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TMI Blog2014 (6) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of duty on the clearance of final products under Section 11A(2) of the Central Excise Act, 1944 along with appropriate interest under Section 11AB of the Central Excise Act, 1944. (c) Penalty of Rs.6,79,61,303/- under Rule 15(2) of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. 2. The appellants have also filed a miscellaneous application for placing additional evidence on record under Rule 23 of the CESTAT Procedure Rules, 1982. 3. The application for bringing additional evidence on record is admitted, as the evidence produced by the appellants were available at the time of adjudication and are very much relevant for arriving at the correct conclusion in the matter. 4. M/ s. JSW Power Ltd. ('JSWPL' - in short) filed an appeal against imposing of penalty of Rs.5,00,00,000/- under Rule 26 of the Central Excise Rules, 2002 read with Rule 15 of the CENVAT Credit Rules, 2004 5. As both the appeals have arisen from a common order and the facts are similar, therefore, both the appeals are heard together and disposed of by a common order. 6. The facts of the case are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CENVAT credit - balance 50B on capital goods received during the period Sept.'05 to Mar.'06 and CENVAT credit availed on the capital goods during the period July, 2006. 10. The total denial of CENVAT credit for the entire period is Rs.6,79,61,303/- is on the following grounds: (a) The capital goods have not been received by M/ s.SISCOL in. its premises as the land where these capital goods were received was leased out to M/ s.JSWPL and the 'CPP' was not in the possession of M/ s. SISCOL to take credit; (b) Rule 4 of the CENVAT. Credit Rules, 2004 requires that goods should be received within the factory to take credit. The real manufacturer is only M/ s.JSWPL and as the land is leased out, the owners of the land is M/ s.JSWPL and not M/ s.SISCOL; and (c) Possession of capital goods was with M/s. JSWPL and not with M/S. SISCOL. 11. The adjudication took place and a detailed order was passed confirming the demand of Rs.6,79,61,303/- towards wrong credit availed by M/s.SISCOL and Rs.6,79,61,303/.., towards excise duty as M/s. SISCOL has utilised the credit for the payment of excise duty and equivalent amount of penalty under Rule 15(2) of the CENV AT Credit Rules, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Del.) (vi) M/s. German RemediesLtd. Vs Commissionerof Central Excise, Goa reported in 2002 (144) E.L. T.606 (Tri.-Mumbai); (vii) M/s. Ucbtog Ltd. Vs Commissionerof Central Excise, New Delhi reported in 2004 (165) E.L. T.226 (Tri.-Del.); (viii) M/s.Steel Authority of India Ltd. & Anr. Vs Commissionerof Central Excise, Bhubaneswar-II reported in 2006 (79) RL. T.33 (CESTAT-Del.); (ix) Mls.Sanghi Industries Ltd. Vs Commissioner of Central Excise, Rajkot reported in 2006 {76) RL. T. 132 (CESTAT-Del.); (x) M/s. Coromandel Fertilisers Ltd. Vs Commissioner of Customs. & Central Excise, Visakhapatnam reported in 2007-TIOL-09-CESTAT-BANG; (xi) Collector of Central Excise Vs M/s.Solaris Chemtech Ltd. reported in 2007 (214) E.L. T.481 (S.C.); (xii) M/s.Finolex Industries Ltd. Vs Commissionerof Central Excise, Pune-II reported in 2003 (156) E.L. T.96 (Tri.b &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llation of 'CPP' by M/ s.JSWPL (for Consignee M/ s.SISCOL') in the account of M/s.SISCOL., On these capital goods credit was taken by M/ s.SISCOL. These facts are not in dispute. The CENVAT credit taken by M/s.SISCOL was proposed to be denied by way of show-cause notices on the premise that the capital goods have not been received by M/s.SISCOL in its premises as the land on which these capital goods were installed has been leased out to M/ s.JSWPL,which was not in the possession of M/s. SISCOL,to take credit. 20. To counter this allegation of the appellants submitted that these capital goods are installed in their factory as defined in Section 2(e) of the Central Excise Act, 1944, which is reproduced herein below:- Factory means "any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process connected with the production of these goods is being carried on or is ordinarily carried on." 21. In this case, the further dispute is that whether the land on which these capital goods installed are part of the factory or not. 22. In this regard, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per cent. of the duty paid on such capital goods in the same financial year: Provided that the CENVAT credit in respect of capital goods shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year if such capital goods are cleared as such in the same financial year. Provided further that the CENVAT credit of the additional duty leviable under sub-section (5) of 'section 3 of the Customs Tariff Act, in respect of capital goods shall be allowed immediately on receipt of the capital goods in the factory of a manufacturer. (b) The balance of CENVATcredit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer, or in the premises of the provider of output service, if the capital goods, other than components, spares and accessories, refractories and refractory materials, moulds and dies and goods falling under heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Excise Tariff Act, are in the possession of the .. manufacturer of final products, or provider of output service in such subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable, is to be paid, allow final products to be cleared from the premises of the job worker. (7) The CENVAT credit in respect of input service shall be allowed, on or after the day which payment is made of the value of input service and the service tax paid or payable as is indicated in invoice, bill or, as the case may be, challan referred to in rule 9." 