" (1) Appeal No. E/30194/2022 CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL HYDERABAD REGIONAL BENCH - COURT NO. – I Single Member Bench Excise Appeal No. 30194 of 2022 (Arising out of Order-in-Appeal No.VIZ-EXCUS-001-APP-022-21-22, dated 12.02.2022 passed by Commissioner of Central Tax & Customs (Appeals), Guntur) M/s Berry Alloys Ltd., .. APPELLANT Plot No. 368, APIIC Growth Centre, Bobbili, Vizianagaram District, Andhra Pradesh – 535 558. VERSUS Commissioner of Central Tax .. RESPONDENT Visakhapatnam– GST GST Commissionerate, Port Area, Visakhapatnam, Andhra Pradesh – 530 035. APPEARANCE: Ms A S K Swetha, Advocate for the Appellant. Shri A Rangadham, Authorised Representative for the Respondent. CORAM: HON’BLE Mr. A.K. JYOTISHI, MEMBER (TECHNICAL) FINAL ORDER No. A/30344/2024 Date of Hearing:16.07.2024 Date of Decision:31.07.2024 [ORDER PER: A.K. JYOTISHI] M/s Berry Alloys Ltd., (hereinafter referred to as appellant) are in appeal before this Tribunal against the order dated 12.02.2022 passed by the Commissioner (Appeals) upholding the Order-in-Original dated 02.11.2020 (hereinafter referred to as impugned order). 2. Facts of the case, in brief, are that the appellants, engaged in the manufacture of Silico Manganese, provided certain information/clarification for November 2016 to June 2017 to the Department indicating, interalia that they had availed Cenvat Credit to the tune of Rs. 42,85,986/- on capital (2) Appeal No. E/30194/2022 goods such as CI Sinter Baking PAN (73251000), HR Plates (72085210), Plates (72085110), MS Joists/ISMB (72163200), MS Channels (72163100), MS Angles (72165000), MS Bars/Sqares (72142090), SS Plates (72192212), MS Rounds (72149990), SS Pipes and Tubes (73069090), MS Plates (72111410), Choard Plates (72088210). The Department did not find these goods as eligible for credit under the definition of capital goods, primarily on two grounds: (i) the said goods are not getting covered within the definition of capital goods under Rule 2(a)(A) o Cenvat Credit Rules 2004 (CCR) - by either not being specified by way of their tariff sub-headings or by finding place in their categories mentioned under Rule 2(a)(A), and (ii) Considering the usage submitted by assessee for these goods, Department felt that in view of Board Circular dated 15.01.2012 issued under Section 37(B), these items having been used as parts in construction or in furnace and other equipments attached to earth which cannot be considered as excisable goods, and therefore these goods used for making furnace and other equipments leading to change in the identity from parts to such equipments attached to earth. The Department also invoked the provisions of Rule 9(5) of Cenvat Credit Rules which casts burden on the assessee to prove the admissibility of the credit taken by him. 3. On adjudication, the Original Adjudicating Authority considered their submissions especially that such items covered in Show Cause Notice were to be considered as components, parts etc., for capital goods and by virtue of that they would be covered within the definition of capital goods. As regards usage, the appellant had submitted a Chartered engineer’s certificate indicating the usage of such items. The Adjudicating Authority has held that the furnace and other equipment are not excisable goods and (3) Appeal No. E/30194/2022 therefore these items cannot be considered as parts used for manufacture of capital goods. As regards usage, the Adjudicating Authority has observed that the assessee had not produced any records like material received report, materials issue notice containing item description, drawing/designs etc., to help identify the utility or end usage of the subject goods in relation to manufacture of final goods, which is very important to allow the credit. Therefore, he held that in the absence in the absence of any proof to indicate the usage of equipment/machinery for processing any goods or bringing about any change in any substance for the manufacture process, the eligibility of credit cannot be decided. He has also relied on the judgment of Hon’ble Supreme Court in the case of M/s KCP Ltd., Vs CCE, Chennai wherein, interalia, it was held that in order to avail MODVAT/CEBNVAT an assessee has to satisfy the Assessing Authorities that the capital goods in the form of components, spares and accessories had been utilised during the process of manufacture of finished product. Since, the appellant did not at any point of time provided details of these capital goods or declared in their ER-1 nor produced any drawings and designs of capital goods, he did not find the Chartered Engineer’s certificate produced at the time of adjudication as sufficient to establish the usage of item. 4. Commissioner (Appeals) has agreed with the observation of the Original Authority that appellant is required to justify and prove the usage of the material and mere Chartered