ORDER
T.K. Jayaraman, Member (T)
1. This appeal has been filed against the OIO No. 03/2005 dated 25.01.2005 passed by the Commissioner of Central Excise, Mangalore.
2. The issue relates to the denial of Modvat credit on various items of Capital Goods/Inputs.
3. Shri Rajesh Chander Kumar, the learned Advocate, appeared for the appellants and Shri Anil Kumar, the learned JDR, for the Revenue.
4. We have heard both the parties. The findings are as follows:
(i) The total credit disallowed is to the tune of Rs. 4,64,88,243/- for the period from June 1996 to December 1996. It was pointed out that in respect of chemicals, viz. petrolite, absorbant, catalyst like phenolin, sodium hydroxide, isopropobnol, the Adjudicating Authority has denied credit on the ground that they are not Capital Goods. It is the contention of the learned Advocate that the amounts involved in respect of these items viz. 2,96,459/- (Petrolite) and Rs. 3,08,35,881/- (Abosrbant catalyst) have already been reversed and this fact is admitted by the earlier OIO at pg. 264 as verified by the Range Superintendent. The total of the above amounts comes to Rs. 3,11,32,340/-. Since the reversal had already taken place, the demand of Rs. 3,11,32,340/- is not sustainable and the same is set aside.
(ii) With regard to the credit of Rs. 34,63,960/- relating to Petroleum Testing Equipments, we find that the Adjudicating Authority, before coming to a finding, has simply stated the contention of the appellant and that cannot be construed as a finding given in favour of the appellant. In fact in para 43.2, the Adjudicating Authority has held that the appellant is not entitled for the credit for the reason that the Central Excise Tariff heading has not been specified in the Installation Certificate. In our view, this is not a proper ground for rejecting the Cenvat Credit in the light of the decision of the Apex Court in the case of CCE, Coimbatore v. Jawahar Mills Ltd. . We hold that credit on Petroleum Testing Equipment is admissible.
(iii) Credit to the tune of Rs. 40,53,301 + Rs. 7,125/- has been denied on the ground of non-production of Triplicate copy of the Bill of Entry. It was contended that the originals of the Bill of Entry were submitted along with reconstructed certified copy. The following case-laws were relied on which hold that credit can be allowed on attested copy of Bill of Entry/original copy:
a. Emmes Metals Ltd. v. CCE, Mumbai-V
b. Nicholas Piramal (I) Ltd. v. CCE, Indore 2001 (147) ELT 333 (Tri.-Del.)
c. Rajasthan Polymers & Resins Ltd. v. CCE
d. Startron Video Pvt. Ltd. v. CCE, Meerut
e. Bhoruka Textiles Ltd. v. CCE, Bangalore
We agree with the appellant that the credit is not deniable simply for the reason of non-production of triplicate copy. As the original as well as the re-constructed copy have been submitted, the appellants are entitled for the above mentioned credit in view of the cited case-laws.
(iv) In respect of Piping material, calibration kit, Aviation warning lamp, instruments, etc. credit to the tune of Rs. 44,16,458 + Rs. 1,56,799/- have been denied. The appellant unit is a refinery. Pipes and Piping materials are the most visible structures of any refinery. We do not find any rationale in denying the credit on piping materials.
The Aviation Warning Lamp may not directly participate in the production process. The same is meant for warning the aircraft. While considering the entitlement for modvat, one has to look into the totality of circumstances in the light of the decision in the case of CCE, Coimbatore v. Jawahar Mills Ltd. . We are also convinced that the denial of credit on the following items is not justified considering their use in a sophisticated petroleum refinery.
Items
Items
Credit (Rupees)
Mobile Analyser System
4,10,000
Safety Showers
274
Accessories for plant
24,119
communication system
Aviation warning lamp
8,711
Gl Tower and parts
3,75,125
Fire systems
4,65,240
Electric Driven Trolley
6,53,344
Micro switch
1,008
(v) In respect of certain items, excess credit has been availed to the extent indicated below. The learned Advocate contended that the amounts have been reversed and the same has not been considered by the Adjudicating Authority.