26. On a bare reading of the said rule, the CENV AT credit is available on receipt of the inputs in the factory of the manufacturer or in the premises of provider of output service. As per Rule 4(b) of the CENVAT Credit Rules, it is also a condition that the goods shall be in possession of the manufacturer of the final products. So in the factual matrix o~ the case, it is to be seen that whether the capital goods were installed in the factory o(M/ s.SISCOL and are being used by them and they are having the possession of the same or not. In the case of Steel Authority of India Ltd. Vs Commissionerof Central Excise, Bhubaneshwar-II reported in 2007 (219) E.L.T.960 rtB+. Del.) wherein the facts of the case are that M/s.SAIL has a steel plant at Rourkela. That plant was having a 'CPP' also. In 1999, the steel mills received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said Rotor assembly was not installed by them in their, factory premises and as such was not used in the 'CPP', for which the same was purchased. The said 'CPP' was subsequently sold by them to M/s. SAIL Power Supply Co. Ltd. (M/s.'SAIL PSCL' in short) during March 2001. The Rotor/Insurance spares were also sold by the appellant-company to M/s. SAIL PSCL along with the power plant. In that case, show-cause notice was issued for denial of CENVAT credit on the capital goods which were not installed and used. The said matter was referred to the Larger Bench of this Tribunal but the Larger Bench of this Tribunal returned the reference as in the referral order the reason of differences were not 28. In another case of Steel Authority of India Ltd. Vs Commissioner of Central Excise, R.aipur reported in 2009 (236) E.L. T. 711 (Tri-Del.), the relevant facts of the said case are that the appellants had a 'CPP' installed within their factory premises. The appellants, had entered into a Joint Venture agreement with M/ s.NTPC and started a subsidiary company known as M/ s.Bhilai Electric Supply Company Ltd. (M/s.'BESCL' - in short) with 99.8B0/o of the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on which the said power unit was installed. Therefore, a show-cause notice was issued for demand of excise duty on the capital goods on which the assessees have taken the credit. In that case, it was held by the Hon'ble High Court of Karnataka, that they are to reverse the CENVAT credit. The facts of the said case are also not relevant to the facts of the instant case, as in that case, the power plant installed was sold to a third party and as per CENVAT Credit Rules, the CENVAT credit is required to be reversed on the capital goods which have been cleared as such. The assessees are required to reverse the CENVAT credit availed as per Rule 4(b) of the CENVAT Credit Rules, 2004. In this case, 'CPP' was installed by M/ s.JSWPL, which was merged with M/ s.JSWSL and later on M/s.SISCOL was also merged with M/ s.JSWSL. In that scenario, it is to be seen for what purpose 'CPP' was installed by whom and form whom. As M/ s.JSWPL and M/ s. SISCOL have merged with M/ s.JSWSL, therefore, all the units are one and the lease agreement is for procuring the finance for installation of 'CPP' only. 32. The case law relied upon by the learned JCDR in the case of M/ s.M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that the appellants are entitled to CENVAT credit on the capital goods which were being used for manufacturing of 'CPP' by Ml s.]S\VPL, which is being used by the appellants to manufacture their final iron and steel. 34. In view of these observations, the impugned order is set aside and the appeals are allowed with consequential relief, if any. (To be pronounced in open court on 05-11-2012) Separate Order 21-08-2012 35. I have gone through the order recorded by the Judicial Member and also consldered the case records and arguments raised by both sides during hearing. Since I have a different view on this matter, I am recording this order. 36. Under the Cenvat Credit Scheme a manufacturer of excisable goods is allowed to take credit of excise duty paid on inputs and ca pitaf goods - used in the manufacture of excisable goods and utilize - such credit for payment of excise duty on final products manufactured byhlm. In this case we are concerned with taking of credtt on capttat goods. 