Engineer’s Certificate is not sufficient. He has also observed that the ratio of the judgements cited by the appellant have been accepted by the Adjudicating Authority. However, facts of the case requires sufficient evidence to determine the usage of goods. The operative part of the impugned order at para 11 is reproduced below: (4) Appeal No. E/30194/2022 “11. In light of the above facts and legal position, I agree with the findings of the Adjudicating Authority wherein it has been held that the appellant is required to justify and prove the usage of the material and mere Charted Engineer’s Certificate (Which incidentally in this case proves the allegation of the department, as discussed above) is not sufficient. The facts in the present case clearly bring out that the ratio of the judgment cited by the appellant have been accepted by the Adjudicating authority however the facts of the case required sufficient evidence to determine the usage of goods. It is more relevant as a definition of ‘input’ under Cenvat Credit Rules, 2004 was amended in 2009 so as to exclude “but shall not include cement, angles, channels Centrally Twister Deform Bar (C.T.D.) or Thermo Mechanically Treated bar (TMT) and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods.” I do not find any infirmity in the order of the Adjudicating Authority.” 5. Learned Advocate for the appellant reiterates the submissions made in the appeal memorandum and also points out that the matter is no longer res-integra in view of earlier order of Tribunal in Excise appeal no. 23786/2014 order dated 09.05.2022 in their own case wherein for the period September 2010 to July 2012 the Tribunal has set aside the order of the Adjudicating Authority confirming the demand. She has also tried to explain that Chartered Engineer’s certificate clearly brings out the usage of such items in fabrication of capital goods within the factory and that usage as such has not been disputed by the Department. She however fairly concedes that items used involving an amount of Rs. 3.73 lakhs for foundation etc., would not be admissible for credit as capital goods in view of the provision under CCR. 6. On the other hand, the Learned DR points out that the referred judgment of Tribunal dated 09.05.2022 would not be applicable in the facts of the case as the period involved in the present appeal is beyond 01.07.2012 when the definition of capital goods underwent change whereas the period covered in the referred Tribunal Order is prior to 01.07.2012. He also emphasises that for any claim of credit of either capital goods or inputs (5) Appeal No. E/30194/2022 has to be satisfied in accordance with the provisions of Rule 9(5) of the CCR. According to him, the Chartered Engineer’s certificate is not a conclusive and sufficient proof of usage test so as to conclude that said goods were actually used in the manufacture of capital goods. He fairly concedes that they are not contesting the ground that these capital goods, since they were embedded to earth, ceases to be excisable goods and hence, these goods were not eligible as input or capital goods within the purview of CCR. However, what they are contesting is that first whether these are components, spare parts etc., and secondly these were actually used in the fabrication/manufacture of the capital goods in view of insufficiency of evidence adduced by the appellant and statutory provisions under Rule 9(5) of the Cenvat Credit Rules 2004 (CCR) which casts onus of burden of proof regarding the applicability of CENVAT credit on manufacturer of goods. He has relied on certain judgments in support of the submission that merely producing Charter Engineer’s certificate would not suffice to discharge the onus placed on the appellants under provisions of Rule 9(5) especially since they have failed to produce any supporting documents. He has relied on the judgment of Hon’ble Allahabad High Court in the case of M/s Bajaj Hindustan Ltd., Vs Union of India & Others [2013 (295) ELT 20 (ALL)], Commissioner of Central Excise and Service Tax, Haldia Vs M/s Emami Agrotech Ltd., [2022 (1) TMI 764 (CAL-HC)], Hon’ble Karnataka High Court in the case of CCE, Aurangabad Vs Toyota Kirloskar Motors Ltd., [2009 (12) TMI 529 (KAR- HC)]. 7. Heard both the sides and perused the documents. 8. The main issue to be decided in this case is as follows: (6) Appeal No. E/30194/2022 (i) whether the case is no longer res-integra in view of the order dated 09.05.2022 passed by the Tribunal in their own case (ii) whether these items are covered within the definition of capital goods or otherwise (iii) whether the Chartered Engineer’s certificate submitted by the appellant sufficient to discharge the responsibility placed on appellant under Rule 9(5) of CCR 2004. 