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TMI Blog2013 (9) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... ike lighting in the artillery roads/yard, administrative building, canteen/cafeteria. Decision in RELIANCE INDUSTRIES LTD. Versus COMMISSIONER OF C. EX., RAJKOT [2008 (3) TMI 591 - CESTAT, AHMEDABAD] and SAKTHI SUGARS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, SALEM [2007 (6) TMI 471 - CESTAT, CHENNAI] and GODAVARI SUGAR MILLS LTD. Versus COMMISSIONER OF C. EX., BELGAUM [2006 (11) TMI 497 - CESTAT, BANGALORE] followed. - E/1346/2007 and 317/2009-Mum - A/701-702/2012-WZB/C-II(EB) - Dated:- 9-5-2012 - Shri Ashok Jindal and Sahab Singh, JJ. Shri M.H. Patil and Sachin Chitnis, Advocates, for the Appellant. Shri Y.K. Agarwal, Addl. Commissioner (AR), for the Respondent. [Order per : Ashok Jindal, Member (J)]. - The appellant are in appeals against the confirmation of demand along with interest and various penalties by denying benefit of exemption under Notification No. 67/95-C.E., dated 16-3-1995. 2. Brief facts of the case are as follows :- 2.1 Appeal No. E/317/2009. Demand of duty of Rs. 3,09,84,240/- along with interest and penalty of Rs. 25,00,000/- under Rule 25 read with Rule 27 of Central Excise Rules, 2002. Benefit of exemption under Notification No. 67/9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pts the reversal of proportionate credit and goes on to allege that merely by reversing proportional credit under Rule 6(3)(a) of CCR, exemption under Notification No. 67/95-C.E. would not apply since Naphtha is used for manufacture of exempt goods. To substantiate the reversal of credit, in any case, a Certificate from Chartered Accountant was submitted. (d) Hon ble Tribunal has taken consistent view, interpreting proviso to Notification No. 67/95, that once the manufacturer has discharged the obligation cast upon him under Rule 6 of CCR of not taking credit [sub-rule (1) or (2)] or reversing proportionate credit [clause (a) to sub-rule (3)] or paying presumptive tax [clause (b) to sub-rule (3)], he would be eligible for exemption to a product manufactured in a factory and captively consumed, under Notification No. 67/95. To substantiate the above reliance was placed on the ratio of following judgments : (i) Shakti Sugar Ltd. - 2008 (230) E.L.T. 676 (T) (ii) Lanco Indst. - 2008 (227) E.L.T. 395 (T) (iii) Godavari Sugar Mills - 2007 (212) E.L.T. 234 (T) (iv) Kothari Sugar - 2010-TIOL-148-CESTAT-MAD = 2010 (262) E.L.T. 545 (Tri.). (v) Chennai Petroleu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 relate to the refinery activities and due to safety factors, they are housed separately from the process units. Hence, the Appellants submit that they being an integral part of the refining process, they would be covered by the exemption Notification No. 67/95-C.E. for captive consumption. 3.4 The following judgments would support the availability of exemption under Notification No. 67/95 for Naphtha used for generation of electricity which in turn used for allied activities like Admn. bldg./artillery roads/yard lighting/cafeteria/canteen, etc. : (i) Reliance Industries - 2008 (232) E.L.T. 751 (T) (ii) Reliance Industries - 2008 (224) E.L.T. 117 (T) (iii) Indorama Synthetics - 2006 (199) E.L.T. 175 (T) (iv) Indorama Synthetics - 2007 (219) E.L.T. 122 (Bom.) (v) Upheld by Hon ble Supreme Court - 2008 (226) E.L.T. A181 (S.C.) (vi) Raymond Ltd. - 2000 (117) E.L.T. 104 (T) (vii) This judgment has been approved by Hon ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pectively and submitted that they have reversed CENVAT which is equivalent to CENVAT credit attributable to inputs or input services used in relation to manufacture of final product as against the demand of duty of about Rs. 2.81 crores (for use of naptha in manufacture of fertilizer, etc.) plus Rs. 28 lacs (for use of electricity in allied activities). The amount of Cenvat reversal attributable to inputs used, has not been mentioned by the appellant in their reply to the show-cause notice or even in the grounds of appeal therefore, the claim of reversal has not verified or authenticated by Central Excise authorities. By a letter dated 13-10-2010 they claimed that they have reversed Rs. 5 lakhs of Cenvat on inputs used in naptha used for electricity generation. This letter also is not an authenticated letter as the same has not been verified by the adjudicating authority. In fact, the adjudicating authority has not dealt with this issue and there is no finding in the impugned order regarding the reversal of CENVAT credit on the inputs stated hereinabove by the appellants. Therefore, matter needs examination on this issue and should be remanded. He further submitted that for the use ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as admitted in the show-cause notice itself. 