THE COMMISSIONER OF CENTRAL EXCISE & CUSTOMS GUNTUR Vs. M/S. HEMADRI CEMENT LTD. (HCL) AND SHRI B. RAVINDRANATH, STORES OFFICE AND AUTHORIED SIGNATORY OF M/S. HCL

JUDGEMENT

(1.) THESE appeals of the department are directed against grant of CENVAT credit amounting to Rs. 4,65,296/ - to the respondent for the period from July 2006 to January 2009 in respect of MS plates, angles, channels, HR plates, coils, etc. which were found to have been used (a) for fabrication of capital goods viz., Fly Ash Silo, Fine Coal Hopper, Coal Mill Hot Air Duct and Raw Mill Low Grade Hopper, (b) for repairs and maintenance (reconditioning) of plant and machinery and (c) for fabricating structural support to capital goods. The appellant is also against the decision of the lower appellate authority to vacate the penalties imposed on the assessee by the original authority. In adjudication of the show -cause notice dt.13.8.2009, which had invoked the extended period of limitation on the alleged ground of suppression of facts by the assessee, the original authority denied CENVAT credit to the aforesaid extent to the assessee and appropriated equal amount already reversed by them towards such demand. Equal amount of penalty was also imposed on the assessee. A separate penalty of Rs. 10,000/ -was imposed on the authorized signatory of the company. The company and its authorized signatory preferred an appeal to the Commissioner (Appeals) and the latter passed the impugned order setting aside the demand of duty and vacating all the penalties. On a perusal of the records and hearing both sides, I note that it is not in dispute that the plates, sheets, angles, coils, etc. were used to the quantitative extent and in the matter stated below.

(2.) CONSIDERING the comparative stakes both sides have chosen to address first the question of admissibility of CENVAT credit on the structural items which were found to have been used for repairs and maintenance (reconditioning) of plant and machinery. The respondent has consistently claimed these structural items to be inputs falling under Rule 2(k) of the CENVAT Credit Rules, 2004. According to the appellant, CENVAT credit is not admissible in respect of goods used for repairs and maintenance in view of the Tribunal's Larger Bench decision in the case of Jaypee Rewa Cement vs. Commissioner : : 2003 (159) ELT 553 (Tri. -LB). Learned Superintendent (AR) has reiterated this view of the appellant. Per contra, the learned Chartered Accountant has referred to the Tribunal's decision in Alfred Herbert Ltd. vs. Commissioner:, 2009 (245) E.L.T. 407 (Tri. -Bang.) upheld by the High Court in Commissioner vs. Alfred Herbert (India) Ltd.:, 2010 (257) E.L.T. 29 (Kar.). In the cited case, certain materials were used for replacement of worn out parts of machinery and such materials so used in the process of maintenance of the machinery were held to be inputs under Rule 2(k).

(3.) ON the contrary, the submission of the Chartered Accountant is that the respondent is entitled to the benefit of the Second Explanation to the definition of 'input' under Rule 2(k) of the CCR, 2004, which (as it stood during the period of dispute) reads thus: 'input used in the manufacture of capital goods which are further used in the factory of the manufacturer'. The date 7.7.2009 is significant, according to the learned Chartered Accountant, because an exclusion clause was added to the Second Explanation so has to restrict the scope of the explanation. By virtue of this exclusion clause which was added from 7.7.2009, construction materials such as cement, angles, channels, etc. stood excluded from the ambit of 'input' defined under Rule 2(k). The argument is that such exclusion meant preexisting inclusion. The learned consultant means to say that, prior to 7.7.2009, the said construction materials were also within the ambit of that definition of 'input'.