1. This is an appeal against the order passed in File No. V/Adj (SCN) 15/473/97-M III dated 23rd September, 1996 by the Commissioner of Central Excise, Mumbai III whereunder he disallowed the Modvat credit of Rs. 3,49,64,830/- covered by four show cause notices as they have been wrongly availed and also levied a penalty of Rs. 3,50,00,000/- under Rule 173Q of the Central Excise Rules.
2. The appellants were manufacturing Direct Reduced Iron classified under sub-heading 7203.00, Briquetting Iron, classified under the same sub-heading 7203.00 and Hot Rolled Coils under sub-heading 7209.00 under Central Excise Tariff Act. It appears they had taken Modvat credit under Rule 57Q for beams, channels, plain plates angles HR sheets channel, plain plates, CTD bars, corrugated sheets, paints and varnishes etc. Four show cause notices were issued for various periods for various amounts as mentioned below mentioning that Modvat credit was erroneously taken and utilised.____________________________________________________________Date of SCN Period Amount____________________________________________________________21-12-1994 July, 1994 to Nov., 1994 Rs. 30,58,810.005-6-1995 Dec, 1994 to Mar., 1995 Rs. 1,07,59,017.0010-10-1995 Apr., 1995 to July, 1995 Rs. 90,41,799.004-03-1996 Aug., 1995 to Sept., 1995 Rs. 1,21,05,204.00____________________________________________________________ Rs. 3,49,64,830.00 The appellants by their various letters replied to the SCNs denying their liability. The Commissioner after hearing the appellants had held that the materials M.S. Angles, M.S. Plates etc. did not fall within the ambit of Rule 57Q of the Central Excise Rules. Various items of steel like beams, channels, bars under Chapter 72 and 73 have been used for erection of structural sheds for setting up of plant and machinery for manufacture of final product/sponge iron and the same could not be construed as capital goods themselves. He, therefore, confirmed SCNs and levied penalty as indicated in the earlier portion of this order.
Hence this appeal.
3. Shri Lakshmikumaran, Advocate appeared for the appellant and Shri Gurnani, JDR appeared for the Department.
4. Shri V. Lakshmikumaran, learned Advocate for the appellants had argued that out of the entire items involved only CTD was involving Modvat credit of Rs. 96,57,140/- have been used for civil foundation work. They had been used for construction of shed and office. It was argued that the remaining items like beams, angles, channels, plates have been used for fabrication of supports on which the machineries and equipments were mounted. Without these supports the machineries and equipments could not function. Consequently it is argued that they form part of the plant and machinery itself. They are thus covered by Explanation l(a) to Rule 57Q it is argued. In any case if the supports are not considered per se as plant and machinery it is further argued that they could be considered as components spare parts or accessories of the plant and machinery and could therefore, be covered under Explanation l(b) to Rule 57Q. He also would further argue emphatically in an alternative way so to speak that these items are to be treated as inputs and in terms of provisions of Rule 57D (2) read with Notification 57/95 appellants are entitled to succeed in the appeal. He also would argue that the observation of the Commissioner that the appellants have deliberately availed Modvat when not entitled for the same were without any basis as in SCNs. There was no allegation of suppression of facts. Hence levy of penalty is not sustainable.
5. Shri Gurnani, ld. JDR, would argue in reply that the entire amount demanded has been validly made. The items under consideration have been used for purpose of creation of immovable property which are not excisable under the Central Excise Act. The Act levies duties on manufacture of goods which means movable property only. Credit has been taken in this case on structurals which are immoveable property fixed structurals are not and cannot be goods. He would emphasis in the argument that inputs used for creation of asset which is embedded to earth cannot be capital goods. He would rely on the judgment of Supreme Court in J. K. Cotton Spinning Mills v. STO, 1997 (91) E.L.T. 34 para 11 thereof. The items in question cannot be raw materials of plant as it is fixed structurals. He would also state that these items which are claimed as raw materials do not come within the purview of Rule 57Q.The argument of learned Counsel it is argued by Shri Gurnani are new argument which were not raised earlier. These items do not bring any change in the finished goods. He also cites the decisions of Tribunal in the cases of C.C. Coimbatore v. Shanmukharaja Spinning Mills Ltd., 1997 (89) E.L.T. 84 and Indo Rama Synthetics (I) Ltd. v. CCE, 1996 (86) E.L.T. 277.
