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TMI Blog2020 (2) TMI 690X X X X Extracts X X X X X X X X Extracts X X X X ..... uty Chief Inspector of Factories, Salem on the pretext that, the SISCOL was taken over by Jindal. Further, even under the condition of Rule 2(a)(1) and (1A), the capital goods purchased for the purpose of setting up CPP were fully used only in the factory premises of the SISCOL and therefore, the said contention of the Revenue by the learned counsel that, under definition Clause in Rule 2(a)(1) and (1A) of the CENVAT Credit Rules, the SISCOL was not entitled to take the CENVAT credit does not hold any water, therefore it is liable to be rejected. Even if the CPP is located well away from the main factory of the manufacturer of final product, the capital goods purchased and utilised for such CPP even though not in the same factory premises, even then the manufacturer can take CENVAT credit. This has been explained and amplified by the subsequently amended Rule i.e., 2(a)(1A) of the CENVAT Credit Rules, 2004. Therefore, it has been explained or clarified in Rule (1A) which is in the aid of 2(a)(1). The case of the Revenue that the Assessee i.e., original SISCOL who got merged with JSW Steel Limited and JSW Power Limited, did not have the authority or right to take the CENVAT cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the tune of ₹ 62 Crores. Since the entire cost of CPP project was roughly about ₹ 95 Crores, the balance cost to the extent of ₹ 28 Crores was invested by SISCOL in the form of shares in JSWPL. 6.Accordingly, the JSWPL using the funds it generated, as stated above, set up the CPP 2 x 30 MWs in the land leased out by SISCOL in its factory premises. 7.While setting up the CPP, the capital goods were ordered to be purchased and accordingly, on the capital goods purchased by raising invoice in the name of JSWPL - Consignee SISCOL, the Assessee availed CENVAT Credit. After having completed the CPP, it was commissioned in the year 2008. In the meanwhile, during the CDR proceedings, the SISCOL was merged with the JSW Steel Limited (JSWSL) with effect from 01.04.2007 as per the order dated 22.02.2008 of the High Court of Bombay. 8.In the meanwhile, the JSWPL as well as JSWSL got merged with effect from 01.04.2005, of course pursuant to the order of the High Court dated 14.11.2005. On 31.08.2006 even before that 60 MW Power Plant i.e., CPP was fully set up, the SISCOL terminated the lease agreement with JSWPL and took over the CPP. The loan taken from UTI was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OPINION 56. In the facts and circumstances of the case,- Whether it is proper to allow Cenvat Credit of excise duty paid on excisable capital goods paid for and used by JSWPL to be taken by SISCOL from October 2005 onwards as held by Judicial Member? Or Whether it is proper to allow Cenvat Credit of excise duty paid on excisable capital goods paid for and used by JSWPL to be taken by SISCOL from 31.08.2006 when the two companies got merged as held by Technical Member? 14.A Third Member also, by his order dated 23.05.2014, concurred with the view of the Judicial Member, who decided to allow the Assessee's Appeal, thereby the majority order was passed on 23.05.2014 by the CESTAT allowing the Appeals filed by the Assessee by setting aside the Order-in-Original passed by the Revenue. Aggrieved over the said order of the CESTAT dated 23.05.2014, the instant Appeals have been preferred by the Revenue. 15.These appeals were admitted by a Coordinate Bench of this Court on 17.04.2015 on the following Substantial Questions of Law : (i) Whether the Tribunal was correct in holding that the availment of CENVAT credit by the respondent M/s.SISCOL is correct, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the SISCOL was not entitled to take any CENVAT credit. These factors, according to the learned counsel, had been unearthed only subsequently based on the intelligence input received by the Revenue and thereafter, only on verifying the books of accounts of the SISCOL, the Revenue found that the SISCOL taken the CENVAT credit wrongly without the entitlement, therefore, it triggered the Revenue to issue show cause notices on two dates seeking show cause from the Assessee on various heads as has been stated therein. 18.The learned counsel for the Revenue, having relied upon Rule 2(a)(1) of CENVAT Credit Rules, would emphatically submit that, if at all the capital goods are not used in the factory of the manufacturer/Assessee of the final product, the Assessee is not entitled to CENVAT credit. He would also submit that, by virtue of the insertion of Rule 2 (a)(1A) from 01.04.2011, the capital goods used outside the factory of the manufacturer of the final product for generation of electricity or for pumping of water for captive use within the factory premises alone would be entitled to take the credit. 