Commissioner Vs Rajasthan Spinning & Weaving Mills Ltd (CESTAT Delhi)
The Revenue appealed against the order dated 04.02.2020 of the Commissioner (Appeals), which had set aside the adjudicating authority’s order disallowing MODVAT credit on components of DG sets.
The assessee, engaged in manufacturing yarn of synthetic and artificial staple fibres, had availed MODVAT credit on capital goods under Rule 57Q of the Central Excise Rules, 1944. It placed purchase orders for DG sets and their components, which were received in its factory on payment of duty and used for erection and commissioning of the DG sets. After erection, the DG sets were handed over to the assessee.
The Revenue contended that the DG sets were manufactured and commissioned by another entity, that such manufacture was exempt from duty, and that the supplier could not pass MODVAT credit to the assessee. A show cause notice dated 25.04.2003 proposed recovery of the credit under Section 11A(1) of the Central Excise Act, 1944 read with Rule 57U of the Central Excise Rules, 1944, along with interest and penalty. The adjudicating authority confirmed the demand, but the Commissioner (Appeals) allowed the assessee’s appeal.
Before the Tribunal, the Revenue sought to distinguish earlier decisions relied upon by the assessee. The Tribunal examined those decisions, including the Supreme Court’s order in CCE, Chandigarh Vs. Ambuja Cement dated 08.09.2022, which held that DGPP sets formed part of the factory and qualified for MODVAT credit under Rule 57Q.
Applying the same reasoning, the Tribunal held that the imported DG set components were received in the assessee’s factory and were acquired not for manufacturing DG sets as the final product but for generating electricity required in the manufacture of yarn. It also observed that parts, spares and accessories fall within the definition of capital goods under Rule 57Q.
Accordingly, the Tribunal affirmed the order of the Commissioner (Appeals) and dismissed the Revenue’s appeal.
Cases Discussed
- CCE, Chandigarh vs. Ambuj Cement, Order Dated 08.09.2022 in Civil Appeal Nos. 3005-3007/2011, 9295/2012 AND 6504-6505/2022
- UOI vs. Aditya Cement & Anr, Order dated 27.03.2008 in Tax Ref. Civil No. 18 of 2003 by Hon’ble High Court
- Vasvadatta Cement vs. CCE, Belgaum, 2002 (148) ELT 1046 (Tri.-Bang)
- CCE, Mumbai II vs. NRC Ltd., 2001 (135) ELT 1012 (Tri-Mumbai)
- Gujarat Ambuja Cements Ltd. vs. CCE, Chandigarh, 2001 (130) ELT 129 (Tri.-Del)
FULL TEXT OF THE CESTAT DELHI ORDER
1. The present appeal has been filed by the revenue challenging the order in appeal dated 4.02.2020 whereby the learned Commissioner (Appeals) allowed the appeal and set aside the order of the adjudicating authority.
2. The question of law sought to be raised by the revenue is that whether the assessee is entitle to claim modvat credit on parts /components of DG set as they are not the manufacturer of these DG sets which was commissioned / directed by another person.
The issue is no longer res-integra as the same has been decided in several decisions of the Tribunal which have been affirmed by the High Court and the Apex Court.
3. Briefly stated the assessee is engaged in the manufacture of yarns of synthetic and artificial staple fibres falling under chapter heading no. 55.09 and 55.10 of CETA. They have been availing modvat credit on capital goods in terms of rule 57Q of the Central Excise Rules, 1944. The assessee placed purchase orders dated 23.1 0.97 and 1.08.98 for supply of DG sets on M/s WNSD FIN and purchase orders dated 23.10.97 and 1.08.98 on M/s WIL, New Delhi. As per the purchase orders, the set was to consist of spare parts required for assembly of the complete DG sets. These items were received by them on payment of appropriate duty in their factory and were used in the factory premises by M/s WNSD for erection of DG set. The assessee took credit of duty paid on components DG set used in their factory. The said DG set after erection was handed over to them on 4.06.98 and 24.03.99.
4. The revenue found that the assessee placed purchase orders for supply of operational DG sets to M/s WNSD and M/s WIL. The supply of imported parts for the DG sets were made by M/s WNSD and after receipt of the same at the site from them, M/s WIL procured other parts / equipments / accessories etc. indigenously and carried out erection and commissioning of the DG set. Thus WIL is the manufacturer of the DG sets. According to the revenue as the manufacture of DG sets assembled at site is exempted from duty M/s WIL cannot take credit on parts or equipments of these DG sets. Since the supply and assembly was done by M/s WIL they cannot be considered as job worker and therefore credit cannot be passed on to the assessee. The department issued the Show Cause Notice dated 25.04.2003 disallowing the modvat credit and for recovering it under proviso to section 11A (1) of CE Act, 1944 read with Rule 57U of the CE Rules, 1944 along with interest and penalty. The adjudicating authority affirmed the demand under the SCN vide order dated 30.11.2019. The appeal filed by the assessee was allowed by the Commissioner (Appeals) in terms of its order dated 4.02.2020. The revenue is in appeal before this Tribunal.
5. The authorised representative for the revenue vehemently argued and distinguished the decisions relied on by the assessee whereas according to the assessee the issue is squarely covered by the earlier decisions, wherein WIL or similar party was responsible for commissioning and handing over the complete DG sets. Reliance is placed on the following decisions:
i. Gujarat Ambuja Cements Ltd. vs. CCE, Chandigarh1
ii. CCE, Mumbai II vs. NRC Ltd.2
iii. CCE, Chandigarh vs. Ambuj Cement,3
iv. UOI vs. Aditya Cement & Anr, 4
v. Vasvadatta Cement vs. CCE, Belgaum,5
6. We have gone through the above referred decisions and also the latest decision of the Apex Court in CCE, Chandigarh Vs. Ambuja Cement vide order dated 8.09.2022 in CA No. 3005 of 2011, inter-alia, observing that DGPP sets on which modvat credit is allowed is part and parcel of the factory of the assessee which is ultimately used in the manufacture of the end product- cement. Therefore, Sl. No. 5 of the Table appended to rule 57 Q shall be attracted and the assessee shall be entitle to the modvat credit on such DGPP sets being part / components of the cement plant/final manufacture product.
7. The above analysis is clearly applicable to the facts herein as the parts of DG sets were imported and were received by the assessee in their factory even where the purchases are made by WIL. Further, the assessee acquired the components of the generating set, not for use in the manufacture of generating set as a final product but to generate electricity which was required for the manufacture of yarn etc. which was their final product. Needless to mention that the parts, spares and accessories are covered under the definition of capital goods under Rule 57-Q.
8. We affirm the order of the Commissioner (Appeals).
Consequently, the present appeal by the revenue is dismissed.
(Order pronounced in open court)
Notes:
1 2001 (130) ELT 129 (Tri.-Del)
2 2001 (135) ELT 1012 (Tri-Mumbai)
3 Order Dated 08.09.2022 in Civil Appeal Nos. 3005-3007/2011, 9295/2012 AND 6504-6505/2022
4 Order dated 27.03.2008 in Tax Ref. Civil No. 18 of 2003 by Hon’ble High Court
5 2002 (148) ELT 1046 (Tri.-Bang)
