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TMI Blog2014 (8) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... is not is dispute that the Appellant have all along been claiming that they are the de facto manufacturer of the Lime from the Lime sludge. We observe that there is no detailed finding recorded on this aspect by the Ld. Commissioner. Also, there is a dispute about transfer/use of the land in favour of the Appellant - matter remanded back for ascertaining the facts and to apply the ratio of Associated Cements case - however penalty set aside - Decided partly in favour of assessee. - APPEAL NO.E/761/2010 - ORDER NO.FO/A/75447/2014 - Dated:- 7-8-2014 - DR. D.M.MISRA AND DR. I.P.LAL, JJ. FOR THE APPELLANT : SHRI A.R.MADHAV RAO, ADV. ASSISTED BY SHRI KRISHNA RAO, ADV. FOR THE RESPONDENT : SHRI S.MISHRA A.R. (ADDL. COMMR.) JUDGEMENT Per Dr. D.M.Misra; This is an Appeal filed against the Order-in-Original No CCE/BBSR-I/28/2010 dt.28.09.2010 passed by the Commissioner of Central Excise, Customs Service Tax, Bhubaneswar-I. 2. Briefly stated, the Appellant are engaged in the manufacture of excisable goods viz. Pulp, Paper Paper Board falling under Chapters 47.25 48.02 of CETA, 1985. They had availed CENVAT Credit on various Pollution Control equipmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived by the Appellant under 265 invoices during the period, August, 2007 to March, 2008 and taken in their books of accounts. The Appellant against bills dated 02.04.2008 and 01.09.2008, sold the said equipment/capital goods required for setting up the lime kiln plant involving a total cenvat credit of ₹ 2.37 crore to M/s JKETL. The Appellant had entered into a Conversion Agreement, which was been later changed to Take or Pay Agreement for the conversion of lime sludge into lime in the said premises and the Appellant had agreed to pay ₹ 48 lakhs towards conversion charges to M/s JKETL. It is his contention that all infrastructure support and day to day running of the said lime kiln plant had been provided by the appellant to M/s JKETL, and the entire quantity of lime converted from lime sludge by M/s JKETL were returned to the appellant, which in turn, were used in the manufacture of paper and paperboard. 3.2. It is his contention that the demand notice had been issued and confirmed alleging that the CENVAT Credit amount of ₹ 1.89 crore had been availed wrongly in violation of Rule 3(5B) of the CENVAT Credit Rules, 2004, on the premise that once the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... randum of Understanding has been executed on between Appellant and M/s JKETL in this regard. In support, he has referred to the judgments of the Hon ble Supreme Court in (i)Grauer Weil India Ltd. vs. CCE, Baroda, 1994(74)ELT 481(SC); (ii)Shree Agency vs. SK Bhattacharjee, 1977 (1) ELT J 168 (SC); (iii)Bee Pee Coating Ltd. vs. CCE, Vadodara, 2000 (115) ELT 765 affirmed at 2000 (118) ELT A241(SC). Further, he has submitted that conversion of lime form lime sludge is an integral process in the manufacture of paper and paperboard, hence, one factory registration would be necessary, in view of the judgements in the following cases: Dhamapur Sugar Mills Vs. CCE Meerut 2001 (129) ELT 73(Tri. Del.), Amaravathy Co.-Op Sugar Mills Vs. CCE, Coimbatore 2002 (150) ELT 449(Tri.-Chennai). 3.5. Further, he has submitted that credit cannot be denied on the ground that the capital goods are sold and owned by JKETL and not by the Appellant, since ownership of the capital goods, is not a relevant factor in availing the CENVAT Credit. In support, he has referred to the judgments, namely, HIS Automotives vs. CCE, Chennai 2004 (163) ELT 116(Tri-Chennai); CCE, Ludhiana vs. Pepsi Foods, 2010(254)ELT 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... introduction to the subsequent clauses representing the understanding between the parties; the understanding as set out thereafter, clearly renders the Appellant as a manufacturer. Distinguishing the judgment of the Hon ble Karnataka High Court in the case of Commissioner of Central Excise, Belgaum Vs. Associated Cement Company Ltd. 2009(236)ELT 240(Kar.), the ld. Advocate submitted that the said judgment would not be applicable to the present case, in as much as the land has not been leased to M/s JKETL and the control of running the lime kiln plant is fully with the Appellant. Further, he has submitted that the said judgment of the Hon ble Karnataka High Court is per incuriam, as it has not considered the meaning of removal laid down by the Hon ble Supreme Court in the case of JK Spinning and Weaving Mills (supra); hence cannot be considered as a binding precedent. 