Introduction: In the case of Ultratech Cements Ltd Vs C.C.E. & S.T.-Rajkot, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Ahmedabad addresses discrepancies between the show cause notice and the adjudication order. The main issues discussed are related to the eligibility of Cenvat credit on certain items and the applicability of the extended period of limitation. The case raises questions about the usage of iron and steel items in the fabrication of plant and machinery and the subsequent credit availed.
Analysis: The appellant, Ultratech Cements Ltd, contends that the iron and steel items in question were used in the fabrication of plant and machinery, supported by a Chartered Engineer’s Certificate. However, the show cause notice alleges their use in civil construction, while the impugned order states that they were used as supporting structures for embedded plant and machinery.
The appellant argues that Cenvat credit is eligible for iron and steel items used in the fabrication of plant and machinery, irrespective of their embedding. They cite various judgments in support of their claim.
On the other hand, the revenue, represented by the Deputy Commissioner, supports the findings of the impugned order.
The CESTAT observes significant discrepancies and contradictions between the show cause notice and the adjudication order. It also notes that the Adjudicating Authority did not properly appreciate the use of goods in the fabricated machinery.
Given the evolving legal landscape and various judgments on similar issues, the CESTAT decides that a fresh order is necessary, ensuring compliance with the principles of natural justice.
Conclusion: The Ultratech Cements Ltd Vs C.C.E. & S.T.-Rajkot case highlights the importance of clarity and consistency in show cause notices and adjudication orders. The CESTAT’s decision to remand the case for re-adjudication reflects the need to reconsider the matter in light of relevant legal precedents.
FULL TEXT OF THE CESTAT CHENNAI ORDER
The issues involved in the present case are that:
(i) Whether the Cenvat Credit availed on items like M.S. Beams/Angles/ Channels/Flats/Joists etc. claimed to have been used in the fabrication of plant and machinery in the factory during January 2008 to April 2010 is eligible.
(ii) Whether extended period of limitation could be invoked in the facts of the present case.
2. Shri Ishan Bhatt, Learned Counsel appearing on behalf of the appellant submits that Iron, Steel items in question having used in the fabrication of plant and machinery in the factory, the same is supported by Chartered Engineer’s Certificate dated 25.06.2013. He submits that the show cause notice wrongly alleges that the iron, steel items were used in civil construction. Whereas, the impugned order has confirmed the demand on the ground that iron, steel items were used in fabrication of items, which was further used as supporting structure of plant and machinery. Both the show cause notice and impugned order have not provided on any basis for such contrary allegation/finding. It is now settled law that Cenvat credit is eligible on iron, steel items used in the fabrication of plant and machinery in the factory irrespective of whether the plant and machinery is embedded to earth.
2.1 He submits that the chartered engineer’s Certificate dated 25.06.2013 provides the list of items which have been fabricated using the disputed iron steel items on which credit was availed. These items include belt conveyors, cable gallery, cement mill hopper, clinker cooler, compressor house, tower crane, raw materials hopper, boiler and other machinery which is essential for manufacturing activity in the plant of the appellant.
2.2 He also refers to a summery table, wherein he pointed out that all the materials have been used in the machinery equipment fabricated in the factory. Therefore, all the items falling under chapter 84 or 85 of the first schedule of Central Excise Tariff Act, 1988 clearly falls under the definition of the Capital Goods under Rule 2(a)(A)(i) of the Cenvat Credit Rules, 2004. Accordingly, the iron and steel items under dispute satisfied the definition of inputs in as much as they have been used in the manufacture of capital goods, which are further used in the factory of the manufacturer, as provide in Explanation 2 to Rule 2(k) of the Cenvat Credit Rules, 2004.
2.3 Notwithstanding the above, he submits that the show cause notice and impugned order are contradictory to each other since the show cause notice alleged that the iron and steel items were used for civil construction purposes and repairs. Whereas the Learned Commissioner in the impugned order has held that the iron steel and items were used for fabrication of items, which were further used as supporting structures for plant and machinery embedded to earth.
2.4 He further submits that the major period is prior to 07.07.2009 whereby the Explanation 2 to Rule 2(k) of Cenvat Credit Rules, 2004 was inserted, therefore, prior to this date there should not be any dispute about the admissibility of the Cenvat credit.
2.5 Without prejudice to the above submission, he further submits that extended period of limit cannot be invoked in the present case as the entire demand is beyond the normal period of limitation. It is an admitted fact in the show cause notice that the demand arises from the scrutiny of ER-1 returns filed by appellant for the month of March 2010. A majority of credit sought to be denied was availed prior to the amended provisions. Thus the actions of the appellant are completely bonafide in nature and there is no question of any fraud suppression or willful mis-statement in the facts of the present case. In support of his above submissions on merit as well as time bar, he placed reliance on the following judgments:
3. Shri Tara Prakash, Learned Deputy Commissioner (AR), appearing on behalf of the revenue reiterates the findings of the impugned order.
4. On careful consideration of the submission made by both the sides and perusal of record, we find that there are number of discrepancies/ contradictions between the show cause notice and adjudication order such as, in the show cause notice the Cenvat credit was proposed to be denied on the ground that the goods were used in the construction. However, in the impugned order though it was admitted that the goods were used in fabrication of machinery but the same was denied on the ground that these machineries are embedded to earth.
4.1 We also find that the Adjudicating Authority has not appreciated in proper perspective, regarding the use of the goods in the machineries equipments fabricated by the appellant. After passing of the adjudication order much water has flown on this issue and various judgments were passed by various forums. Therefore, we are of the considered view that the entire matter needs reconsideration in the light of the facts of the present case vis-a-vis the law in terms in various judgments of the High Courts/ Tribunals. All the issues are kept open.
5. Impugned order is set aside appeal is allowed by way of remand to Adjudicating Authority for passing a fresh order after compliance of the principles of natural justice. Since the matter is of 2008-10, the adjudicating authority shall pass a de-novo order within a period of three months from the date of this order.
(Pronounced in the open court on 02.08.2023)