8. Now we come to the merit of the case. Whether the appellants are entitled for exemption under Notification No. 67/95-C.E. are not. Under Notification No. 67/95, dated 16-3-1995 amended vide Notification No. 35/2001, dated 29-6-2001 exemption of duty is available to the assessee to all capital goods specifically if captively consumed which is reproduced herein as under :- Notification No. 67 dated 16th March 1995 C. CAPTIVE CONSUMPTION (GOODS USED WITHIN FACTORY OF PRODUCTION) GENERAL EXEMPTION NO. 6 In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excise Act, 1944 (1 of 1944), read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance Act, 1957 (58 of 1957), (herein after referred to as the said Special Importance Act), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts - (i) capital goods as defined in rule 3 of the CENVAT Credit Rules, 2002 manufactured in a factory and used within the factory of production; (ii) goods specified in column (1) of the Table hereto annexed (hereinafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the manufacture of such final products at the time of their clearance from the factory. The said circular would apply as Naphtha was used in the manufacture of fertilizers or for generation of electricity which in turn was used for manufacture of LPG (domestic), SKO (PDS). 10. In the case of Sakthi Sugars Ltd. - 2008 (230) E.L.T. 676 (Tri.-Chennai) this Tribunal has dealt with the issue and observed as under :- We have carefully considered the case records and the rival submissions. We find that disposing a couple of appeals involving similar facts the Bangalore Bench of the Tribunal in para 7.2 of its Final Order Nos. 56 to 59/2007, dated 30-11-2006 [2007 (212) E.L.T. 234 (T)] made the following observations : 7.2. It is the contention of the appellants that the reversal satisfies the conditions of Notification 67/95 read with Rule 6 of Cenvat Credit Rules, 2002. Notification 67/95 grants exemption from payment of duty on an intermediary product which is captively consumed for manufacture of excisable goods. Molasses is an excisable product. When molasses is used in the manufacture of some other excisable product, then the molasses captively consumed need not discharge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants. Therefore, the appellants are entitled to the benefit of Notification No. 67/95 in respect of molasses used captively for manufacture of Rectified Spirit and Denatured Spirit. Therefore the demand of duty in respect of the credit taken on molasses is not correct. 11. In paragraph 7.2 in the case of Godavari Sugar Mills - 2007 (212) E.L.T. 234 (T) the Tribunal has taken the same which is reproduced as under :- 7.2 It is the contention of the appellants that the reversal satisfies the conditions of Notification 67/95 read with Rule 6 of Cenvat Credit Rules, 2002. Notification 67/95 grants exemption from payment of duty on an intermediary product which is captively consumed for manufacture of excisable goods. Molasses is an excisable product. When molasses is used in the manufacture of some other excisable product, then the molasses captively consumed need not discharge any duty burden. However, the entitlement to Notification 67/95 is subject 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 Spir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rer effects clearance of cement at NIL rate of duty for earthquake relief as provided under Notification No. 16/2001-C.E., dated 26-3-2001 and reverses the amount of CENVAT credit as required in terms of Rule 57AD then, as specified in clause (vi) of the proviso to Notification No. 67/95, dated 16-3-1995 as amended, he can avail the exemption for captive consumption in respect of clinker or other inputs manufactured in a factory and used captively in the manufacture of Cement in terms of Notification No. 67/95-C.E., dated 16-3-1995. 13. Therefore, we hold that the appellants are entitled for exemption under Notification No. 67/95-C.E., dated 16-3-1995 as amended at Naphtha cleared availing exemption under Notification No. 4/2006-C.E., dated 1-3-2006 for manufacture of fertilizers under ICB and on the 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). 