37. The relevant facts are already recorded by the Judicial Member. Prima facie there can be doubt whether the facts would fit into the conditions prescribed _in Cenvat Credit Rules, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the other hand definition of capital goods as given in Rule 2 (a} and the Rule 3 (1) and Rule 4 (2) (a) allowing taking of credit are clear enough that credit is to be taken on capital goods received in the factory of the manufacturer. Interestingly there has been amendment to Rule 2(a) and Rule 4(2) (a) by Notification 3/2011-NT dated 01-03-2011 to the effect that in the case of captive power plants credit can be taken even if the plants are outside the factory. 40. In this case Cenvat credit was taken by .SISCOLduring the period Sep OS to July 06. (From 31-08-06, SISCOLhad taken over the power plant from JSWPL.). SISCOL had not paid for the value of the goods or . excise duty payable thereon when .credit was taken. Such payments could not be seen in the books of accounts of SISCOL, when credit was taken. The value of the goods and excise duty thereon were paid by JSWPL on the date on which credit was taken by SISCOL. These are two different companies. Th.ere is no relationship of oneas.the.holdlnq company of the other ~ which fact existed in some of the decisions relied upon. There is no relationship of SISCOL as job-worker of JSWPLwhich was the fact in cases where persons n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal Goods Yes Yes 13 Konark Met Coke Ltd- 2007 (207) ELT 4 70 Capital goods Yes No 43. There are other decisions of the type mentioned at S. No 5 where the ,job-worker was allowed to take credit notwithstanding the fact that the job-worker had not paid the value of the capital goods or excise duty on the capital goods from his funds. Three such cases are,- (i) CCE Vs. Sunrise Chemical Industries-2010 (262) E.L.T.110(Guj); (ii) Prolite Engineering Co Vs. UOI-1995 (75) ELT 257 (Guj); (iii) Evergreen Engineering co. Pvt. Ltd. Vs. CCE-2012 (278) E.L.T. 328 (Tri. - Mumbai); 44. In the present case SISCOL cannot be considered as a jobbthe assessee who was taking credit nor was it used in their factory though there are some arguments OQ the second part of the statement. 45. Now it is time for answering the issues raised. If issue-I is seen independently, then tt may appear that precedent decisions support the 'case of the appellant. For this one has to ignore that those 'decisions were give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Rules like the one that) the person who purchased the goods cannot capitalize the duty amount and claim depreciation. The person who pays for the value of goods and duty may take credit and claim, depreciation and another person who uses the goods can claim the credit and the department may not know about the misuse because the books of accounts of the owner is not audited normally as in this case wherein the owner of the goods is not a Central Excise assessee. The owner may even refuse permission for such audit and the information can be extracted only through a procedure 'of issue of summons. Further it can also lead to a situation where someone sets up a power plant supplies part of the electricity to a manufacturer who takes credit and sells the rest of the electricity to the public. The next step can be, for illustration, a factory of SAIL can take credit of duty paid on equipment used by NTPC in a power plant for the reason that the power from NTPC is used in the factory of SAIL at least partially. Such benefits are not intended by the scheme. So I dot agree with the proposal for further liberalization of the conditions laid down in the rules. 48. Now let me examine Is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessees and in favour of Revenue and is not a practicable approach.' The tax liability from the date of future event can be certainly looked into. If credit was taken during a period when the assessee was not entitled to take credit, there is loss caused to Revenue at least to the extent of interest for the period for which there was no eligibility for the credit. However while deciding matters off penalty these future event can be taken into account. 50. Now there is a need to examine the main decision relied upon by the appellant which is the decision of the Apex Court in State of UP and Others Vs. Renusagar Power Company and others (AIR 1988 SC 1737). Here the facts were that M/s HINDALCOhad set up a, power plant through a 100B0/o subsidiary namely Renusaqar Power Co., a power plant which started producing power and supplying power to HINDALCO in 1967. Under the Electricity Duty Act, 1952 of the State of UP electricity duty was payable on electricity other than from "own source of generation". UP State demanded such duty from Renusagar Power Co. because power was belnq supplied to another company, namely HINDALCO. The Court ruled that the demand is not maintainable because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. It appears to us, however, that as mentioned the concept of lifting the corporate veil is a changing concept and is of expanding horizons. We think that the appellant was in error in not treating Renusagar's power plant as the power plant of Hindalco and not treating it as the own source of energy. The respondent is liable to duty on the same and on that footing alone; this is evident in view of the principles enunciated and the doctrine now established by way of decision of this .Court in Life Insurance Corpn of India, (supra) that in the facts of this case sections 3(1)(c) and 4(1)(c) of the Act are to be interpreted accordingly. The person generating and consuming energy were the same and the corporate veil should be lifted. In the facts of this case Hindalco and Renusagar were inextricably linked up together. Renusagar had in reality no separate and independent existence apart from and independent of Hindalco. 