9. I have perused order dated 09.05.2022 in the Final Order No. A/30058/2022, wherein, the Tribunal had considered similar matter in respect of same appellant for the period September 2010 to July 2012 and one of the main observations of the Tribunal was that no cogent findings have been given by the Learned Adjudicating Authority in respect of non- acceptance of Chartered Engineer’s certificate and the ground on which Cenvat Credit was denied was the fact that the capital equipment in question were embedded to earth and hence become immovable property. The items covered were more or less same. The Tribunal after going through the submissions and facts of the case held that Chartered Engineer’s certificate, in the absence of any other proof that any such items were not received or diverted or any other contradictory certificate, cannot be set aside. The Tribunal also observed that the receipt of the goods and thereafter use for fabrication as per Chartered Engineer certificate is not contested but it has been contested only on the point that said inputs do not fall under the category of capital goods and therefore not eligible for Cenvat Credit. The Tribunal held that the issue was no longer res-integra in view of the judgment of Hon’ble Supreme Court in the case of CCE, Jaipur Vs Rajastan Spinning & Weaving Mills Ltd., [2010 (225) ELT 481 (SC)] wherein Hon’ble Supreme Court by relying on the earlier decision of Commissioner of Central (7) Appeal No. E/30194/2022 Excise, Coimbatore & Others Vs Jawahar Mills Ltd., & Others [2001 (132) ELT 3 (SC)] has dismissed the appeal preferred by Revenue by applying user test. 10. I find that there is some force in the arguments made by the Learned DR that the rules applicable for the period in the present appeal were not same and therefore on that ground alone said order should not be made applicable to the present appeal. I further find that the Tribunal has observed that receipt of goods and thereafter their use for fabrication as per Chartered Engineer’s certificate is not contested, whereas, in the present case, the use is being doubted in the Order-in-Original upheld by the Commissioner (Appeals), in as much as the said certificate was considered as not sufficient to prove whether they were actually utilised in the fabrication of the capital goods or otherwise. Therefore, Rule 9(5) of CCR 2004 has not been considered. 11. Therefore, while I find that facts of the case are more or less identical bearing few items the grounds taken for confirming demand, grounds and reasons for grant of relief by Tribunal are different. Firstly, in their order Tribunal had not examined applicability of Rule 9(5) of CCR. Also, though it was claimed as “input” in the relevant period, in the present appeal it has been claimed as “capital goods”. Admittedly, the declaration of capital goods was under different rules during the said period and apparently because of that it was claimed as “input” and not as capital goods. The format of Chartered Engineer’s certificate perused by the Tribunal was also different than the one relied upon by the appellant in present appeal. (8) Appeal No. E/30194/2022 12. Therefore, I find that the judgment dated 09.05.2022 cannot be applied in totality for deciding the present appeal where facts and submissions are slightly different as well as the rule position is also different. Therefore, this ground of the appellant is not tenable. As far as the second issue, whether these items can be considered as capital goods or not, I find that in the light of the facts stated in the show cause notice as also in terms of the provisions under Rule 2(a)(A) of CCR, these items, per se, could be considered as capital goods, if they are used as components etc., of capital goods specified at Rule 2(a)(i) and (ii). It is not the case, nor disputed by Department that various capital goods were fabricated/manufactured at site within the factory and that they were not falling under Chapter 82, 84, 85, 90 etc., or Pollution Control Equipment. In fact, the impugned order has tacitly accepted that these items could be considered as components. What is being disputed is whether these items were actually used as components of the capital goods covered within the definition of capital goods under Rule 2(a) within the factory in view of insufficiency of evidence adduced by the appellant. In so far as the issue whether such components would still be eligible for input credit on account of the fact that the goods were embedded to earth and thus not goods at all, the appellants have relied on plethora of judgments and I observe that in various judgments it has been held that the goods which are embedded to earth and therefore not excisable, cannot be the ground for denial of Cenvat Credit as capital goods, as follows: a) CCE & ST, Panchkula Vs M/s Indo Bhutan Construction Solutions Pvt Ltd., [2018 (9) TMI 909 CESTAT – Chandigarh] b) Ritesh Trade Fin Ltd., Vs CCE, Bolpur [2005 (5) TMI 184 (CESTAT- KOL)] c) CCE, C & ST, Rourkela Vs M/s Jai Jagannath Steel & Power