6. We have considered the rival submissions carefully. Let us see from SCN stage. Let us take SCN dated 21-12-1994. It reads as under : "They have taken credit on the material which is not covered under the definition of capital goods envisaged in the said Rule amounting to Rs. 30,58,810.05 and utilised the said credit towards payment of Central Ex cise duty." "...The assessee have contravened the provisions of Rule 57Q, 57T read with 57G of Central Excise Rules 44 in-as-much as They have wrongly taken and utilised Modvat credit on the material beam and channels CTD bars plate and corrugated sheets claiming it as capital goods.
As per definition of capital goods as envisaged in Rule 57Q plant is described as capital goods. And the plant is erected/installed from raw material like channel angle beam etc. by way of fabrication activity." "whereas it is further observed that all the items are used for erection of plant/and structures on which no excise duty was paid being immovable properties. Since the credit under Rule 57Q can be availed only on capital goods which are used for production of final excisable goods and not on buildings and plants, the credit of duty on goods (as listed above) used for erection of plant/buildings is not admissible." In reply to SCN by their letter dated 2-9-1995 appellants stated as follows : "Inasmuch as the items in question viz. channels, angles bars, plates etc are components of our plant they are clearly covered by definition of capital goods.
"From the above I find that the materials/items such as beams, M.S. Angles, M.S. Plates, CTD Bars, corrugated sheets, CTD Rounds, M.S. Rails, Channels, bolts, nuts, paints, varnishes etc. do not fall within 57Q ibid. As per assessee's own submissions these materials are not plant machinery etc. but the same have been used in the erection installation of the structural shed under which the plant and machinery is set up for the manufacture of this final product i.e. spong iron. By no stretch of imagination these materials can be construed to be capital goods." The arguments of Shri Lakshmikumaran regarding coverage of items in question under Expln. l(b) of Rule 57Q and regarding applicability of Rule 57D and applicability of Notification 57/95 have to be considered to the facts of this case. This line of argument as has been rightly pointed out by JDR has been taken for the first time before us. Then the question would be whether we can ourselves decide the point.
7. Kerala High Court had rendered a similar question arising under the Income Tax Act in the case of CIT v. Kerala State Cooperative Marketing Federation Ltd., 1992 (193) ITR 624 & 638.
"Following the decisions of Supreme Court cited above and agreeing with the view expressed by the Madras High Court in Brahadesivaran's case 1987 (163) ITR 680 we held that an appellant before the Tribunal could raise any new or additional point for the first time in appeal before the Tribunal even though it had not been raised in any form either before the assessing authority or before the Commissioner of Income Tax (Appeals). We further hold that when once any such new or additional ground is raised before the Tribunal, they are duty bound to entertain that ground and render a decision thereon either themselves or by remanding the matter if further investigation into facts is necessitated." The above judgment has been commented upon by a learned author Shri V.T. Raghavachari, himself a former Judicial Member of this Tribunal in his book "Appellate Remedies Under Excise and Customs" 3rd Edition at page 153 as under : "Thus the Kerala High Court has put the issue in the proper perspective (i.e.) that the purpose of all proceedings is to see that what is due to the Government is collected and the collection of what is not due discarded. That would, therefore, mean that no ground should be shut out if that would subserve the above purpose, subject of course to the proviso, that so far as raising additional grounds before appellate authorities the same should be permitted at the discretion to be judicially exercised of the appellate authority." 8. We have carefully considered the arguments of Shri Lakshmikumaran and Shri Gurnani. These arguments regarding Notification No. 57/95 has been made only before us. We, are, therefore of the opinion that to meet the ends of justice, we are setting aside the impugned order.
9. Neither the grounds of appeal nor the replies to SCNs mention these grounds therefore the matter is remanded back to the jurisdictional Commissioner to consider the entire matter afresh according to law.