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TMI Blog2012 (10) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... at much quantity of Naphtha, attributable to electricity generated in captive power plant/co-generation plant, used for manufacture of exempt goods viz. LPG (Domestic) and Superior Kerosene Oil (PDS) (c) On that much quantity of Naphtha, attributable to electricity generated in captive power plant/co-generation plant, used for allied activities like lighting in the artillery (sic) roads/yard, administrative building, canteen/cafeteria. 2.2 The demand has been confirmed by the learned Commissioner on the basis that for allowing exemption under Notification No. 67/95-CE, final product should not be exempt from duty or chargeable to nil rate of duty or chargeable to nil rate of duty as the said notification shall not apply to inputs used in or in relation to manufacture of final products which are exempt from the whole of the duty of excise or additional duty of excise leviable thereon or are chargeable to nil rate of duty. He further found that lighting in the artillery (sic) roads/yard, administrative building, canteen/cafeteria would not have relation to manufacture of dutiable final products. 2.3 Appeal No. E/1346/07 - Duty demand of Rs.57,70,263/- along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made known by Rajkot Commissionerate Trade Notice No.56/2001 dated 21.6.2001 [2001 (131) ELT T-42], clarifying that clinker or other inputs, manufactured from cenvat availed inputs and captively used in the manufacture of cement exempted for supply to earthquake relief, was eligible for exemption under Notn. No.67/95 on reversal of credit on inputs. (f) Exemption to goods manufactured and used as inputs within the factory is available if the same are used in or in relation to manufacture of final products under preceding Notn. No.217/86-CE dated 2.4.86 as well as succeeding (present) Notn. No.67/95-CE dated 16.3.95. The said expression "in relation to manufacture of final product" mentioned in the said Notn. is identical to the expression mentioned under Rule 2(k) of CCR, 2004/erstwhile Rule 57A of CER, 1944 for allowing cenvat/modvat credit. Therefore, the words "in relation to the manufacture" have been used to widen and expand the scope, meaning and content of the expression "inputs" so as to attract goods which do not enter into finished goods. 3.1 The following judgments would render persuasive support for allowing exemption under Notn. No.67/95-CE for us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (229) ELT 9 (SC) 3.5 Indirect use of exempted materials also would satisfy the requirement under Notn. No.67/95 which view gets persuasive support from the ratio of following judgments: i. Rajasthan State Chemicals - 1991 (55) ELT 44 (SC) ii. Indian Oil Corpn. Ltd. - 2002 (148) ELT 1021 (T) iii. Ferro Alloys Corpn - 2003 (159) ELT 1030 (T) iv. IFFCO - 1996 (86) ELT 177 (SC) 3.6 Allowing of input service credit to outdoor catering (canteen) would render persuasive support for availability of exemption to electricity consumed in canteen/cafeteria, under Notn. No.67/95: i. Ultratech Cement - 2010 (20) STR 577 (Bom) ii. GTC Industries - 2008(12) STR - 468 (T.LB) 3.7 The following judgments relied upon by the Ld. Commissioner in the impugned Order would either do not apply or would support the Appellants. 3.8 Ld. Commissioner relies upon para 14 of Hon'ble Supreme Court judgment in IOCL [2006 (202) ELT 37 (SC)], while para 15 thereof specifically indicates conceding by ASG of availability of exemption under the dispute Notn. No.67/95 for use of RCO and LSHS within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 2(jk) of the CENVAT Credit Rules, 2004 and the definition of the phrase 'any other purpose' has been elaborated in the order of Hon'ble High Court of Bombay in the case of Indorama Synthetics (India) Ltd. v. CCE Nagpur reported in 2007 (219) ELT 122 (Bom.) and relied on by this Tribunal in the case of MCC PTA India Corporation Pvt. Ltd. - 2010 (249) ELT 370 (Tri. Kol.) wherein it was held that credit of duty paid on fuel used in generation of electricity used in canteen of office building is not available. He further submitted that in Appeal No.E/1346/07, the appellant's claim that they buy power from Tata Power used for pumping. The said averment was not accepted by the learned Commissioner. Moreover the table which shows the electricity power procured from Tata power is about 35 times more power than required for pumping. Therefore, it seems that the appellant is buying power from Tata Power for some other use but claiming use of same for pumping. That fact needs verification at the end of the adjudicating authority. Therefore this matter also be remanded. 5. Heard and considered the submissions made by both the sides. 