M/S. Abhinav Steels Pvt. Ltd vs Commissioner Of Central Excise

[Arising out of Order-In-Appeal No. MP(Dem-14/2012) 23/2012 dated 13.8.2012 passed by Commissioner of Customs & Central Excise Allahabad ]

For approval and signature:

Honble Mr Ashok Jindal, Member (Judicial)

Hon'ble Mr. B Ravichandran , Member (Technical)

1 Whether Press Reporters may be allowed to see 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 CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

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

4 Whether Order is to be circulated to the Departmental authorities?

M/s. Abhinav Steels Pvt. Ltd. Appellants

Vs.

Commissioner of Central Excise Respondent

& Customs & ST, Allahabad

Appearance:

Shri Bipin Garg, Advocate for the Appellants

Shri Pramod Kumar, Jt.CDR for the Respondent

CORAM:

Hon'ble Shri Ashok Jindal, Member (Judicial)

Hon'ble Mr. B Ravichandran, Member (Technical)

Date of Hearing /decision: 07.08.2015

FINAL ORDER NO. A/ 52568 /2015-EX(DB)

Per Ashok Jindal :

The appellant is in appeal against the impugned order.

2. The appellant is manufacturer of MS ingots, MS bars and TMT bars. The factory is located in plot No. 18, 19, 25, 26 & 27, SIDA Industrial Area, Sathariya, Jaunpur (UP). The appellant installed a power plant of 40 MW capacity at plot No. A-42 to 47, SIDA, Sathariya, Jaunpur. Admittedly, the said power plant is outside the factory premises i.e. 250 mts. Away from manufacturing plant. The said power plant is installed for generation of electricity which in turn is to be used by the appellant for manufacturing of MS ingots, bars and TMT bars.

3. The officers of Anti-evasion wing of Central Excise department visited the factory premises of the appellant on 17.1.2012 and 18.1.2012 and verified the records relating to cenvat credit in respect of power plant. During the investigation, it was revealed that the appellant has availed cenvat credit on imported capital goods namely, boiler parts, condenser, H P Heater, ESP, Steam Turbine and generator on the strength of Bills of Entry in their Cenvat Credit account on 28.11.11 as 50% duty credited. Further, the investigation revealed that these capital goods were purchased by the appellant during the period 04.08.2010 to 31.03.2011. Therefore, it was alleged that as per notification No. 3/11 CE (NT) dated 1.3.11 which was effective from 1.4.2011 clarifies thedefinition of capital goods which means the following goods used outside the factory of manufacture of final product for generation of electricity for captive use within the factory. Therefore, the capital goods which were procured by the appellant prior to 31.3.2011, do not qualify as capital goods, therefore, the appellant is not entitled to take cenvat credit. Consequently, the impugned proceedings were initiated. The Cenvat Credit was denied, the demand of duty along with interest was confirmed, equivalent amount of penalty was also imposed. Against the said order, the appellant is before us.

4. Learned Counsel for the appellant submits that notification No. 3/11 CE(NT) dated 1.3.11 is clarificatory in nature as appellant is entitled to take cenvat credit on the capital goods used for generation of electricity outside the factory itself prior to 01.04.2011 as per various judicial pronouncements namely in the case of Vikram Cement [2006 (194) ELT 3 SC]; Madras Cement Ltd. [2010 (257) ELT 321 (SC)]; and Hindalco Industries Ltd. [2014 (313) ELT 311 (Tri-Del)]. He further submits that appellant has availed cenvat credit on 28.11.2011 and at the time of availment of cenvat credit, the definition as per Rule 2 (a) of Cenvat Credit Rules, 2004 was in force, therefore, there is no bar under the provisions of Cenvat Credit Rules, 2004 to take cenvat credit on these goods. Therefore, the impugned order is to be set aside.

