Discrepancies in Show Cause Notice & Adjudication Order: CESTAT Ahmedabad Directs Fresh Adjudication in Ultratech Cements Case

Court Name : CESTAT Ahmedabad

Parties : Ultratech Cements Ltd Vs C.C.E. & S.T.-Rajkot

Decision Date : 02 August 2023

Judgement ref : Excise Appeal No. 13677 of 2013- DB

The case involving Ultratech Cements Ltd and C.C.E. & S.T.-Rajkot brought to light discrepancies between the show cause notice and the adjudication order.

Ultratech Cements Ltd brought forward a contention regarding the use of certain iron and steel items. They argued that these items were integral to the fabrication of plant and machinery, a claim backed by a Chartered Engineer’s Certificate. Contrarily, the initial show cause notice pointed towards their use in civil construction. However, the final order indicated their role as support structures for machinery embedded in the ground.

CESTAT Ahmedabad pinpointed these glaring contradictions. They highlighted that the Adjudicating Authority might not have fully grasped the actual use of the goods in the machinery's fabrication.

Considering the changing legal environment and the existence of judgments on related matters, CESTAT felt the need for a new, more informed order. They decided to set the previous order aside, directing the Adjudicating Authority to draft a new order, ensuring it aligns with the principles of natural justice.

This case underscores the necessity for clear and consistent legal documentation. CESTAT's move to ask for a re-adjudication underlines the importance of thorough scrutiny and adherence to justice principles. It serves as a reminder that legal processes should be precise and rooted in a comprehensive understanding of all relevant facts and regulations.

Final Order No. 11642/2023

DATE OF HEARING: 18.07.2023

DATE OF DECISION: 02.08.2023

RAMESH NAIR

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:

HIL Limited Vs CCE 2023 (4) TMI 428-CESTAT Ahmedabad

CCE & ST, Rajkot v. Sanghi Industries Ltd. 2022 (5) TMI 475 (Tri. Ahm)

Sanghi Industries Ltd. v. CCE & ST, Kutch 2017 (10) TMI 330 (Tri. Ahm)

CCE, Lucknow v. Mankapur Chini Mills 2019 (367) ELT 889 (All) Mundra Ports & Special Economic Zone Ltd. v. Commissioner 2015 (39) STR 726 (Guj.)

India Cements Ltd. v. CESTAT Chennai 2015 (321) ELT 209 (Mad.)

Manglam Cement Ltd. v. CCE, Jaipur-1 2018 (360) ELT 737 (Tri. LB)

CCE, Raipur v. Hira Ferro Alloys Ltd 2016 (342) ELT 434 (Tri. Del.)

CCE, Raipur v. Topworth Steels (P) Ltd. 2018 (15) GSTL 383 (Tri. Del.)

Singhal Enterprises Pvt. Ltd. 2016 (341) ELT 372 (Tri. Del.)

Vodafone Mobile Services Ltd. v. CCE & ST, Delhi 2019 (27) GSTL 481 (Del.)

Bharti Hexacom Ltd. v. CCE, Jaipur-1 2021 (52) GSTL 62 (Tri. Del.)

Thiru Arooran Sugars v. CESTAT Chennai 2017 (355) ELT 373 (Mad.)

Birla Corporation Ltd. v. CCE 2005 (186) ELT 266 (SC)

Vandana Global Limited Vs Commissioner, Central Excise and Customs, Central Excise 2018 (5) TMI 305 (Chhat.)

Commissioner of CGST & Central Excise Lucknow DSCL, Sugar, Rupapur District Harodi, U.P 2019 (6) TMI 199 (All.)

Tamilnadu Newsprint & Papers Ltd. Vs The Commissioner of Central Excise 2021 (3) TMI 179 (Mad.)

The Commissioner of Central Excise Vs Madras Cements Ltd 2019 (7) TMI 460 (Mad.)

Dalmia Cements (Bharat) Ltd. Vs CESTAT, Chennai 2016 (341) E.L.T. 102 (Mad.)

Commr. Of C.Ex., Visakhapatnam-II Vs Sai Sahmita Storages (P) Ltd. 2011 (270) E.L.T. 33 (A.P)

SLR Steel Ltd. Vs Commissioner of C.Ex., Banglore-II 2010 (249) ELT. 394 (Tri-Bang)

Commissioner of Central Excise, Banglore-II Vs SLR Steel Ltd. 2012 (280) E.LT. 176 (Kar.)

Ambuja Cement Ltd. Vs Commissioner CE & ST (LTU) Mumbai Final Order dated. 03/03/2022

Ambuja Cements Ltd. Vs Commissioner of Central Excise & Service Tax Final Order dated. 01/12/2021

Ambuja Cements Ltd Vs Commissioner CE & ST (LTU) Mumbai Final Order dated 21/02/2022

Commissioner of Commercial Tax, Lucknow v. Ambuja Cement Ltd. 2018 (8) GSTL 161 (All)

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)

RAMESH NAIR

MEMBER (JUDICIAL)

C.L.MAHAR

MEMBER (TECHNICAL)

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Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad REGIONAL BENCH-COURT NO. 3 Excise Appeal No. 13677 of 2013- DB (Arising out of OIO-82-COMMR-2013 dated 31/07/2013 passed by Commissioner of Central Excise and Service Tax-RAJKOT) Ultratech Cements Ltd ……..Appellant Sewagram, Village Vayor, Taluka- Abdasa, Kutchh, Gujarat VERSUS C.C.E. & S.T.-Rajkot ……Respondent Central Excise Bhavan, Race Course Ring Road...Income Tax Office, Rajkot, Gujarat- 360001 APPEARANCE: Shri, Ishan Bhatt, Advocate appeared for the Appellant Shri Tara Prakash, Deputy Commissioner (AR) for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. C.L.MAHAR