4. Per Contra, the Ld. A.R for the Revenue has submitted that the Ld. Commissioner has not travelled beyond the scope of the show cause notice, in the sense that even though he did not agree with the contention of the Department that that recovery of CENVAT credit could be made under Rule 3(5B) of CCR,2004 but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacture of Lime which was exempted from duty, it cannot be considered that the plant still belonged to the Appellant. It is submitted that a similar view was taken by Hon ble High Court of Karnataka in Commissioner of Central Excise, Belgaum Vs. Associated Cement Co. Ltd., 2009(236) E.L.T. 240 (Kar.) in which it was held that once the sale transaction between the assesse and buyer is accomplished the assesse-company had lost its ownership and control and was nothing short of physical-removal of cenvatted unit. 4.3. Referring to judgment of Hon ble Gujrat High Court in the case Sintex Industries Ltd. Vs. Commissioner of Central Excise, 2013 (287) E.L.T. 261 (Guj.), it is submitted that once the assessee has a separate Registration the assessee is stopped from contending that their manufacturing facility is also a factory within factory simply because both are situated within the common boundary wall. In the instant this principle would hold goods for JKETL even when they manufacture lime which is nevertheless exempted but on which exemption may be removed at a later date 4.4. The Ld. A.R. argued that in case such a device/method is accepted as legal the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o various provisions of CENVAT Credit Rules, 2004. Therefore, in our opinion, the ld. Adjudicating Authority has not travelled beyond the scope of Show Cause Notice, as no new facts had been considered, nor extraneous matters were taken into account in confirming the demand. 5.2. Now, coming to the merit of the case, we find that the Appellant had assailed the impugned Order on various grounds. It is contended that on sale of the capital equipments, machineries, no doubt, there has been change/transfer of ownership from the Appellant to M/s. JKETL; but, since the criterion of ownership being not relevant to the eligibility of CENVAT Credit on inputs/capital goods under the CENVAT Credit Rules,2004, therefore, CENVAT Credit cannot be demanded from them being correctly taken and utilized. In support they have referred to the judgments of the Tribunal and High Court, which are discussed as below. 5.3. In His Automotives Ltd. s case(supra), the question arose was whether CENVAT Credit availed on capital goods, namely, Checking Fixtures and Jigs Fixtures, cleared by M/s Hyundai Motors to the Appellant, for the manufacture of auto parts, would be admissible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Credit on the duty paid on the capital goods by M/s Hyundai Motors India Ltd., which were used by them in the manufacture of auto parts. 5.6. In the case of Sharda Motors case (supra), the assessee was the manufacturer of automobile components for M/s. Hyundai Motors who had supplied them certain jigs and fixtures. The Tribunal had observed that even though the ownership of such moulds and dyes vested with M/s. Hyundai Motors, MODVAT Credit was held admissible to the Appellant. In this case also while clearing the capital goods M/s Hyundai Motors reversed/paid the credit/duty on the said Jigs fixtures under Rule 57S of the erstwhile Central Excise Rules, and the Appellant had availed the credit. 5.7. We find that in all these cases the issue of ownership was held not relevant, when the supplier/owner had removed the moulds/capital goods, to the job-worker, on reversal of credit/payment of duty under erstwhile Rule 57S, and the job-worker even though not the owner of the said goods used the same in the manufacture of finished goods and accordingly, availed the credit. But, the circumstances in the present case are totally different, in as much as, the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h v. State of Maharashtra, 2004 (2) SCC 362]. (emphasis supplied) in a recent case in Arasmeta Captive Power Company Pvt. Ltd. vs. Lafarge India Pvt. Ltd.,2014 AIR SCW 39, at paras 35 and 36, held as follows: 35. At this stage, we may also profitably refer to another principle which is o assistance to understand and appreciate the ratio decidendi of a judgment. The judgments rendered by a court are not to be read as statutes. In Union of India v. Amrit Lal Manchanda and another, it has been stated that observations of courts are neither to be read as Euclid's Theorems nor as provisions of the statute and that too taken out of their context. The observations must be read in the context in which they appear to have been stated. To interpret words, phrases and provisions of a statute, it may become necessary for Judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes. 36. In Som Mittal v. Government of Karnataka, it has been observed that judgments are not to be const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 4 of the Act inasmuch as place of removal as defined therein, does not contemplate any deemed removal, but a physical and actual removal of the goods from a factory or any other place or premises of production or manufacture or a whatehouse etc. This contention is unsound and also does not follow from the definition of place of removal . Under the definition place of removal may be a factory or any other place or premises of production or manufacture of the excisable goods etc. The Explanations to Rules 9 and 49 do not contain any definition of place of removal , but provide that excisable goods produced or manufactured in any place or premises at an intermediate stage and consumed or utilised for the manufacture of another commodity in a continuous process, shall be deemed to have been removed from such place or premises immediately before such consumption or utilisation. Clause (b) of sub-section (4) of Section 4 has defined place of removal , but it has not defined removal . There can be no doubt that the word removal contemplates shifting of a thing from one place to another. In other words, it contemplates physical movement of goods from one place to anot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e word, removal occurs under the excise provisions , irrespective of its context, to be understood as mentioned in the said para 39 of the judgment as physical removal only . 