6. The learned A.R. submitted that the claim of the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory and used within the factory of production in or in relation to the manufacture of final products specified in column (2) of the said Table; from the whole of the duty of excise leviable thereon which is specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) or additional duty of excise leviable thereon, which is specified in the Schedule to the said Special Importance Act : Provided that nothing contained in this notification shall apply to inputs used in or in relation to the manufacture of final products which are exempt from the whole of the duty of excise or additional duty of excise leviable thereon or are chargeable to nil rate of duty, other than those goods which are cleared,- i. to a unit in a Free Trade Zone, or ii. to a hundred per cent Export Oriented Undertaking or iii. to a unit in an Electronic Hardware Technology Park, or iv. to a unit in a Software Technology Park, or v under notification No.108/95-Central Excise dated the 28th August, 1995, or vi. by a manufacturer of dutiable and exempted final products, after discharging the obligation prescribed in rule 6 of the CENVAT Credit Rules, 2001. 9. As per the proviso to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject to a condition. The condition is that the final product should be dutiable or otherwise the exemption would not be applicable. According to Revenue when molasses is used in the manufacture of Rectified Spirit, the Rectified Spirit, which emerges, is not excisable. Therefore, the Notification benefit cannot be available. This is the main contention of the Revenue for denying the benefit of Notification to molasses captively consumed. However, it is the appellants' contention that the molasses is not completely used for the production of exempted/non-dutiable product because a part of Rectified Spirit is converted to Denatured Spirit which is dutiable. Our attention was invited to amendment to Notification No. 67/95-C.E. by Notification No. 31/2001-C.E. dated 1-1-2001. In terms of the said amendment, the appellants are entitled for the benefit of the exemption Notification in a situation where there is manufacture of both dutiable and exempted final product, provided the manufacturer discharges the obligation prescribed in Rule 57 AD of the Central Excise Rules, 1944 which is pari materia with Rule 6 of the Cenvat Credit Rules, 2002. This is the point urged by the appellant. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not excisable. Therefore, the Notification benefit cannot be available. This is the main contention of the Revenue for denying the benefit of Notification to molasses captively consumed. However, it is the appellant's contention that the molasses is not completely used for the production of exempted/non-dutiable product because a part of Rectified Spirit is converted to Denatured Spirit, which is dutiable. Our attention was invited to amendment to Notification No. 67/95 Central Excise by Notification No. 31/2001 Central Excise dated 1.1.2001. In terms of the said amendment, the appellants are entitled for the benefit of exemption Notification in a situation where there is manufacture of both dutiable and exempted final products, provided the manufacturer discharges the obligation prescribed in rule 57 AD of the Central Excise Rules, 1944, which is pari materia with Rule 6 of the Cenvat credit rules, 2002. this is the point urged by the appellants. what is the obligation under Rule 6 of the Cenvat Credit rules, 2002? The obligation under rule 6 of Cenvat Credit Rules, is that when a manufacturer uses input both for exempted and dutia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . LPG (Domestic) and Superior Kerosene Oil (PDS). 14. As contended by the learned Advocate that electricity used for allied facilities within the refinery like lighting in the artillery (sic) roads/yard, administrative building, canteen/cafeteria that they are integral part of the refining process, without which the refinery would not be able to function. In fact, Yard lighting refers to the lighting that is on the roads in between the process units and the tank farms to facilitate movement of men and machinery in the refinery. Canteen is a statutory requirement in a factory of their size without which the refinery would not be legally permitted to function. Administration building houses the functions that related to the refinery activities and due to safety factors they are house separately from the process units. Therefore the contention of the appellant is that these activities also covered for exemption under Notification No.67/95 for captive consumption. The appellant has relied on the decision in the case of Reliance Industries Ltd. vs. CCE Rajkot - 2008 (232) ELT 751 (Tri. - Ahmd.) wherein this Tribunal has dealt with the issue and hold that definition of 'input' as contai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarified and field an affidavit by Shri Suranjan Pal, Chief Manager Operation - MPSPL certifying that MPPL never uses refinery power for pumping and finished goods and the said affidavit has proved by the appellant by filing purchase invoices/statement that during the impugned period they have purchased power from Tata Power Company and not used the refinery power for pumping and finished goods and the adjudicating authority has merely denied the claim of the appellant without any evidence, which is not correct view. Hence, the denial is not sustainable. 