19.By relying upon these provisions of CENVAT Credit Rules, the learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... By explaining these factors, the learned counsel for the Assessee would submit that, even at the time of entering into a lease between SISCOL and JSWPL, for all practical purposes, there had been a take over of SISCOL by Jindal Group i.e., JSWPL and that is the reason why the land earmarked by way of lease by SISCOL was in turn pledged by JSWPL with UTI Bank Limited and raised funds to the extent of ₹ 62 Crores and the balance cost of the project i.e. ₹ 28 Crores was invested by SISCOL at the shares of JSWPL. Therefore, the learned counsel would contend that, even before setting up the CPP, for the purpose of supplying the power in entirety to SISCOL in order to expand its manufacturing capacity to the maximum extent, there had been a coordination and unison of activities between the SISCOL and JSWPL and that is the reason why the CPP though was set up by JSWPL, was established only in the name of SISCOL for all practical purposes and that is the reason why when the capital goods were purchased, invoices were raised in the name of JSWPL Consignee SISCOL. 21.The learned counsel for the Assessee would also contend that, in the Second Annual Report of JSWPL Group u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and with UTI Bank limited to raise the fund to the tune of ₹ 62 Crores for the purpose of setting up the CPP. That apart, another sum of ₹ 28 Crores was invested by SISCOL in the form of shares in the JSWPL, the total cost of the CPP itself is around ₹ 95 Crores, therefore, the entire cost or 90% of the cost of the CPP was generated by JSWPL only from the source of SISCOL. 25.In this context, the case of the Assessee is that, since the SISCOL decided to expand its production capacity, for which they wanted to set up a CPP to meet the power requirement of 60 MW, the aforementioned arrangement was made between the SISCOL and JSWPL, as at that time the SISCOL was sick and was under Restructuring Scheme under CDR and also was declared as a sick Industry by BIFR. 26.Pursuant to the said leased out of the land for setting up CPP, the JSW Power Limited i.e., JSWPL in its request letter dated 06.01.2005 itself, addressed to the Deputy Chief Inspector of Factories, Salem, made the following request: Sub: Construction of 2 x 30 MW CPP at SISCOL plant site. Dear Sir, JSW Power Limited (JPL) is a JSW Group Company, having its registered office at 5-A, G.D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titled to take the CENVAT credit as the capital goods were not used in the factory premises of SISCOL, accordingly, the show cause notices were issued and ultimately it ended in Order-in-Original dated 03.10.2007 whereby the amount of CENVAT credit taken by SISCOL was demanded and also the excise duty was demanded besides imposing penalty. 29.The main contention of the Revenue as projected by Mr.V.Sundareswaran, learned counsel for the Revenue, for denying such CENVAT credit to SISCOL is, because of the condition imposed under the CENVAT Credit Rules under the explanation clause to the word capital goods . In this regard, the learned counsel for the Revenue since has heavily relied upon the relevant definition clause i.e., Rule 2(a) (1) and (1A), the same is quoted below: 2.Definitions In these rules, unless the context otherwise requires,- (a) capital goods means,- (A) The following goods, namely:- (i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, [heading 6805, grinding wheels and the like, and parts thereof falling under [heading 6804 and wagons of subheading 860692]] of the First Schedule to the Excise Tariff Act; (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e leased out area to JSWPL to set up the CPP. As per the Certificate issued by SISCOL, 6000 Cu.M. of water everyday was supplied by SISCOL to the CPP and before the CPP in fact was completed, the lease was terminated and the CPP unit was taken over by SISCOL. There is no prohibition in CENVAT Rules against lease of part of land. The leased portion continues to remain in the ownership of SISCOL. 32.During that point of time, though the merger process was undertaken between SISCOL and JSWPL (Jindal Group), it has been materialised only after the order passed by the Bombay High Court on 22.02.2008 thereby the merger took place with effect from 01.04.2007. 