14. As contended by the learned Advocate that electricity used for allied facilities within the refinery like lighting in the artillery roads/yard, administrative building, canteen/cafeteria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y purpose connected with or related to manufacture of final product is admissible and held that inputs used as fuel for generation of electricity used in canteen or office building was denied. The decision of MCC PTA India (supra) appealed against and the decision is pending before the Hon ble High Court of Calcutta - 2010 (256) E.L.T. A160 (Cal.) and in the case of CCE, Chennai-II v. BOC India Ltd. - 2007 (212) E.L.T. 222 (Tri.-Chennai) this Tribunal has held that when appeal against Tribunal s order is admitted by Apex Court, its finality and correctness are in jeopardy. 16. Therefore, relying on the decision of Reliance Industries Ltd. (supra) we allow the exemption for Naphtha, attributable to electricity generated in captive power plant/co-generation plant, used for allied activities like lighting in the artillery roads/yard, administrative building, canteen/cafeteria. 17. With regard to the Appeal No. E/1346/2007, the appellant has already clarified and filed 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. has held that exemption for naphtha, attributable to electricity generated in captive power plant/co-generation plant, used for allied activities is available to the appellant. 22. I find that the decision in the case of Reliance Industries Ltd. v. CCE, Rajkot - 2008 (232) E.L.T. 751 (Tri.-Ahmd.) relied on by the ld. Member (J) was only clarification to the main decision in the case of Commissioner of Central Excise v. Reliance Industries Ltd. - 2008 (224) E.L.T. 117 (Tri.-Ahmd.) In the main decision, it was held by the Tribunal that it was 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. Paras 7 8 of the said decision are reproduced below :- 7. We, however further note that a part of the electricity so generated was also used by the appellant for non-manufacturing 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 st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder :- 3. At this stage, the learned Joint CDR submits that part of the premises of the appellant has been rented out to M/s. GAIL, VKPL and RPEL and the appellants might be charging them for the electricity so consumed by them. Learned Advocate clarifies that no charge of the electricity is being reimbursed by these companies, who are all owners of the pipe lines and have been provided space only to supervise the onward transmission of various products through the said pipe lines. Electricity so consumed is within factory premises and for loading of their own final product, in which case, they would be entitled to the benefit. We agree with the submission of the learned Advocate that in case no charge of electricity is being reimbursed by these companies to the appellant and the entire electricity is used for loading of the appellants own production in the pipe lines, the same would be liable to benefit or for Modvat credit in respect of fuel. It was held by the Tribunal that the entire electricity is used for loading of the appellant s 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d within the factory premises are neither connected with or related to the production of the final products. In this view of the matter, we hold that the finding recorded by the Tribunal that the assessee is not entitled to the credit of duty paid on the furnace oil used in the generation of electricity supplied to the residential complexes cannot be faulted . 25. Therefore, relying on the decision of the Hon ble Bombay High Court in the case of Indo Rama Synthetics, I am of the view that the appellants are not entitled for exemption on that much of naphtha, attributable to electricity generated in captive power plant/co-generation plant, used for allied activities like lighting in the artillery roads/yard, administrative building, canteen/cafeteria. Sd/- Sahab Singh Member (Technical) 26. My learned Brother Member (Technical) is having a difference of opinion on the issue regarding 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 roads/yard, administrative building, canteen/cafeteria. As this issue is not related to Appeal No. E/1346/2007, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fining of crude petroleum in their refinery and marketing various finished petroleum products thereof. Refining of petroleum crude is a continuous process. Hence the power and steam required for the refinery need to be met on a continuous basis without any interruption. The