18. In view of the above observations, both the appeals are allowed by setting aside the impugned orders. (Pronounced in open Court on ...................................) Per: Sahab Singh: I have perused the order proposed by Member (J) and I am not able to agree with the Member (J) with regard to the issue regarding the exemption on that much quantity of Naphtha, attributable to electricity generated in captive power plant/co-generation plant, used for allied activities like lighting in the artillery (sic) roads/yard, administrative building, canteen/cafeteria. The basis facts have already been fairly narrated. Therefore, I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turing activities like residential premises, guest house, canteen etc., in which case the appellant would not have been entitled to credit of duty paid on the fuel. Such legal proposition stands confirmed by the Hon'ble Supreme Court in the case of CCE Vs. Solaris Chemtech Ltd. [2007 (214 ) ELT 481 (SC). Apart from laying down that Low Sulphur Heavy Stock used as fuel in the manufacture of electricity is an eligible input for the purposes of modvat credit, it has been held that the inputs used in electricity generated which is consumed by residential colony of factory worker families, schools etc, will not be eligible inputs for the purposes of modvat credit. As such that part of the fuel, which has been used in the manufacture of electricity, which has been further used for non-manufacturing activities, is required to discharge duty liability inasmuch as duty required to be paid on the same will not be available as credit to the appellant. 8. Having held that the duty is required to be confirmed only in respect of that part of the fuel used for manufacturing of electricity, which stands used for non-manufacturing activities, we remand the matter to Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal that the entire electricity is used for loading of the appellants own production in the pipe lines, the same would be liable to the benefit or for modvat credit in respect of fuel. The issue regarding supply of electricity for allied activities like lighting in the artillery (sic) roads/yard, administrative building, canteen/cafeteria was not at all before the Tribunal. Therefore, I am of the view that the ratio of the judgment in the case of M/s Reliance Industries Ltd. is not applicable to the present case. 4. On the other hand, it was held by the Hon'ble Bombay High Court in the case of Indo Rama Synthetics (India) Ltd. supra that the furnace oil used in generation of electricity must have nexus with manufacture of goods in the factory. For the sake of convenience, para 19, 20 & 21 of the said judgment are reproduced below: 19. According to the assessee, the words 'any other purpose' in Rule 57B(iv) is wide enough to cover supply of electricity to the residential complexes. In other words, the submission is that once it is established that the electricity manufactured from the duty paid furnace oil is used within the factory premises for any purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... city generated in captive power plant/co-generation plant, used for allied activities like lighting in the artillery (sic) roads/yard, administrative building, canteen/cafeteria. As this issue is not related to Appeal No.E/1346/07, therefore the appeal No.E/1346/07 is allowed. 2. In Appeal No.E/317/09, the Member (Technical) is having a difference of opinion; therefore the same is placed before the Hon'ble Vice President/HOD for appointing a 3 rd Member to decide the issue. Difference of Opinion 3. Following difference of opinion is placed before the Hon'ble Vice President/HOD:- (a) Whether the exemption on the quantity of Naphtha attributable to electricity generated in captive power plant/co-generation plant, used for allied activities like lighting in the artillery (sic) roads/yard, administrative building, canteen/cafeteria is available to the appellant used in or in relation to the final product or for any other purpose within the factory of production as per Rule 2(k) of CENVAT Credit Rules, 2004 as held by Member (Judicial) OR Whether the appellants are not entitled for exemption on that much of Naphtha attributa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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