33.Even before setting up of CPP, the permission was sought for by JSWPL on 06.01.2005 from Deputy Chief Inspector of Factories, Salem, where also the JSWPL claimed that, the SISCOL has been recently taken over by JSWPL Group which was proposing to install 2 x 30 MW CPP. The content of the said request letter of JSWPL had already been quoted herein above. It is also to be noted that, almost the entire cost of the CPP was generated by JSWPL only from the source of SISCOL i.e., by pledging the land of SISCOL ₹ 62 Crores was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also the contention of the learned Counsel that in this case corporate veil was required to be lifted so as to arrive at the reality of the transaction and reach appropriate conclusion. Therefore, in that case, this Tribunal has relied on the judgment of the Hon'ble Supreme Court in the case of State of Uttar Pradesh v. V.Renusagar Power Co. and others reported in 1988 (4) SCC 59 for lifting of corporate veil. It is being explained that the case of Renusagar Power Co., was one where a dedicated power generation plaint was set up to support the aluminium manufacturing activity of M/s.Hindustan Aluminium Corpn. Ltd. (M/s.Hindalco - in short) and after going into all the relevant aspects, the Hon'ble Supreme Court ruled that since the power plant was set up and run as a dedicated power plant for the manufacturing factory, the power generated by the power plant should be treated as power generated from M/s.Hindalco's own source of generation. This conclusion was reached by the Hon'ble Supreme Court after lifting the corporate veil and finding that the power plant (utility) was created and existed solely to support the aluminium company. Thereafter, this Tribunal came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 good 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 - 2004 (175) ELT 169 (Tri.-Chennai) observed that variations/unusual features in the agreement covering the lease arrangement were not relevant for determining the eligibility of credit. It is clear that title of the property is not relevant for availing cenvat credit on capital goods. 68.4 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This definition also states that captive generating plant means a power plant set up by any person or company to generate electricity for his own use. In the instant case, there is no dispute between the parties because power generated by Renusagar Power Plant was exclusively supplied to the appellant company, and, therefore, in our considered view, the power plant is captive power plant of the appellant. 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 Supreme Court in the matter of Vikram Cement v. C.C.E., Indore - 2006 (197) E.L.T. 145 (S.C.) wherein while dealing with the issue of eligibility of modvat/Cenvat credit on capital goods relating to captive mine, the Supreme Court held thus - 5. As regards the Modvat/Cenvat credit on capital goods, if the mines are captive mines so that they constitute one integrated unit together with the concerned cement factory, Modvat/Cenvat credit on capital goods will be available to the assessee. On the other hand, if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be utilised by the SISCOL alone. The major funds for setting up of CPP also was generated only from the sources of SISCOL. Even before setting up of CPP, permission was sought for by JSWPL from the Deputy Chief Inspector of Factories, Salem on the pretext that, the SISCOL was taken over by Jindal. Further, even under the condition of Rule 2(a)(1) and (1A) as quoted above, the capital goods purchased for the purpose of setting up CPP were fully used only in the factory premises of the SISCOL and therefore, the said contention of the Revenue by the learned counsel that, under definition Clause in Rule 2(a)(1) and (1A) of the CENVAT Credit Rules, the SISCOL was not entitled to take the CENVAT credit does not hold any water, therefore it is liable to be rejected. 41.Even if the CPP is located well away from the main factory of the manufacturer of final product, the capital goods purchased and utilised for such CPP even though not in the same factory premises, even then the manufacturer can take CENVAT credit. This has been explained and amplified by the subsequently amended Rule i.e., 2(a)(1A) of the CENVAT Credit Rules, 2004. Therefore, it has been explained or clarified in Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X
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