2021 (7) TMI 294 - AT - Central Excise

CENVAT Credit - capital goods - pipeline used to connect the SBM with the refinery - difference between Cenvat Credit Rules and the Modvat scheme - denial of Cenvat credit on the ground that the pipeline is located outside the factory premises and the Cenvat Credit Rules do not permit Cenvat Credit of such capital goods as are used outside the factory premises - HELD THAT - Hon ble Apex Court in the case of Vikram Cement 2006 (1) TMI 130 - SUPREME COURT has held that the Cenvat Credit Rules and the Modvat scheme are not different and therefore the decision made in the context of Modvat would be equally applicable to Cenvat Credit Rules. It is seen that the decision in the case of Vikram Cement was given by comparing the Modvat rules with the provision of Cenvat credit introduced vide Notification No 27/2000- CE(NT) dated 31.03.2000 by introducing rule 57AA to rule 57AK in Central Excise Rules 1944. It is seen that Hon ble Apex Court in the case of Vikram Cement did not have any occasion to examine the provisions of Modvat Scheme with the Cenvat Credit Rules, 2001, or Cenvat Credit Rules, 2002, or Cenvat Credit Rules, 2004. Therefore the argument of the Learned Counsel that the decision made with reference to earlier rules will also be applicable to the disputes involving of subsequent Cenvat Credit Rules, is misplaced. The Cenvat Credit Rules have evolved over the period 2000 to 2004 and the ratio of the decision made with reference to Cenvat introduced vide Notification No 27/2000(NT) cannot be straight away applied to the subsequent rules without due examination - Hon ble Apex Court never had the occasioned to compare the Modvat Rules with Cenvat Credit Rules, 2004 under which the present dispute lies. This fundamental issue if the area under pipeline and SBM lies in the factory premises or otherwise is also pending before original adjudicating authority. Thus, the impugned order is set aside and matter is remanded to original adjudicating authority to decide afresh, after a decision is taken on the issue of registration which has been remanded by tribunal to the original Adjudicating Authority. Appeal allowed by way of remand.

Summary

Issues Involved:
1. Admissibility of Cenvat credit on pipelines used to connect Single Buoy Mooring (SBM) with the refinery.
2. Whether the pipeline and SBM are part of the factory premises.
3. Application of decisions made under Modvat rules to Cenvat Credit Rules, 2004.
4. Invocation of the extended period of limitation.

Issue-wise Detailed Analysis:

1. Admissibility of Cenvat Credit on Pipelines:
The appellant, engaged in manufacturing various petroleum products, sought to include the area under the crude oil tank, SBM, and the pipeline connecting these to the refinery within the factory premises for Cenvat credit purposes. The revenue denied this inclusion, arguing that the pipelines did not qualify as "capital goods" under Rule 2(a) of the Cenvat Credit Rules, 2004, as they were not "used in the factory of manufacture of final products." The appellant relied on the Bombay High Court decision in the case of Reliance Industries Limited, which held that equipment integral to the manufacturing process, even if located outside the factory, should be treated as capital goods. The tribunal found that the issue of whether the pipelines and SBM are part of the factory premises is fundamental and pending before the original adjudicating authority.

2. Whether the Pipeline and SBM are Part of the Factory Premises:
The appellant's application to include the pipeline and SBM area within the factory premises was initially rejected by the adjudicating authority and the first appellate authority. The tribunal had previously remanded the matter to the original adjudicating authority to reconsider this inclusion. The tribunal noted that the decision on whether the pipeline and SBM are part of the factory premises is still pending, making it premature to resolve the dispute on Cenvat credit admissibility.

3. Application of Decisions Made Under Modvat Rules to Cenvat Credit Rules, 2004:
The appellant argued that the principles from the Modvat scheme should apply to the Cenvat Credit Rules, 2004, citing the Apex Court's decisions in Madras Cement Limited and Birla Corporation. However, the tribunal observed that the Cenvat Credit Rules have evolved significantly since the Modvat scheme, and the Apex Court had not examined the provisions of the Cenvat Credit Rules, 2004. The tribunal concluded that the argument for applying Modvat principles to the current Cenvat rules without due examination is misplaced.

4. Invocation of the Extended Period of Limitation:
The appellant contended that the extended period of limitation was improperly invoked, arguing that the revenue was aware of the pipeline's location and that verification of documents was conducted by the superintendent. The tribunal did not specifically resolve this issue but noted that the matter of registration and inclusion of the pipeline area is still pending, which is fundamental to determining the applicability of the extended period.

Conclusion:
The tribunal set aside the impugned order and remanded the matter to the original adjudicating authority to decide afresh after resolving the issue of registration and inclusion of the pipeline and SBM area within the factory premises. The tribunal directed that the issue should be decided quickly, preferably within three months from the date of the order. The appeal was allowed by way of remand.