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TMI Blog2018 (9) TMI 822X X X X Extracts X X X X X X X X Extracts X X X X ..... d. vs. CCE Jaipur-II [2017 (4) TMI 841 - CESTAT NEW DELHI], where it was held that the electricity has been used in the manufacture of dutiable final products and also the fact that all units belong to the appellant the denial of credit is not justifiable. The decision which is taken by the Tribunal that the captive power plant of the sister concern, the same is against the fuel and fuel is used for the sister concern which is a part of the company itself. In that view of the matter, we are of the considered opinion that the view taken by the Tribunal is just and proper - credit remains allowed. Appeal dismissed - decided against Revenue. - D.B. Central/Excise Appeal No. 134 / 2017 - - - Dated:- 17-1-2018 - MR. K.S.JHAVERI AND MR. VIJAY KUMAR VYAS, JJ. For The Petitioner(s) : Mr. Siddharth Ranka with And Mr. Muzaffar Iqbal For The Respondent (s) : Mr. M.P. Devnath, Mr. Sameer Jain, Mr. Vivek Sharma, Ms. Mahi Yadav, Mr. Daksh Pareek And Mr. Arjun Singh Order 1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has allowed the appeal of the assessee. 2. This Court while admitting the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovider of taxable service for providing an output service; or ( ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, security, business exhibition, legal services, inward transportation of inputs or capital goods and outward transportation upto the place of removal; but excludes services, - ( A) specified in sub-clauses (p), (zn), (zzn), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act (hereinafter referred as specified services), in so far as they are used for - ( a) construction of a building or a civil structure or a part thereof; or ( b) laying of foundation or making of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... common balance sheet is maintained. But, by this can it be said that both the factories are one and the same? The definition of the factory as defined in Section 20(e) of the Central Excise Act, 1944, reads as under: ( e) 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; 8. Simply because both the factories are in the same premises that does not lead to the inference that both the factories are one and the same. In the present case, from the facts it is apparent that there is no commonality of the purpose, both the factories have a separate entrance, there is a passage in between and they are not complimentary to each nor they are subsidiary to each other. The end-product is also different, one manufactures duplex board and the other manufactures paper. They are separately registered with the Central Excise Department. The staff is separate, their management is separate. It is also not the case of revenue that end- produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 51895- 51899/2016-Ex (DB) dated 16-11-2016 of the ld. CESTAT in case of Hindustan Zinc Ltd. has been accepted on monetary limit and not on merit. K. BECAUSE the Final order No. 52132- 52133/2017-EX[DB] dated 02.03.2017 of the ld, CESTAT in case of Hindustan Zinc Ltd. has not been accepted by the Department on merits and is being appealed against. L. BECAUSE the Final order No. 53340- 53343/2017-Ex[DB] dated 17.04.2017 of the ld. CESTAT in case of Shree Cement Limited, Ajmer has not been accepted by the Department on merits and is being appealed against. 5. Counsel for appellant has contended that the observations made by the Tribunal are as under:- -/ Here, the excess electricity has been cleared by the appellant at the agreed rate in favour of their sister concern units and have also cleared such electricity in favour of the grid for distribution. Therefore, the appellant are not entitled to take Cenvat Credit to the extent of excess electricity transferred to the sister concern units at the contractual rates. 5(iii). Obviously, the electricity generation required for carrying out the manufacturing activity, the electricity also forms part of the manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in their favour from the single member bench in the case of Shree Cement Ltd. vs the single E Jaipur vide final order no. A/522so/2016.sM(BR) dated 30.06.2016. 4. The Ld. DR submits that the issue may be decided in favour of the Revenue. 