appellants have set up a cogeneration power plant where steam and electricity are generated by firing the gas turbine generators and stage Naphtha is used as the fuel for the Gas Turbine Generators in the cogeneration power plant. The appellants are claiming the benefit of Notification No. 67/95-C.E. in respect of the Naphtha. The demand is raised on the ground that the electricity so generated is being used in the manufacture of dutiable as well as exempted final product and also for refinery road lighting, canteen and administrative office in the refinery. The only difference of opinion referred to the third Member is whether the Naphtha regarding which the benefit of Notification No. 67/95-C.E. is availed is used as fuel for generation of electricity and the part of electricity is used for road lighting, canteen and administrative office in the refinery. As the same is not used for the manufacture of goods, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re exempted from payment of duty. Admittedly, the appellants are claiming benefit of this Notification in respect of the Naphtha used for quantum of electricity which is not used in or in relation to the manufacture of final product. Revenue also relies upon the decision of the Hon ble Supreme Court in the case of CCE v. Solaris Chemtech Ltd. reported in 2007 (214) E.L.T. 481 (S.C.) and in the case of Indorama Synthetics (India) Ltd. v. CCE reported in 2009 (219) E.L.T. 122 (Bom.) and the dismissal of the appeal against the decision of the Bombay High Court filed by M/s. Indorama Synthetics (India) Ltd. by the Hon ble Supreme Court as reported in 2008 (226) E.L.T. A181. The contention is that the Hon ble Bombay High Court in the above decision specifically held that credit in respect of the inputs used for generation of electricity which is supplied to the residential complex is not available, as the residential complex situated within the factory premises are neither connected nor related to the manufacture of the final product. 34. I find that the only issue before me for consideration is whether the exemption under Notification No. 67/95-C.E. on the quantity of Naphtha attribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is established that the electricity manufactured from the, duty paid furnace oil is used within the factory premises for any purpose whatsoever, the credit of duty paid on furnace oil would be available. 20. We find it difficult to accept tine submissions of the assessee. In our opinion, credit of duty under Rule 57B(iv) would be available to inputs used for generation of electricity provided, the electricity is used for manufacture of final products or for any other purpose connected with or related to the manufacture of the final products. In other words, the use of electricity must have nexus with the goods manufactured in the factory. For example, where the electricity is used in the production of an intermediate product within the licensed premises for use in the final product or use of electricity in the godowns or workshop established by the assessee within the licensed premises to facilitate storage/repair of the machinery used in the production of the final products, it would be covered within the meaning of the word any other purpose in Rule 57B(iv) of the Central Excise Rules, 1944. 21. The fact that the residential complexes are situated within the licensed prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not admissible. The definition of input under the Cenvat Credit Rules, 2004 is also similarly worded. In view of the above decisions, I agree with the opinion of the learned Member (Technical) that the appellants are not entitled for exemption on that much of Naphtha attributable to electricity generated in captive power plant used for allied activities like lighting of roads, administrative building, canteen etc. 38. The Registry is directed to place the appeal papers before the regular Bench for passing appropriate orders. (Pronounced in Court on 6-6-2012) Sd/- S.S. Kang Vice-President MAJORITY ORDER 39. In view of the majority decision, following order is passed : The benefit of exemption under Notification No. 67/95-C.E., dated 16-3-1995 was allowed on account of (a) Naphtha cleared, availing exemption under Notification No. 4/2006-C.E., dated 1-3-2006 for manufacture of fertilisers under International Competitive Bidding (ICB). (b) On that 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) And denie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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