2016 (3) TMI 153 - AT - Central Excise

Whether appellants are eligible for concessions available for the goods manufactured/purchased by them when transferred to the power plant owned by another entity inside their factory premises - inputs purchased (Water Treatment Chemicals & LSHS) and certain items manufactured (Sulphuric Acid) and transferred to the captive power plant owned by the Joint Venture for use in the generation of electricity - Held that - We find that the factory premises as licenced under Central Excise provisions in respect of the appellants continued to be unaffected and no separate Central Excise licence with de-marketed premises was given to the power plant separately. In such situation, the Revenue cannot take a stand that the power plant is another factory and not to be considered as within the factory of the appellant. The appellant s case is further strengthened in view of the fact that all the inputs transferred to the power plants by the appellant are fully utilized in or in relation to the manufacture of electricity which in turn is fully used captively by the appellants. As such, we find the impugned order of the lower Authorities is not sustainable - Decided in favour of assessee

Summary

Issues:
Eligibility of Cenvat credit on inputs transferred to captive power plant. Interpretation of Rule 4(5)(a) of Cenvat Credit Rules. Applicability of Notification No. 67/1995-CE. Consideration of power plant as a separate factory. Liability for duty on goods transferred within factory premises.

Analysis:

The case involved a dispute over the eligibility of Cenvat credit on inputs transferred to a captive power plant owned by a Joint Venture within the factory premises of the appellant. The appellants contended that the inputs purchased or manufactured by them and transferred to the power plant were fully utilized in the generation of electricity, which was then used captively by them. The main issue was whether such transfers within the factory premises would attract duty liability.

The appellant argued that the power plant, despite a change in ownership, remained an integral part of their factory for production purposes. They cited Rule 4(5)(a) of the Cenvat Credit Rules and relied on a precedent involving Haldia Petrochemicals Ltd. to support their position. Additionally, they claimed entitlement to benefits under Notification No. 67/1995-CE concerning capital goods and inputs.

On the other hand, the Revenue contended that the transfer of ownership of the power plant to a Joint Venture entity should be treated as a transfer to another factory, necessitating compliance with clearance procedures applicable to inter-factory transfers. They argued that this transfer constituted a removal outside the factory, triggering duty liability.

After hearing both sides and reviewing the records, the Tribunal found that the factory premises, as licensed under Central Excise provisions, remained unchanged, with no separate license issued for the power plant. Consequently, the Tribunal held that the power plant should be considered part of the appellant's factory. Given that all inputs transferred to the power plant were fully utilized in electricity generation for captive use by the appellants, the Tribunal concluded that the Revenue's position was untenable. Therefore, the Tribunal set aside the lower authorities' order and allowed the appeal, providing consequential relief as necessary.

In conclusion, the judgment clarified that transfers of inputs within the factory premises to a captive power plant, even after a change in ownership, did not attract duty liability. The decision emphasized the integrated nature of the power plant within the appellant's factory and the full utilization of inputs for captive electricity generation, ultimately ruling in favor of the appellant.