5. on careful consideration of the submissions made by both sides and perusal of records, we find that the issue is regarding reversal of Cenvat Credit attributable to the power generated but transferred to their sister concerns. It is the case of the Revenue that the inputs and input services are not used in respect of power which is generated and captively consumed. We find no merits in the arguments put forth by the adjudicating authority in denying the cenvat credit to the appellant as in an identical issue, in respect of very same assessee, but situated at Chittorgarh, Rajasthan, this bench vide Final order No. A5189s 51899/2016 held as under: Heard both the sides and examined the appeal records. The short point for decision is whether or not the appellant is eligible to avail the credit on input services used in the generation of electricity which is partly cleared to their sister units who are also engaged in the manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt for nonreversal of proportionate Cenvat Credit availed by the respondent on the inputs viz furnace oil for generation of Electricity and Steam and passing the same to other unit/sister concern is permissible in law? ( b) Whether in the facts and circumstances of the case, the Tribunal has committed substantial error of law in holding that the extended period of limitation is not invocable by the revenue to raise demand from the respondent? As learned counsel for respondent appears on caveat and waives service of notice, no notice need be issued to the respondent. Paper book be prepared within three months issued. After the paper book is prepared, the appeal be listed final hearing. -/ The Appellate Tribunal in its impugned order had held that supplies made to a 100% EOU cannot be considered as exempted goods for denying Cenvat by virtue of Rule6(6)(ii) of Cenvat Credit Rules 2004. Assessee used cenvatable inputs viz, furnace oil to generate electricity and also to produce steam. Part of this electricity and steam supplied to its sister concern, a 100% EOU, situated outside its factory premises. It is economical in the modern competitive working to have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of third parties to supply products to assessee in consideration of assessee selling the electricity to them - Assessee having sold electricity to third parties lost all control or rights in respect thereof Even if electricity was by chance used for manufacture of final product sold by third parties to assessee, it would make no difference for it cannot be said that same was used by assessee itself Assessee not entitled to credit to transportation services - Rules 2(1) and14 of Cenvat Credit Rules, 2004 section 73 of Finance Act, 1994. 2. Commissioner of Central Excise, Chennai-I vs. SRF Ltd., 2013 (298) ELT 521 (Mad), wherein it has been observed as under: ... assessee was entitled to credit on furnace oil only to extent to which electricity was used within their factory. However, Apex Court judgment was delivered subsequent to impugned decision of CESTAT allowing credit, and its distinguishment in case of electricity being wheeled out only in favour of sister units without element of sale, was not discussed. Also, CESTAT had not decided question as to whether electricity supplied to other units of assessee situated in different premises was also entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facture of dutiable final products. The admitted fact is that the Cenvat credit on input services used in the generation of power is eligible to the appellant as long as the electricity is used in the manufacture of dutiable final product. The only dispute is relating to the usage of electricity captively within the plant of generation or also outside the generation unit by the same manufacturer. Considering that the electricity has been used in the manufacture of dutiable final products and also the fact that all units belong to the appellant the denial of credit is not justifiable in the present case. Further, it is a fact that if the appellant were to follow the procedure for input service distribution the credit eligibility on part of the electricity cleared to sister unit could not have been questioned and the credit could have been passed on to the unit which is actually using the electricity or retained fully by the appellant himself without proportionate distribution. Such being the factual position, I find that the impugned orders are not sustainable. Further, the reliance placed in the impugned order on the ratio of Hon'ble Supreme Court in Maruti Suzuki Ltd. vs. CCE, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that if the appellant were to follow the procedure for input service distribution the credit eligibility on part of the electricity cleared to sister unit could not have been questioned and the credit could have been passed on to the unit which is actually using the electricity or retained fully by the appellant himself without proportionate distribution. Such being the factual position, I find that the impugned orders are not sustainable. Further, the reliance placed in the impugned order on the ratio of Hon'ble Supreme Court in Maruti Suzuki Ltd. vs. CCE, Delhi- III (supra) appropriate. In fact the appellate Authority records that the facts are different in both the cases but still goes ahead and applies the ratio. As mentioned earlier in this order, the Hon ble Supreme Court was dealing the sale of electricity to outside parties and not to clearance of electricity to another manufacturing unit of the appellant. The input service credits attributable to the electricity sold to utility companies are not to the appellants as held by the Hon ble Supreme Court. This, the appellants are not contesting and have already reversed the amount towards such input service credits. