Eimco Elecon India Limited VERSUS Commissioner of Central Excise & ST, Vadodara-i

EXCISE Appeal No. 13028 of 2013-SM

[Arising out of Order-in-Original/Appeal No PJ-246-VDR-I-2013-14 dated 18.07.2013

passed by Commissioner of Central Excise, Customs and Service Tax-VADODARA-I(

Appeal)]

 

Eimco Elecon India Limited

VERSUS

Commissioner of Central Excise & ST, Vadodara-i

APPEARANCE :

Shri Mrugesh Pandya, Advocate for the Appellant

Shri Sanjay Kumar, Superintendent (AR) for the Revenue.

CORAM:

HON’BLE MR. RAMESH NAIR, MEMBER (JUDICIAL)

DATE OF HEARING : 07.02.2023

DATE OF DECISION: 09.02.2023

FINAL ORDER NO. A/10271 / 2023

RAMESH NAIR :

The appellant have two units i.e. Unit-1 and Unit-2 which are adjacent

to each other. The appellant carrying out part of process in Unit-2 on the

machinery installed therein and after the entire process is done, Unit-1 is

clearing the final products on payment of duty. The appellant have availed

Cenvat credit in respect of some spares and accessories of laser cutting

machines which were used in Unit-2. The case of the department is that

since the spares and accessories were used in Unit-2, Cenvat credit thereof

shall not be admissible to appellants i.e. Unit-1.

Shri Mrugesh Pandya, learned Counsel appearing on behalf of the

appellant submits that processing of both the units i.e. Unit-1 and Unit-2 are

integrated and goods which are finally cleared from Unit-1 on payment of

duty therefore, the Cenvat credit on spares and accessories used for the

parts manufactured in Unit-1 should be allowed. He submits that in respect

of capital goods i.e. Laser Cutting machines installed at Unit-1, a similar

issue was raised earlier also but this Tribunal vide order No. A/10006/2019

dated 02.01.2019 allowed the credit. The present issue is similar to the

issue decided in aforesaid decision, therefore the issue is no longer in

dispute.

Shri Sanjay Kumar, Superintendent (AR) appearing on behalf of the

Revenue reiterates the findings of the impugned order.

I have carefully considered the submissions made by both sides and

perused the record. I find that objection of the department is that since

spares and accessories procured by Unit-1 is used in Unit-2 where the Laser

Cutting machines was installed, the credit for the same is in dispute. Firstly,

I find that the excisable goods manufactured and cleared from the

appellant’s Unit-1, therefore, it is undisputed that the spares and accessories

were used in or in relation to the manufacture of excisable goods of the

appellant. Secondly, the similar issue has been decided in the appellant’s

own case in respect of capital goods i.e. machineries installed in the

Appellant’s Unit-2 vide Final order No. A/10006/2019 dated 02.01.2019 and

Tribunal passed the following order:-

“4.

We have gone through rival submissions. We find that the appellant has relied

on the decision of Hon’ble High Court of Madras in the case of Habasit Iakoka (supra),

the facts in the said case were similar as can be seen from para 3 of the said order.

“3. The respondent assessee availed Modvat credit in respect of capital goods

used in the manufacture of Leather Nylon Sandwitch Beltings in its registered

factory. By order dated 12-6-2000, the original authority held that the

respondent had two units namely (1) Central Excise registered factory producing

excisable final products and (2) another unit called Mother Roll Plant which was

not registered under the Central Excise Rules; that they purchased capital goods

and installed in their registered factory and took the credit of the duty paid

thereon; that subsequently for want of space, they shifted the machinery to their

another Unit namely Mother Roll Plant which was situated 500 mts away from

the registered unit and that at the time of removal of the capital goods, they

neither obtained permission nor reversed the credit of duty taken on the said

capital goods. The department reversed the credit amount of Rs. 87,976/-. The

claim made by the respondent assessee for refund of the said amount was on the

ground that the capital goods installed in their Mother Roll Plant was eligible for

the credit of duty inasmuch as the said plant process the goods of the registered

factory. The original authority rejected the claim by holding that 57Q(1)

stipulates that the capital goods should be installed in the place of manufacture

of final products and not in the place outside the place of manufacture of final

products. The Commissioner affirmed the order of the original authority. The

respondent approached the Tribunal and the Tribunal by the impugned order

dated 15-10-2004 allowed the appeal and directed for refund to be sanctioned.

Before passing the impugned order, the Tribunal called for the report of the

Commissionerate. The Tribunal, after noting the findings contained in the report

of the Commissioner held that the Mother Roll Plant is for all practical purposes,

part of the appellants main factory and it can be reasonably held that the subject

capital goods were used by the respondent in the factory of production of final

products and therefore, it was entitled to avail Modvat credit of the duty paid

thereon under Rule 57Q.”

Hon’ble High Court after examining the issue observed as follows:

“7.