Ltd., [2017 (10) TMI 608-CESTAT-KOL] (9) Appeal No. E/30194/2022 d) Commissioner of Central Excise & Customs-BBSR-II Vs M/s SPS Steel & Power Ltd., [2017 (7) TMI 884 -CESTAT-KOL] In fact, this issue has been discussed in great detail in the SPS Steel & Power Ltd., referred supra, where relying on, interalia, Hon’ble Supreme Court decision in the case of CCE, Jaipur Vs Rajastan Spinning & Weaving Mills Ltd., [2010 (255) ELT 481 (SC)] it was held that the credit would still be admissible, subject to user test, despite such goods having been used in fabrication of various capital goods embeded to earth. Therefore, the ground taken by the Revenue that since these items were used as components, spares etc., for fabrication of various capital equipments/goods embedded to earth would debar it from being considered as capital goods is not tenable. Thus, such goods would still be considered as components etc., if used in fabrication or construction of capital goods within the factory where such capital goods etc., are further used in the manufacture of excisable goods. Further, it has also not been disputed that such items have not at all been received in the factory or not at all used in fabrication of capital goods etc., as reported by the appellant in their submission to the Department, which made the basis for issuing the show cause notice. Therefore, apparently, what is being now disputed is whether the usage criteria has been clearly satisfied to consider as component. Thus, impugned items, except when used for making foundation etc., would fall within the definition of capital goods under category 2(a)(A)(iii). 13. The third issue which needs deliberation is whether in the given facts of the case, appellant has been able to specify the usage of such components in the capital goods fabricated within the factory of production or otherwise. The appellants have relied solely on one document in support of their usage in capital goods and that is Chartered Engineer’s certificate (10) Appeal No. E/30194/2022 issued by Shri R K L Prasad wherein various details of credit taken and its utilisation in the main equipment have been indicated. This certificate, interalia, also links the quantity of impugned goods to the main equipment and also describes the uses of main capital equipment in making the final excisable goods. What is however not forthcoming from the certificate is the item’s descriptions describing some of the very basic specifications like size, quality standard/parameters etc. From the description given by the Chartered Engineer, it is also not clear as to when and how such items were actually issued for fabrication of the intended main equipment. It also does not show what documents were verified and whether they had verified issue register, technical feasibility of utilisation of such items in the intended capital equipment, drawings, designs etc., to satisfy whether such items were required for manufacturing of final goods etc. This becomes more important especially when most of these items have multiple uses and can be used for various purposes and some of these items cannot be used for the intended purposes if they are not having specified technical parameters compatible with such use because of the high temperature etc., where only a specified variety of sheets, plates etc., can be used. Therefore, though theoretically these items can be considered as components, parts etc., for these equipments but were they actually used for such fabrication or uses as detailed in the Chartered Engineer certificate needs further corroboration to the satisfaction of the Competitive Authority. 14. Therefore, in this case, the appellants have clearly failed to bring any corroborative evidence even at the stage of adjudication or appeal to supplement their claim which they have based purely only on Chartered Engineer’s certificate. Further, the fact that as per explanation 2 to definition of term “input”, though it includes certain goods used in the of (11) Appeal No. E/30194/2022 manufacture of capital goods which are further used in the factory of the manufacturer, but it does not include certain items like cement, angles, channels, CTD bars, TMT bars and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods. Thus, in view of multiple uses of these goods as well as exclusion of certain end uses, the actual utilisation assumes greater significance to not only determine the actual use as component but also the nature of “capital goods” in which such goods have been used. The Chartered Engineer’s certificate in this case was not sufficient to prove the same conclusion. 