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10(SC) , upheld the decision rendered in Ballarpur Industries Limited's case (supra). In view of the -/ decision of this Court in Solaris Chemtech's case (supra) and the fact that the decision in Ballarpur Industries Limited's case (supra) has already been upheld by this Court, we do not find any merit in this appeal on the first question and hold that modvat credit was allowable for the use of LSHS by the Assessee. As regards the second issue involved in the case, the Revenue has accepted the decision in the case of Raymond Ltd. (supra), as it did not file any appeal against the said decision in this Court. The second issue is already decided in favour of the Assessee. The decision rendered by the Tribunal is, thus, confirmed. The appeal is dismissed leaving the parties to bear their own costs. 6. Collector of Central Excise vs. Solaris Chemtech Limited, 2007 (214) ELT 481 (S.C.), wherein it has been observed as under: 2. In this batch of civil appeals the short question which arises for determination is : whether the assessee is entitled to MODVAT credit under Rule 57A on Low Sulphur Heavy Stock (LSHS) and furnace oil used for generating electricity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... half of the Department one needs to interpret the expression in or in relation to the manufacture of final products . The expression in the manufacture of goods indicates the use of the input in the manufacture of the final product. The said expression normally covers the entire process of converting raw-materials into finished goods such as caustic soda, cement etc. However, the matter does not end with the said expression. The expression also covers inputs used in relation to the manufacture of final products . It is interesting to note that the said expression, namely, in relation to also finds place in the extended definition of the word manufacture in Section 2(f) of the Central Excises and Salt Act, 1944 (for short, 'the said Act'). It is for this reason that this Court has repeatedly held that the expression in relation to must be given a wide connotation. The Explanation to Rule 57A shows an inclusive definition of the word inputs . Therefore, that is a dichotomy between inputs used in the manufacture of the final product and inputs used in relation to the manufacture of final products. The Department gave a narrow meaning to the word used in Rule 57A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the manufacture of the final product, such as cement, caustic soda etc. Therefore, it is not correct to state that inputs used as fuel for generation of electricity captively consumed will not be covered as inputs under Rule 57A. 7. Commissioner of CUS. Central Excise, India vs. Jindal Polyester, 2014 (305) ELT 43 (All.), wherein it has been observed as under: 6. Being aggrieved, the Department has come out in the present appeal. In the memo of appeal, the following substantial question of law has been framed: Whether the Appellate Tribunal has correctly interpreted Rule 57AA of the Central Excise Rules, 1944/Rule 2(g) of the Cenvat Credit Rules, 2001/2002/Rules 2(k) of the Cenvat Credit Rules, 2004 in holding that Cenvat Credit is admissible on the portion of Furnace Oil/LDO used for generation of electricity supplied to other units? Heard Shri B.K. Singh Raghuvanshi, learned counsel for the appellant and Shri Bharatji Agrawal, learned Senior Advocate assisted by Shri Manu Khare, Advocate. The learned counsel for the appellant submits that in view of Rule -/ 57-AA of the Central Excise Rules Modvat Credit is not admissible to the second unit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturing activity, the electricity generation also forms part of the manufacturing activity and the input used in that electricity generation is an input used in the manufacture of final product. This observation makes it clear that in the case where there is an arrangement for captive generation of electricity, it has to be treated as a requirement for carrying out manufacturing process and therefore credit would be admissible. Therefore, the key expression is captive arrangement . Captive arrangement means arrangement means arrangement made by the company for its own use and not for use by others. Therefore, when one company has various different units located at different geographical locations, all the units are manufacturing units, and the electricity generated in one unit are being consumed in the other unit of the same company in addition to it being consumed in the same unit also), it can be safely concluded that it is a case of captive generation and captive consumption of such electricity. In such a situation, the case would satisfy the test electricity generation is a captive arrangement. 15. In our considered opinion, therefore, Maruti s judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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