2004 (9) TMI 556 - AT - Central Excise

Summary

Issues:
1. Whether the credit taken on alum used in the water treatment plant adjacent to the factory premises is admissible.
2. Whether the invocation of extended period and imposition of penalties under Section 11AC of the Central Excise Act, 1944, and Rule 173Q of the erstwhile Central Excise Rules is correct.

Issue 1 - Admissibility of Credit on Alum:
The main issue in this case revolves around the admissibility of the credit taken on alum used in the water treatment plant adjacent to the factory premises. The Commissioner (Appeals) determined that the process of water treatment is ancillary to the manufacture of paper, making the modvat availed on alum admissible. However, the Revenue contested this decision, arguing that the credit on alum should have been reversed when used for water treatment due to the plant's location outside the factory precincts. The Tribunal referenced the case of Amravathy Co-op. Sugar Mills Ltd. v. CCE, Coimbatore, where it was established that plants situated nearby, sharing resources, and having common registrations could be considered as one factory. In the present case, the water treatment plant and the paper manufacturing factory are within the same compound, separated only by a service road. Therefore, the Tribunal concluded that there was no requirement to reverse the credit on alum when used in the water treatment plant on the factory premises.

Issue 2 - Invocation of Extended Period and Imposition of Penalties:
The second issue concerns the invocation of the extended period and the imposition of penalties under Section 11AC of the Central Excise Act, 1944, and Rule 173Q of the erstwhile Central Excise Rules. The Revenue contended that the credit taken on alum for water treatment should have been reversed since the plant was outside the factory premises. However, the Tribunal's decision, based on the proximity and shared resources between the water treatment plant and the paper manufacturing factory, negated the Revenue's argument. Consequently, the Tribunal found the invocation of the extended period and penalties to be incorrect and improper, upholding the admissibility of the credit on alum used in the water treatment plant within the factory compound.

In conclusion, the Appellate Tribunal CESTAT, Mumbai, in this judgment, resolved the issues surrounding the admissibility of credit on alum used in a water treatment plant adjacent to a factory premises and the correctness of invoking the extended period and penalties. The Tribunal's decision emphasized the proximity and shared resources between the water treatment plant and the factory, ultimately determining that the credit on alum need not be reversed when utilized in the water treatment plant within the factory compound.