Judgment:
The present appeal filed by M/s Preciforge and Gears, Pune is against Order-in-appeal No. P-I/RKS/90/2010 dated 22-6-2010 passed by the Commissioner of Central Excise (Appeals), Pune.
2. The facts relevant for consideration in this case are as follows. The appellant is a manufacturer of transmission gears and forgings falling under Chapter 84 and 73 of the Central Excise Tariff. The appellant availed cenvat credit of excise duty paid on steel plates, coils, rounds, angles, channels, etc. which were used in the manufacture of goods such as stands, tables, trolleys, trays, cupboards, stools, bins, etc. on which no excise duty was paid and the credit was taken under the category of capital goods. The department was of the view that these goods are neither inputs nor capital goods and the appellant was not eligible to avail the cenvat credit. Therefore, the department issued a show cause notice dated 17-4-09 proposing to deny credit amounting to Rs.1,49,540/- and recover the same under rule 14 of the Cenvat Credit Rules, 2004 read with section 11A of the Central Excise Act along with interest thereon under section 11AB and impose penalty on the appellant under rule 15 of the said Rules read with 11AC ibid. The notice was adjudicated vide order dated13-1-2010 wherein the proposals in the notice were confirmed and penalty of Rs.50,000/- was imposed. The appellant preferred an appeal before the lower appellate authority and the appeal was rejected but for modification in the penalty amount from Rs.50000/- to Rs. 10,000/-. Hence the appellant is before me.
3. The Ld. Advocate for the appellant submits that the various steel inputs such as angles, channels, plates, coils, etc. on which cenvat credit was availed were used in the manufacture of items such as bins, trolleys, racks, stands, etc. and the said items were used in various processes such as material movement, storage, testing, etc. which are integrally connected with the manufacture of their finished products , namely, transmission gears and steel forgings. He has submitted a Chartered Engineer’s certificate dated 5-1-2011 indicating the quantity of various raw materials used and quantity of items manufactured in support of the above contention. He further argues that the items manufactured are in the nature of capital goods. Alternatively he pleads that if these can not be considered as capital goods, they can certainly be considered as accessories of capital goods. As per the definition of capital goods under rule 2 (k) of the Cenvat Credit Rules, capital goods includes not only the goods falling under Chapter 82, 84, 85, 90, sub-heading No. 6801.10 and heading No. 68.02 and pollution control equipment but also components, spares and accessories of capital goods. Therefore, inputs used in the manufacture of capital goods which are captively used in the manufacture of finished products are eligible for cenvat credit. The Ld. Advocate relies on the judgment of this Tribunal in the case of - 1) Banco Products [2009 (235) ELT 636 LB]; 2) Sonai Engg. Pvt. Ltd. [2010 (253) ELT 806]; 3) Geltec Pvt. Ltd. [2010 (258) ELT 391] and 4) Kosi Plast Pvt. Ltd. [2011 (271) ELT 93] in support of his contention.
4. The Ld. Additional Commissioner (AR) re-iterates the findings of the lower adjudicating and appellate authorities. He also relies on the judgment of the apex court in Saraswati Sugar Mills case [2011 (270) ELT 465] wherein it was held that iron and steel structures can not be considered as components or parts of machinery as defined in the Central Excise Rules, 1944. He further relies on the judgment of this Tribunal in the case of Bayer Indian Syntans Ltd. wherein it was held that steel rack can not be considered as an accessory to the manufacturing plant. He also relies on the judgment of the hon’ble A.P. High Court in the case of Sree Rayalaseema Hi-strength Hypo. Ltd. vs. CCE, Tirupati [2012 (278) ELT 167] wherein it was held that welding electrodes used for repairs and maintenance of plants and machinery can not be considered as inputs for capital goods.
5. I have carefully considered the rival submissions. The Advocate for the appellant has submitted a Chartered Engineer’s certificate indicating the details of the steel items used in and the quantity of various items manufactured and the usage of those items in the process of manufacture. The said certificate was not produced either before the adjudicating authority or the appellate authority. Therefore, they had no occasion to verify the claim of the appellant that these are inputs for accessories of capital goods. In view of this position, I am of the view that the matter has to go back to the adjudicating authority to verify and consider the claim of the appellant in the light of the Chartered Engineer’s certificate and decide the matter afresh after giving a reasonable opportunity to the appellant to make submissions in their defence. All issues are kept open.
6. Thus the impugned order is set aside and the appeal is allowed by way of remand.