15. As pointed out by Learned DR, Rule 9(5) of CCR, 2004 provides for certain obligations. Rule 9(5) is reproduced below for ease of reference: The manufacturer of final products or the provider of output service shall maintain proper records for the receipt, disposal, consumption and inventory of the input and capital goods in which the relevant information regarding the value, duty paid, CENVAT credit taken and utilized, the person from whom the input or capital goods have been procured is recorded and the burden of proof regarding the admissibility of the CENVAT credit shall lie upon the manufacturer or provider of output service taking such credit. Thus, the burden of proof relating the admissibility of Cenvat Credit shall lie upon the manufacturer. In this case, they have not clearly discharged this burden which was invoked in the show cause notice itself. It has been clearly held and upheld that mere production of Chartered Engineer’s certificate was not sufficient to discharge this burden. Learned DR has relied on certain judgments in the case of CCE & ST, Haldia Vs Emami Agrotech Ltd., where the Hon’ble High Court of Calcutta, interalia, held that onus is on the part of the assessee to produce documents to show that the certificate has been issued upon verification of all details, which has not (12) Appeal No. E/30194/2022 been done by the assessee. There was no record to rely upon by the Tribunal which corroborates the certificate issued by the Chartered Accountant. Similarly in the case of Commissioner of Central Excise, Aurangabad Vs Toyota Kirloskar Motors Ltd., [2010 (256) ELT 216 (Kar)], Karnataka High Court, interalia observed that it cannot be universally held that certificate itself is sufficient to establish that the incidence of duty has not been passed on to the buyers. In the case of Commissioner of Customs (Exports), Custom House Vs M/s BPL Ltd., [2010 (259) ELT 526 (Mad)], Madras High Court held that the certificate issued by the Chartered Accountant is simply a piece of evidence acknowledging certain facts and the Authorities cannot merely act upon such certificate. In essence, these judgments support the contention of the Learned DR that the Chartered Engineer’s certificate, per se, would not be a sufficient evidence or proof in view of the statutory provision under Rule 9(5) as also in view of various judgments so as to allow the credit in respect of these goods for their having actually being used as component in the manufacture/fabrication of capital equipment. 16. Per contra, Learned Advocate for appellant has disputed these reliance by Learned DR on the grounds that facts are distinguishable to the facts of present appeal. In fact, there are plethora of cases where Chartered Engineer’s certificate was found sufficient, includes their own case referred supra, for allowing credit based on usage. However, he has not been able to point out whether any of the cited judgments examined the applicability of Rule 9(5) as regards onus of proof while deciding the issues. 17. Therefore, I find much force in the argument of the Department that in the present appeal, the appellants have failed to satisfy the lower authorities (13) Appeal No. E/30194/2022 as regards its actual use which is crucial to decide usage and the extent of it’s usage. Thus, in the fact of the case and statutory provisions what is needed is the verification and corroboration of the Chartered Engineer’s certificate with the internal records as pointed out in para 11.5 by the Adjudicating Authority so as to satisfy him about its actual use in those intended capital equipments/goods etc. 18. So far as the issue of involving imposition of penalty is concerned, I find that Original Authority has imposed penalty under Section 15(1) of CCR read with Section 11AC(1)(a) of Central Excise Act on the grounds that appellant has violated provisions of Rule 9(5) by not disclosing the actual usage, which came to their knowledge only when they informed the Department on being asked. However, this aspect would have to be re- determined in view of discussions in foregoing paras where admissibility of the entire demand would have to be re-determined. 19. Therefore, the matter is remanded to the Original Authority to go through the corroborative documents supporting the Chartered Engineer’s certificate supporting actual use of such goods in fabrication/construction of capital goods as claimed by appellant and to allow credit to the extent they are proved to have been actually used in fabrication of those equipments / capital goods etc. Similarly, imposition of penalty would need to be re- determined. All the necessary documents would need to be produced by the appellants within 3 months of this order to the Original Authority, who shall thereafter pass a speaking order after going through such documents within 3 months of hearing. (14) Appeal No. E/30194/2022 20. Therefore, order of Commissioner (Appeals) is set aside and the appeal is disposed off by way of remand to Original Authority for re- determination of demand and imposition of applicable penalty, if any. (Order Pronounced in open court on 31.07.2024_) (A.K. JYOTISHI) MEMBER (TECHNICAL) jaya "