Commissioner Of Central Excise vs The India Cements Ltd

[Arising out of Order-in-Appeal No.447/2003 (SCN) TRY-II dated 17.9.2003 passed by the Commissioner of Customs & Central Excise (Appeals), Trichirapalli]

Commissioner of Central Excise, Tiruchirapalli Appellant

Versus

The India Cements Ltd. Respondent

Appearance:

Shri S. Muthuvenkatraman, Advocate For the Assessee Shri K.P. Muralidharan, AC (AR) For the Revenue

CORAM:

Honble Shri R. Periasami, Technical Member

Date of hearing/decision :19.6.2015

FINAL ORDER No.40674/2015

Pursuant to Honble High Court of Madras order dt. 29.1.2015, the appeal is taken up for de novo.

2. The issue relates to denial of modvat credit on lubricating oil used outside the factory area under rule 57Q of Central Excise Rules. The adjudicating authority confirmed the demand of Rs.11,43,899/- under erstwhile Rule 57U (3) of Central Excise Rules, 1944 along with interest and also imposed equivalent penalty under erstwhile Rule 57U(6) read with 173Q(bb) of CER. On appeal by the appellant, the Commissioner (Appeals) in the impugned order dt. 17.9.2003 set aside the impugned order and allowed the appeal.

3. Aggrieved by the order, the department reviewed the Order-in-Appeal and preferred an appeal before this Tribunal. The Division Bench of the Tribunal in their Final Order No.1436/2009 dt. 15.10.2009 held that lubricating oil used in the mines are eligible for credit as they are captive mines of the assessee. Accordingly, Revenues appeal was dismissed. The Revenue filed a C.M.A. before the Honble High Court of Madras . The Honble High Court by their order dt. 29.1.2005 in C.M.A.No.2700/2010 set aside the Tribunals order and remanded the matter to the Tribunal. The relevant paragraphs 5 & 6 of the High Court order are reproduced below :-

"5. Heard the learned counsel appearing for the appellant and the learned counsel appearing for the respondent.

6. From the records, it is evident that a fact is in dispute, as has been raised by the Department. Further, the finding of the Tribunal that the mine of the assessee is a captive mine is not supported by any materials. In such view of the mater, this Court is unable to take a decision on the questions of law raised. In view of the dispute in fact and the finding rendered by the Tribunal, in the light of ground (a), raised by the appellant, which has been referred to supra, this Court is inclined to set aside the order of the Tribnal and remand the matter back to the Tribunal for reconsideration on the pla for modvat/cenvat credit claimed by the assessee."

4. Ld. A.R. for the appellant-Revenue reiterated the grounds of appeal and submits that respondent did not own any captive mines. They have only leased out mines from the Tamil Nadu Government. The Govt. of Tamil Nadu is the owner of the mining rights. They have not submitted any government order granting lease of mines to the respondent either before the adjudicating authority and before the lower appellate authority. They have only produced the mining lease order dt. 3.2.2004. Therefore, prior to this period, there was no evidence to support that they have obtained any lease for the mines for which credit has been rightly denied. They have not produced any proof that the mined products are supplied to other cement companies but the products are exclusively used by the respondent. He relied on the following case laws :-

(i) Vikram Cement Vs CCE Indore 2006 (197) ELT 145 (SC)

(ii) Madras Cements Ltd. Vs CCE Chennai 2010 (257) ELT 321 (SC)

5. Ld. Advocate appearing for the respondent-assessee submitted the paper book containing Government Orders (G.O.s) issued by the Govt of Tamil Nadu dt. 8.5.91, 17.3.95, 16.11.98 and also submits copy of lease agreement entered into between the Govt of Tamil Nadu and the respondent and submits that as per the Tamil Nadu Mining Act, the Govt of Tamil Nadu is the owner having the right of all the mining sites. The respondents have been issued with grant of lease in favour of M/s.India Cements by the Govt of Tamil Nadu. The remaining lease period is for 30 years and 20 years respectively for all the mining sites. He further submits that as per the agreement, the liabilities, restrictions and conditions as to the exercise of the liberties and privileges has been clearly set out therein and as per the agreement, the products obtained from the mines are captively consumed in the manufacture of clinker/cement. He relied on the Supreme Courts judgement in the case of Vikaram Cement Vs CCE Indore - 2006 (197) ELT 145 (SC).

6. After hearing both sides, the short issue in the present appeal relates to verification of factual position as directed by the Honble High Court in their above order on the issue of admissibility of capital goods. The eligibility of capital goods credit on fabricating oils was already decided by this Tribunals order in their own appeal reported in 2002 (50) ELT 341 (Tri.-Chennai). The Honble Madras High Court while remanding the matter has set aside the Tribunal order on the ground that the Tribunal has not recorded any finding on the facts whether the mines are captive mines and whether the mining products are supplied to other cement companies and also observed that Tribunal has not recorded the finding on the evidence on the ownership of captive mines.

7. As regards the first issue, whether appellant had any captive mining lease during the relevant period April'96 to March 2000, appellants submitted copies of relevant G.Os. issued by the Govt of Tamil Nadu and on perusal of GO Ms.No.203 dt. 8.5.1991, GO Ms.No.70 Dt. 17.3.95 and GO Ms.765 dt. 16.11.98. I find the TN Govt had granted mining lease in favour of the respondent for the period of 30 years and 20 years respectively subject to fulfilment of various conditions as set out in the G.O itself and also subject to the payment of royalty and other rents etc. In terms of above G.O's, appellants have executed lease deed dated 17.6.95 and 5.3.92. On perusal of the lease deed, I find that the rights, liabilities, restrictions of use of mines and the mode of payment are set out in the agreement. Therefore, it is clearly established beyond doubt that respondents had captive mining lease during the relevant period from 8.5.1991 onwards

8. The second issue relates to the whether respondents have supplied the mining products to other cement companies or to any other person. Upon perusal of High Court order, it is stated that appellant in their letter dt. 21.9.2007 addressed to the Superintendent of Central Excise Ariyalur Range, enclosing declaration to the department. As per the undertaking given by the appellant that the limestone mining has been captively consumed by them in the process to produce cement and not sold to outsiders whereas the Revenue has not brought out any evidence to the contrary. Since the facts have been established as discussed above, the appellants availed the credit on lubricating oils for the use in the manufacture at their captive mines and by following the ratio of the Hon'ble Supreme Court in the case of Vikram Cement Vs CCE (supra), the appellants are eligible for cenvat credit on capital goods and at captive mines. Accordingly, the impugned order is upheld and Revenue appeal is rejected subject to the condition that mining products in dispute are not cleared to outsiders which may be verified by the Revenue. Appeal is rejected. Accordingly Cross-objection filed by respondent stands disposed.

(Dictated and pronounced in open court)

(R. PERIASAMI) TECHNICAL MEMBER

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