallowed the credit to the tune of rs. 3,92,86,820/- and also imposed penalty of rs. 4,00,000/- under rule 173q on m/s. bellary steel. aggrieved over the order of the deputy commissioner, the assessee appealed to the commissioner (appeals) who passed the impugned order. the commissioner (appeals) held that the inputs like hr plates, sheets, etc. used for structural are not entitled for modvat credit. according to the commissioner (appeals), the vise of hr plates, sheets, etc. in the manufacture of structural does not result in the manufacture of capital goods under rule 57q. the technological structure cannot be considered.....

Judgment:


1. These appeals arise out of the Order-in-Appeal No. 469/2002, dated 30-7-2002 passed by the Commissioner of Customs & Central Excise (Appeals), Bangalore. The Appeal No. E/1109/2002 is filed by M/s.

Bellary Steel & Alloys Ltd., Bellary whereas the Appeal No. E/1191/2002 is filed by the Commissioner of Central Excise, Belgaum.

2. The issue relates to the entitlement of Modvat credit availed by M/s. Bellary Steel & Alloys Ltd. (hereinafter referred to as 'M/s.

Bellary Steel' in short or 'the assessee') in respect of the inputs like HR sheets, Angles, Channels, Joists, Rounds, etc. used in the fabrication and erection of technological structure. The final product manufactured by M/s. Bellary Steel is Iron and Steel. The Deputy Commissioner of Central Excise, Bellary Division, disallowed the credit to the tune of Rs. 3,92,86,820/- and also imposed penalty of Rs. 4,00,000/- under Rule 173Q on M/s. Bellary Steel. Aggrieved over the order of the Deputy Commissioner, the assessee appealed to the Commissioner (Appeals) who passed the impugned order. The Commissioner (Appeals) held that the inputs like HR Plates, Sheets, etc. used for structural are not entitled for Modvat credit. According to the Commissioner (Appeals), the vise of HR Plates, Sheets, etc. in the manufacture of structural does not result in the manufacture of capital goods under Rule 57Q. The technological structure cannot be considered as goods. Hence no input credit can be given in the materials used for erecting technological structure. This is the argument of the Commissioner (Appeals). However, he held that when identifiable parts of the capital goods have come into existence/manufactured with the use of plates, sheets, etc., credit should be given. To ascertain the factual position, he ordered that the Jurisdictional Commissioner should examine each of the item involved and decide the matter.

3. The Revenue was aggrieved over the Order-in-Appeal passed by the Commissioner (Appeals) because of its conditional nature. Hence the Revenue filed an appeal. M/s. Bellary Steel & Alloys Ltd. were aggrieved over the Order-in-Appeal denying the Modvat credit to HR Plates, Sheets, etc. used in fabrication and erection of technological structures.

4. Shri B.V. Kumar, learned Advocate appeared on behalf of M/s. Bellary Steel and Shri L. Narasimha Murthy, learned SDR appeared on behalf of the Department.

5. The learned Advocate contended that the M/s. Bellary Steel used HR Sheets, Angles, Channel, Joists, Rounds, etc. as inputs for the fabrication and erection of the following structural- He urged that the only issue involved in the present appeal is whether the assessee can be denied the benefit of Modvat credit on duty paid inputs utilised in the manufacture/fabrication of capital goods and supporting structure, since they have been embedded to the earth and become non-excisable goods. It was submitted that the provisions of Rule 57Q of the Central Excise Rules do not prescribe that the capital goods embedded to earth being entitled to the Modvat credit. In the assessee's case, the capital goods manufactured by them are huge machines/machinery and after manufacture they are required to be built to earth to make all the fabrication and to prevent them falling under the Capital goods. As per Rule 57D, the assessee are eligible for credit of duty on inputs used in the manufacture and fabrication of capital goods, even though they are exempted under Notification No.67/95-C.E., dated 16-3-1995. The following case laws were relied on -Star Paper Mills Ltd. v. CCE, Meerut (ii) Empire Inds. Ltd. v. CCE, Mumbai-II - 2002 (144) E.L.T. 441 (T) - 2002 (51) RLT 113(T) In the course of the personal hearing, the learned Advocate showed us the photographs of different parts of blast furnace and also the raw materials handling equipment wherein the use in the inputs to manufacture the supporting structures.

6. Ld. SDR urged that the Commissioner (Appeals) has rightly denied the Modvat credit on the structurals.

7. We heard the rival contentions. After going through the drawings and photographs submitted, we are convinced that the supporting structure in which the various inputs were used are not civil structures. They are all supporting structures for the blast furnace and also the materials handling system. It is not necessary to describe here the function of each of the systems. Suffice to say that these supporting structures are also capital goods and the fact that they are embedded to the earth is not a sound reason for denying the Modvat credit on the inputs used. In the case of Mahalakshmi Glass Works Ltd. v. CCE, Mumbai -1999 (113) E.L.T. 558 (T), it was held that there is no requirement in Rule 57Q that for credit to be taken on part of the capital goods, the "capital goods" themselves must be liable to duty. Hence the Commissioner (Appeals)'s reasoning that out of all the inputs the assessee manufactured non-excisable goods which are embedded to earth and hence no Modvat credit can be given, is not correct. In the case of Lloyds Metals & Engineers Ltd. v. CCE & C., Nagpur - 2002 (50) RLT 109 (CEGAT - Mum.), the above decision has been reiterated. In the case of Star Paper Mills Ltd., v. CCE, Meerut -1999 (107) E.L.T. 241 (T), it was held that the travelling cranes are also eligible for Modvat credit under Rule 57Q. In the case of New J.K. Cement Works v. CCE, Jaipur - 1999 (113) E.L.T. 428 (T), it was held that the 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. In view of the above case laws, there is no justification for denial of Modvat credit on the inputs used for the supporting structures of blast furnace and raw materials handling equipment system. In the result, the appeal of M/s. Bellary Steel & Alloys Ltd. is allowed and the Department's appeal is dismissed.


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