68. In the aforesaid view of the matter we are of the opinion that consumption of energy by Hindalco is clearly consumption by Hindalco from its own source of generation. Therefore, the rates of duty applicable to own source of generation have to be applied to suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther issue in this matter. Traditionally lifting of corporate veil has been done for denying a claim of the parties concerned which claim is set up through subterfuges of separate entities and not for granting a benefit to the parties who for their own reasons hold themselves to be different. Nevertheless the Apex Court has expanded the concept to grant a benefit by lifting corporate veils of two companies because of the peculiar facts of the case .and also because the Governments themselves were considering the two companies to be one and the same in many matters. The issue to be decided was meaning of the expression "own source of generation" in which case there can be a doubt whether a subsidiary company's resources are the resources of a holding company. No such fact or law exists in this case. Indiscriminate lifting of corporate veil to grant benefits to the parties who claim themselves to be different can be disastrous. 54. The case of SAIL reported at 2007(219) ELT 960 (Tri-Del) also deals with a situation were the holding company took credit and then spun off a new company having the capital goods separated from the parent company. The facts are not comparable because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per to allow Cenvat Credit of excise duty paid on excisable capital goods paid for and used by JSWPLto be taken by SISCOL from 31-08-2006 when the two companies got merged as held by Technical Member? (Pronounced on ) The registry is directed to take appropriate steps for resolving the above difference in views. Per Pradip Kumar Das 57. The point of difference of opinion has already been set out above. 58. The facts of the case have also been narrated by the learned Judicial Member in his order. 59. The learned Advocate Shri Shivdass on behalf of the Appellant, supported the order of the learned Judicial Member and also made the submissions at length. He has filed a written synopsis with compilation of the case laws in support of his submission. On the other hand, the Ld. Authorized Representative, Shri M. Rammohan Rao on behalf of the Revenue, supported the order of the learned Technical Member and also drew the attention of the Bench, the relevant portion of Adjudication order and various provisions of law and made his submission elaborately. He has also submitted a written submission with case laws, which are kept on record. 60. After hearing both sides, and on perusal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006, as no depreciation was claimed by the company and penalty of Rs.25,00,000.00. 63. The Ld. Authorised Representative on behalf of the Revenue contended that in terms of lease agreement dated 17.1.2005, M/s.SISCOL leased out a portion of land to M/s.JSWPL for the purpose of setting up a Power Plant. On 31.8.2006, the lease deed was terminated and by a tripartite agreement between M/s. SISCOL, M/s.JSW Steel Ltd. and UTI Bank Ltd., the Power Plant was transferred to M/s.SISCOL. Prior to 31.8.2006, M/s.SISCOL had not received the capital goods in their factory premises. Goods were not in possession of or ownership of M/s.SISCOL. There was no relation of principal manufacturer and job worker between SISCOL and JSWPL. The ground plan, which was existing prior to such leasing out cannot be sought to be relied upon by the assessee for their wrongful availment of Cenvat credit. 63.1. He has also drawn the attention of the Bench to various provisions of Cenvat Credit Rules as under:- (i) Rule 2 (a) (l) : - The Capital Goods should have been used in the factory of the manufacturer of the final products or for providing output service; (ii) Rule 3(1) : - A manufacturer or producer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As such, the input service used in the power plant would entitle the appellant to claim Cenvat credit because power generated in the power plant is essential for the concerned final product. In our aforesaid view, we are supported by the judgment of Hon'ble. In this case, since as discussed above, the Renusagar Power Plant is a captive power plant of the Appellant 64.4. In view of the above decision, it is apparent that capital goods/input/input service used on power plant situated at a different premises CENVAT credit is admissible subject to exclusive supply of power by the impugned plant to the assessee manufacturing unit. In the present case, the capital goods were used to set up power plant for generation of electricity primarily for use in the manufacture of the final product within the factory of M/s.SISCOL. So, if the power plant is situated outside the factory premises, cenvat credit on capital goods used for setting up power plant cannot be denied as the electricity is captively consumed within the factory of M/s.SISCOL. 