5. On the other hand, learned AR opposed the contention of the learned Counsel and submits that it is admitted fact that the goods in question have been procured prior to 01.04.2011 i.e. before the Notification No. 3/11 dated 1.3.11 which defines capital goods for availment of cenvat credit, and the said provision was made applicable retrospectively. Therefore, for the period prior to 01.04.2011, capital goods procured by the appellants are not entitled to take cenvat credit. Infact as per the decision of this Tribunal in the case of Grasim Industries Ltd. [2004 (176) ELT 265 (Tri-Chennai)], the date of receipt of goods in the factory is the relevant date for availment of Cenvat Credit which was affirmed by the Honble Apex Court reported in [2005 (179) ELT A 38 SC]. Therefore, he submits that adjudicating authority has rightly denied the cenvat credit to the appellants.

6. Heard the parties. Considered the submissions.

7. On going through the arguments advanced by both the sides, the short issue to be decided by us is as under:-

whether the appellant is entitled to take cenvat credit on capital goods outside the factory for generation of electricity in power plant for the capital goods procured prior to 1.4.2011 whereas cenvat credit is taken after 1.4.2011 or not.

We have gone through the various judicial pronouncements. Whereas in the case of Vikram Cement (supra), the Honble Apex Court observed as under:

4.?We observe that Rule 57B commences with a non obstante clause. It allows credit to be taken by a manufacturer on inputs used in or in relation to the manufacture of the final products whether directly or indirectly and whether contained in the final products or not. There is no qualification as to where the inputs must be used in the main body of sub-rule (1). Qualifications have been introduced to the extent stated in Clauses (i) to (vi) read with the Explanation. Thus Clause (i) provides for inputs which are manufactured and used within the factory of production. Paints, fuel, packing materials and accessories are also treated as inputs under clauses (ii), (iii), (v) and (iv) without any requirement for user within the factory. Clause (iv) provides for credit on inputs used for generation of electricity or steam used for manufacture of the final products or for any other purposes within the factory of production. It appears to us on a plain reading of the clause that the phrase within the factory of production means only such generation of electricity or steam which is used within the factory would qualify as an intermediate product. The utilization of inputs in the generation of steam or electricity not being qualified by the phrase within the factory of production could be outside the factory. Therefore, whatever goes into generation of electricity or steam which is used within the factory would be an input for the purposes of obtaining credit on the duty payable thereon. As far as the Explanation is concerned, the inputs are restricted to inputs notified under Rule 57A. There is no dispute that both explosives and limestone are notified under Section 57A for manufacture of the final product viz. cement.

8. Admittedly, in this case also the electricity so generated by the power plant is to be captively consumed by the appellant in their factory of production.

9. Further, in the case of Madras Cements Ltd. (supra) again, the issue has been examined and relying on the decision of Vikram Cement (supra), the Honble Supreme Court observed as under:

3.?As regards the Modvat/Cenvat credit on capital, goods, if the mines are captive mines so that they constitute one integrated unit together with the concerned cement factory, Modvat/Cenvat credit on capital goods will be available to the assessee. On the other hand, if the mines are not captive mines but they supply to various other cement companies of different assessees, and it is found that the said goods were being used in the lime stone mines outside the factory of the assessee, Modvat/Cenvat credit on capital goods used in such mines will not be available to the concerned assessee under the appropriate Modvat/Cenvat Rules. In order to get a clear finding on the issue, all the matters are remanded to the respective original authorities for decision only on the above issue.