5.14. On the other hand, under similar facts and circumstances, the issue had been considered by the Hon ble Karnataka High Court in Associated Cements case (supra). In that case, the Respondent/assessee therein, namely Associated Cements Company Ltd. was engaged in the manufacture of cement at their factory at Wadi. They had installed a captive power plant and availed the MODVAT Credit on the said capital goods under Rule 57Q of the erstwhile Central Excise Rules,1944. The said captive power plant, thereafter, was sold to M/s. Tata Electric Company for a total consideration of ₹ 90.00 crore. The power generated in the said captive power plant had been sold to the Appellant by M/s Tata Power. While selling the power unit, the assessee had also leased the portion of land, on which the power unit was installed in the factory premises, for a period of twenty years, in favour of the said purchaser. The following question of law formulated before the Hon ble High Court, on a reference taken by the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the said Act and the Rules. The said transactions of sale of power unit and simultaneous lease of premises are wisely resorted to by the assessee as a device to avoid the tax liability on it on the ground that the power unit was not physically removed from the premises of the assessee. Therefore, we are of the considered opinion that the Tribunal without application of mind and without proper appreciation of the said transactions in the light of the relevant provisions of the Central Excise Act and the Rules has allowed the appeal of the assessee-company and set aside the Order-in-Original passed by the Commissioner of Central Excise, Belgaum. In the circumstances, we answer the above question of law in the negative and against the assessee. 5.16. The above judgment of Karnataka High Court has been followed by the Honble Delhi High Court in the case of Pure Drinks Ltd. Vs. UOI, 2012(281)ELT 51(Del.) by the Tribunal in Commissioner of Central Excise Vs. krypton Outsourcing Ltd. 2010 (256) ELT768(Tri.-Del.) 5.17. Drawing analogy from the facts and circumstances referred to in the said case, we find more or less similar situations involved in the present case also. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing paid towards the use of the land, which has been included in the Conversion Charges. Also, we find that there is no finding in the impugned Order, on the aspect of exercise of control on the lime kiln plant by the Appellant, as claimed by them,. These facts necessarily to be ascertained and vital for arriving at a conclusion as to whether the principle laid down in Associated Cements case (supra), would be applicable to the facts of the present case. 5.21. The ld. Advocate also argued that even assuming that the said installations were outside the factory premises of the plant, CENVAT Credit would still be admissible to the Appellant in view of the ratio laid down by the Hon ble Supreme Court in Vikram Cements case (supra). We do not find force in the said argument, as in the said case, the assessee had not divested with the ownership or control of the said capital goods, used outside the factory i.e. in captive mines, in favour of any third party, like the present case, hence, the principle in the said case would not come to the rescue of the Appellant. 5.22. The ld. Advocate further argued that there was no provision under the CENVAT Credit Rules to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f CEA,1944. We are of the view that in absence of suppression of facts or any mis-declaration, penalty is not imposable, where the issue involved, is an interpretation of law. 5.24. In view of the above analysis, we are firmly of the view that the ratio laid down by the Hon ble Karnataka High Court in Associated Cement s(Case), is applicable to the present case and accordingly we have no hesitation to hold that once the ownership and control of the equipments, machineries are transferred to another legal entity, even if it is situated in the same factory premises, it would be construed as removal within the meaning of Rule 3(4) of the CENVAT Credit Rules,2004 and CENVAT Credit on the capital goods availed by the transferor is liable to be recovered. For the above reason, the other issue raised, that is, that CENVAT credit on capital goods not to be denied if the intermediate product is exempted, becomes academic and accordingly the same are not deliberated in the present Order. We are of the view that the conclusion reached by the Tribunal in the case of M/s Dalmia Cement s case(Supra) delivered earlier to the decisions of the Hon ble Karnataka High Court in Associated Cements c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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