65. The main contention of the Ld. A.R is that the concerned power plant is not an integral part of the manufacturing unit namely M/s.SISCOL. It is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the merger of SISCOL with Jindal Steel Ltd., is a foreclosed decision taken by the Corporate Data Restructuring Cell. (ii) The communication dated 06.01.2005 to the Deputy Chief Inspector of Factories, Salem shows that 2 x 30 MW captive power plant is proposed to be installed inside the SISCOL premises to meet the present and future requirements of SISCOL. This communication clearly shows that JSW Power did not consider the land as that of theirs but that of SISCOL's. (iii) The Lease Agreement for the land is dated 17.01.2005. The Lease Agreement is between SISCOL and JSW Power Ltd., Clause C reads as SISCOL requested JSW Power Ltd., to set up a power plant of 60 MW at the SISCOL premises to take care of power requirements of SISCOL to which JSW Power agreed. Clause D reads as for the purpose of setting up the power plant, SISCOL agreed to lease a portion of demised land admeasuring about 50.14 acres. The term of the lease was 15 years from 01.01.2005. The actual rent is Rs.10,000/- only. This document also proves that the lease was for the setting up of a power plant for SISCOL only. &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... COL area. 67. For the purpose of proper appreciation of this issue, in so far as the Power Plant a Captive Power Plant, it would constitute integral part of manufacturing activities of M/s.SISCOL, it is appropriate to examine the facts of the case, in precise manner, as under :- (i) M/s.SISCOL had become a sick industrial company as on 30.6.2004 in terms of Section 3(1) of Sick Industrial Companies (Special Provision) Act, 1985 as evident from "Summery Record of Proceedings of Hearing on 23.8.2005" of BIFR. (ii) There was a proposal dated 14.10.2004 for restructuring of debts of M/s.SISCOL under the CDR (Corporate Debt Restructuring) mechanism by CDR cell. It is seen from "Terms and conditions of Restructuring Packages" that completion date shall be 18 months from the date of effective take-over by the Sajjan Jindal Group (SJG). The borrower/SJG to take up with existing/new tenders to bridge the gap in the event of fund not being made available by IFCI and SIB. Instrument shall be finalized to the mutual satisfaction of SJG and lenders. The SJG shall arrange for merger of the SISCOL with its major group steel company. (iii) The Directorsb "Unit III (Expansion) Jindal South West ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eet the present and future power requirements of SISCOL." (vi) TNEB (Tamil Nadu Electricity Board) by letter dt. 21.7.2006 addressed to M/s.SISCOL approved as SISCOL captive power plant located in the company's premises. The relevant portion of the said letter is reproduced below :- "Approval is hereby accorded to M/s.Southern Iron and Steel Company Ltd., Mettur Elecy. Distn. Circle for parallel operation of 1 x 30 MW (Out of 2 x 30 MW0 Captive Power Plant located in the Company's premises at Pottaneri, Mettur Taluk, Salem District with TNEB's Grid as per Sub-Section (2) of Section 9 and Clause (d) of Sub-Section (2) of Section 39 of the Electricity Act, 2003" 68. Section 105 of the Transfer of the Property Act defines a lease of immovable property in the following words : "A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, expressed or implied, or in perpetuity in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of SISCOL. Further, TNEB approved as SISCOL Captive Power Plant located in the company's premises. 68.3. Rule 4 (3) of CCR 2004 provides that the cenvat credit in respect of the capital goods shall be allowed to a manufacturer, even if the capital goods are acquired by him on lease, hire purchase or loan agreement, from a financing company. Rule 4(3) has a wide amplitude in so far as it would cover the cases of various types of financial arrangements for availing credit on the capital goods. It is contemplated that under this sub-rule (3) of Rule 4 would cover the cases where the ownership of the capital goods does not vest in the manufacturer until the loan is repaid. There must be an agreement for the purpose of acquiring the capital goods. The Tribunal in the case of Iljin Automotive India Ltd. Vs CCE Chennai . 4. Taking into account of overall facts and circumstances of the case and records, it is clearly evident that even prior to 31.8.2006, it was a Captive Power Plant of M/s.SISCOL as approved by TNEB under the Electricity Act. SISCOL was a sick unit. They entered into lease agreement with M/s.JSWPL, a relationship had already been developed prior to October 2005, as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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