10. Further, this Tribunal in the case of Hindalco Industries (supra) on the identical issue has observed as under:-

6.?The point of dispute in this case is as to whether the inputs and capital goods used for generation of power in Renusagar Power Plant, would be eligible for Cenvat credit, even though the power plant is not located within the factory premises and it is located at distance of about 40-50 kms. from the factory. There is no dispute about the fact that though initially the power plant was owned by M/s Renusagar Power Company, this company has been amalgamated with the appellant company in the year 1993 and the merger had been affirmed by the Honble High Court during that year. Thus during the period of dispute, the Renusagar power plant was fully owned by the appellant company. We also find that there is no dispute that except for use of some power generated by the power plant in the Renusagar Power Plant township, the entire power generated is used in the factory of the appellant company for production of aluminium. While the department relying upon Larger Benchs judgment of the Tribunal in the case of Vikas Industrial Gas v. CCE, Allahabad (supra) pleads that the captive power plant located far-away from the factory cannot be treated as part of the factory and inputs and capital goods used therein would not be eligible for Cenvat credit, the appellant rely upon the two judgments of the Apex Court in the case of Vikram Cement v. CCE, Indore reported in 2006 (194) E.L.T. 3 (S.C.) and 2006 (197) E.L.T. 145 (S.C.). The Apex Court in the case of Vikram Cement v. CCE, Indore reported in 2006 (194) E.L.T. 3 (S.C.) while dealing with the question as to whether the explosives used in the mines to produce lime stone for use in the manufacture of cement and clinker in the factory situated at some distance away from the mines, would be eligible for Cenvat credit in terms of the provisions of Rule 57A of the Central Excise Rules, 1944, held that the Cenvat credit in respect of explosives used in the mines for blasting purpose to produce lime stone would be admissible if the mine is the captive mine and that utilization of input only within the factory premises is not necessary. In para 4 of this judgment with regard to the admissibility of Cenvat credit in respect of the inputs used for the generation of power or steam for use in the factory, the Apex Court interpreting the provisions of Rule 57B observed as under :-

It appears to us on a plain reading of the clause that the phrase within the factory of production means only such generation of electricity or steam which is used within the factory would qualify as an intermediate product. The utilisation of inputs in the generation of steam or electricity not being qualified by the phrase - within the factory of production could be outside the factory. Therefore, whatever goes into the generation of electricity or steam, which is used within the factory would be an input for the purpose of obtaining credit of duty payable thereon. As far as explanation is concerned, the inputs are restricted to the inputs notified under Section 57A. There is no dispute that both explosives and lime stone are notified under Section 57A for manufacture of final product viz. cement.

6.1?In this judgment, the Apex Court over-ruled its earlier judgment in the case of CCE v. J.K. Udaipur Udyog Ltd. - 2004 (171) E.L.T. 289 (S.C.).

6.2?The Apex Court in its subsequent judgment in the case of Vikram Cement v. CCE, Indore reported in 2006 (197) E.L.T. 145 (S.C.) again held that the explosives, lubricating oil and capital goods used in the mines for mining of lime stone which is used in the cement factory located at some distance away would be eligible for Cenvat credit, if the mines are captive mines so that they along with the factory constitute one integrated unit. Same view has been taken by the Apex Court in case of Madras Cements Ltd. v. CCE reported in 2010 (257) E.L.T. 321 (S.C.).

6.3?We are of the view that the ratio of the above-mentioned judgments of the Apex Court is squarely applicable to the facts of this case, as the Renusagar Power Plant, which is a captive power plant of the appellant company, together with the cement factory of the appellant company constitute one integrated unit and it is not disputed that except of small quantity of electricity generated being used in the Renusagar township, the remaining quantity is used in the appellants factory for production of aluminium. Therefore, the Cenvat credit in respect of capital goods and inputs used in the captive power plant located at Renusagar cannot be denied just because the power plant is located at some distance from the factory.

11. The thrust of the learned AR is on the definition of capital goods as per Rule 2A of Cenvat Credit Rules, 2004 which has been expended with effect from 01.04.2011 and there is no specific provision provided to take the benefit expansion of said definition retrospectively. In fact, prior to 01.04.2011, there are various judicial pronouncements on the said issue. Further, we also find that Honble Supreme Court in the above cited decisions, has time and again has held that if the goods procured outside the factory for generation of power for captive consumption, it is to be seen that the inputs has been used in the factory, therefore, the appellant is entitled to take cenvat credit. We also note that on these capital goods, the appellant has taken cenvat credit only on 28.11.2011. At the time of availment of cenvat credit, the provisions of Rule 2A (1A) were in force and there is no bar for availment of cenvat credit at that point of time.

12. In these circumstances, we hold that appellant has correctly taken the cenvat credit on the goods in question as capital goods and is not required to reverse the Cenvat credit.

11. With these observations, we set aside the impugned order and allow the appeal with consequential relief (if any).

( operative part of the order pronounced in the open court )

( Ashok Jindal ) Member(Judicial)

( B Ravichandran )

Member(Technical)

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