Bayer Cropsciences Ltd vs Commissioner Of Central Excise

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI

COURT No. I

Appeal No. E/1359, 1360/05 and E/1495/06

(Arising out of Orders-in-Appeal No.BR/22 to 23/TH-I/2005 dated 09.03.2005 and BR/264/TH-I/06 dated 12.04.2006 passed by Commissioner of Central Excise, (Appeals) Mumbai IV & I)

For approval and signature:

Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical)

================================================

1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

Bayer CropSciences Ltd. Appellant Vs.

Commissioner of Central Excise Thane I Respondent

Appearance:

Ms. Anjali Hirawat, Advocate for appellant Shri R.K. Maji, Asst. Commr (AR) for respondent

CORAM:

Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical)

Date of Hearing: 08.10.2015 Date of Decision: 08.10.2015

ORDER NO

Per: M.V. Ravindran

These 3 appeals are directed against Orders-in-Appeal No.BR/22 to 23/TH-I/2005 dated 09.03.2005 and BR/264/TH-I/06 dated 12.04.2006. As these appeals are in respect of the very same assessee and the issue also being the same, they are being disposed of by a common order.

2. The issue in brief in these cases is the appellant had availed Cenvat credit of Central Excise duty paid on the furnace oil, which was used for manufacture of steam. Some part of the steam produced was utilised in canteen and in laundry. It is a case of the revenue that the steam utilised for non-productive purpose cannot be considered as being used in or in relation to manufacture of any final products. Coming to such a conclusion both the lower authorities have held against the appellant and confirmed the demands with interest and also imposed equivalent penalties.

3. Learned Counsel would draw our attention to the facts of the case and submit that the utilization of steam generated for the purposes of cleaning of vessels and used in laundry for cleaning of the uniform which was used by the employees in the factory premises for manufacturing of final products. It is his submission that the canteen services are requirement of the law and the uniform is used by the appellants employees in the manufacturing activity of the final products. It is the submission that the canteen services being pre-requisite of any manufacturing activity as also providing clean uniform during the course of manufacturing is nothing but connected with the manufacturing activity. She would submit that the Tribunal in the case of Raymond Ltd  2000 (117) ELT 104 has in identical set of facts laid down the meaning of the words for any other purposes. It is her submission that the steam which is used in canteen and in laundry are within the factory premises is nothing but used for any other purposes.

4. Learned departmental representative would submit that the issue is now settled by the Honourable High Court of Bombay in the case of Indo Rama synthetics  2007 (219) ELT 122 wherein the phrase for any other purpose has been explained as the use of electricity must have nexus with the goods manufactured in the factory. He would submit that in the case in hand, the steam is used for non-productive purposes in the canteen and in the laundry. It is his submission that such credit should not be allowed.

5. We have considered the submissions made at length by both sides and perused the records.

6. As correctly put by both sides, the issue that falls for consideration in this case is whether appellant is required to debit an amount of Cenvat credit proportional to the utilisation of steam in non-productive use in canteen and laundry or otherwise.

6.1 It is undisputed that the Cenvat credit on furnace oil is eligible to be availed by the appellant as they are utilising the steam produced by using furnace oil for manufacturing of final products in factory premises. It is also undisputed that some part of the steam is utilised in canteen and laundry.

6.2 In our considered view the requirement of a canteen in the factory is statutorily mandated in the factories act, the cleaning of the utensils in the canteen for providing hygienic food cannot be disputed by any one. Again, using of clean uniform in the course of manufacturing of final products cannot also be disputed as unwanted expenses. On this factual matrix, we find that the steam which is used in the factory premises is in a way related to manufacturing of final products. We find strong force in the contentions raised by the learned Counsel that the entire dispute needs to be considered from the angle whether the use of steam by the appellant in the factory premises is for the purposes related to manufacture and will be falling under the ambit of the phrase used for any other purposes. In our considered view, Honourable High Court of Bombay, in the case of Indo Rama synthetics (supra) has held what would be covered in the phrase used for any other purposes  in paragraph 20 and 21 of the judgement, which we reproduce.

20.? We find it difficult to accept the submissions of the assessee. In our opinion, credit of duty under Rule 57B(iv) would be available to inputs used for generation of electricity provided, the electricity is used for manufacture of final products or for any other purpose connected with or related to the manufacture of the final products. In other words, the use of electricity must have nexus with the goods manufactured in the factory. For example, where the electricity is used in the production of an intermediate product within the licensed premises for use in the final product or use of electricity in the godowns or workshop established by the assessee within the licensed premises to facilitate storage/repair of the machinery used in the production of the final products, it would be covered within the meaning of the word any other purpose in Rule 57B(iv) of the Central Excise Rules, 1944.

21.?The fact that the residential complexes are situated within the licensed premises would not entitle the assessee to avail credit of duty paid on furnace oil used in the manufacture of electricity supplied to the residential complexes. It is necessary to establish that the electricity is used for any purpose connected with or related to the production of final products. In our opinion, supply of electricity to the residential complexes situated within the factory premises are neither connected with or related to the production of the final products. In this view of the matter, we hold that the finding recorded by the Tribunal that the assessee is not entitled to the credit of duty paid on the furnace oil used in the generation of electricity supplied to the residential complexes cannot be faulted.

(emphasis supplied 6.3 In the said case of Indo Rama (supra) their Lordships were considering the use of electricity generated in the factory and the above observations were made while denying the proportionate Cenvat credit on the fuel used in that portion of electricity which is used for lighting the residential quarters. We find that the said observations will apply in the case in hand as it is undisputed that the canteen services and the laundry service is used within the factory and in a way related to manufacturing activity.

6.4 In view of the foregoing, in the peculiar facts and circumstances of this case, we find that the impugned orders are unsustainable and liable to be set aside and we do so. Impugned orders are set aside and the appeals are allowed with consequential relief.

(Dictated in Court)

(C.J. Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial)

nsk

??

??

??

??

1 6 Appeal No. E/1359, 1360/05 and E/1495/06