There is no dispute that the capital goods involved hereunder is one of the

capital goods falling within the schedule to the Central Excise Tariff Act and used

for the manufacture of the final products. Therefore, the only other question to

be examined is whether the respondent has satisfactorily established the

condition namely that the said capital goods were used in the factory for the

manufacture of final products. The salient points noted in the report establishes

beyond doubt that except the fact that the capital goods were used in the

respondent’s own premises situated just 500 mts away from the place of

manufacture and that after carrying out necessary connected processes in that

premises which is called as Mother Roll Plant, the same is brought to the place of

manufacture where the final products is rolled out. Therefore, the activity of the

respondent in the usage of the capital goods can be said to be part of its

manufacturing activities of final product in its registered factory. It is also not the

case of the appellant that by usage of the capital goods in the Mother Roll Plant,

the same was in any way alienated to any one, other than the respondent

factory.

The salient points noted in the report of the Commissioner established

beyond doubt that the capital goods were used in the factory of the respondent

for the purpose of manufacture of final products. When the above said

conclusion was inevitable, as held by the Tribunal, the respondent was entitled to

avail Modvat credit duty paid on the capital goods concerned. Consequently, the

order of the Tribunal cannot be faulted. The question of law is therefore,

answered in the negative and the appeal stands dismissed. No costs.

Consequently, connected C.M.P. No. 10540 of 2005 is closed.”

Similarly in the case of Pooja Forge Ltd. (supra), in a dispute of similar nature, Tribunal

observed as follows:

“2.

The contention of the appellant is that both the units belong to the

appellant and that manufacturing activities connected to the production of nuts,

bolts and screws were taking place in both the units. It is also the explanation

that machinery was moved for repair, test etc. Whatever be the reasons for

moving them, the ld. Counsel has emphasized that, this is not a case of alienation

of machinery on which capital goods had been taken, to warrant return of credit.

As against the contentions of the appellant, ld. SDR would submit that

since the movement of the capital goods was without permission from the unit

where the credit was taken to another unit, there was violation of the rules. He

also emphasized that at the time of movement/receipt of the capital goods, the

second unit was not registered with the Central Excise.

A perusal of the records makes it clear that capital goods were moved

only between the appellant’s own units and that too for use in the manufacture

of the same final products. The case does not involve any disposal or alienation of

Modvated capital goods, which would warrant return/denial of Modvat credit.

There is no justification for denying the credit. Imposition of penalties were also

unjustified. In these circumstances, the impugned orders are set aside and

appeals are allowed with consequential relief to the appellants.”

In case of Mileen Engineers (supra) also Tribunal observed in para 7 & 8 as follows:

“6.

I find that though the appellant has taken credit at the time of receiving

of capital goods but it is also fact that capital goods was installed in the adjacent

premises and used in relation of manufacture of final product in the registered

premises. Since capital goods was used in the manufacture of final product for

which excise duty is paid, in my view, credit is admissible from the date of

installation and use of capital goods. Incorporation of the said premises is merely

procedure requirement. The main requirement of availing Cenvat credit is that

capital goods should be used in the manufacture of dutiable goods which is not

under dispute. In view of this position, I am of the view that appellant was

entitled for the Cenvat credit from the date of receipt and installation of the

capital goods even though the part of the factory of the appellant was

incorporated subsequently. As regard reliance placed by the ld. AR in case of

Mangal Electricals Industries, I find that in the said judgment facts are not

identical as the capital goods was installed in another unit, the assessee’s plea

was that the goods were removed to another unit for job work whereas in the

present case they received capital goods and installed in the adjacent premises

but it was indeed used for the goods manufactured by the appellant in his

registered premises, therefore fact of Mangal Electricals Industries case is

different from facts of the present case. In view of the above discussion,

impugned order is modified and appeal of the appellant is allowed.”

From the above decisions it is apparent that the essential condition for availment of

credit as interpreted by various courts is that the capital goods should be used in or in

relation to manufacture of the final product and even if the same are used outside the

factory for the said purpose the credit cannot be denied so long as the said capital

goods are not alienated by the appellant.

In the instant case, before availing the cenvat credit the appellant had applied

for common registration and it is seen that no response was given by the Revenue on

the application for common registration made by the appellant. The said application

was neither accepted nor rejected. In these circumstances, it is apparent that the

appellant had sought to follow all the requirements of the cenvat credit Rules, before

availing the cenvat credit.

In view of above cited case laws and special circumstances of the case, we do not

find any merit in the impugned order. Accordingly, the impugned order is set aside and

the appeal is allowed with consequential relied.”

In view of my above observation which is supported by aforesaid

decision of this Tribunal, the issue is no longer res-integra. Accordingly, the

impugned order is set-aside and the appeal is allowed with consequential

relief.

(Pronounced in the open court on 09.02.2023)

(Ramesh Nair)

Member (Judicial)