(i) Rs. 1,27,374/-
(ii) Rs. 13,600/-
(iii) Rs. 4,587/-
(iv) Rs. 1,38,515/-
As the above amounts have already been reversed, no further demands can be made. Therefore, the demand on account of the above amounts already reversed is set aside.
(vi) Credit to the tune of Rs. 3,21,785/- has been denied on the ground that the endorsed copy of GP1 and invoices are not valid documents. It was contended that the materials were received prior to 01.04.1994 and during that period endorsed GP1 was a valid document. The following case-law was relied on:
a. Hybrid Electronic Systems P. Ltd. v. CCE, Mumbai-I
Moreover Rule 57T(3) allows credit availed on contracts. We agree with the appellants and hold that they are entitled for credit to the tune of Rs. 3,21,785/- availed on the basis of Endorsed copy of GP1 and invoices.
(vii) In respect of the following amounts, credit has been denied on the ground that the duplicate invoices were not produced.
(i) Rs. 2,37,508/-
(ii) Rs. 2,28,307/-
(iii) Rs. 20,588/-
(iv) Rs. 5,888/- (v) Rs. 1,45,000/-
It was contended that so long as the goods were received and used, credit cannot be denied on technical grounds. The following case-laws were relied on:
a. Galaxy (FRP) P. Ltd. v. CCE, Delhi
b. Evershine Electrical Works (I) v. CCE, New Delhi
c. Press Comp International v. CCE, Bangalore
d. Kothari General Foods Corporation Ltd. v. CCE, Bangalore
So long as the receipt of goods and their use are not in dispute, credit cannot be denied on mere technical grounds as held in the above cases. Hence, we hold that the above mentioned credit are not deniable.
(viii) In respect of the following items, credit has been denied as item-wise duty payment particulars are not available in the invoice.
(i) Rs. 57,241
(ii) Rs. 10,339
(iii) Rs. 9,481
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Rs. 77,061
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In the absence of duty payment particulars, the credit is not admissible.
4.1 In fine, out of the entire amount of Rs. 4,64,88,243/- demanded, excepting for an amount of Rs. 77,061/-, the balance amount of demand is not sustainable. Therefore, the same is set aside. However, the appellant has to pay an amount of Rs. 77,061/- towards inadmissible credit.
5. Before parting, we have noticed that the original authority has denied the credit on certain items on the ground that they are not used in the manufacture of final products. For example, credit has been denied on Piping material. We cannot think of a refinery without pipes. The Hon’ble Apex Court, in the landmark decision in the case of CCE v. Jawahar Mills Ltd. (cited supra), has held that while interpreting Rule 57Q of the Central Excise Rules 1944 that the language used in the Rule is very liberal and held that ‘Capital Goods’ can be machines, machinery, plant, equipment, tools or appliances. It has also been held that the goods enumerated in Clause (c) need not be used for producing the final product or used in the process of any goods for the manufacture of final products or used for bringing about any change in any substance for the manufacture of final product and the only requirement is that the same should be used in the factory of the manufacturer. For example, Instrumentation is very essential in the Refinery for measuring the various parameters. The Mobile Analyser system is a specialized motor vehicle used to measure the level of atmospheric pollution. The Commissioner has denied credit on the ground that it is not used exclusively for manufacture of final products. The concept of exclusive use has to be abandoned in the light of the Jawahar Mills decision. Safety is very important in all factories, leave alone a Refinery. Therefore, equipments connected with safety cannot be denied modvat credit on the ground that they are not exclusively and directly used in the manufacture of final products. Taking such a view, we hold that the appellants are entitled for the credit excepting to the tune of Rs. 77,061/-. Thus, we allow the appeal in the above terms.
(Pronounced in open Court on 12.03.2007)