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TMI Blog2021 (8) TMI 1199X X X X Extracts X X X X X X X X Extracts X X X X ..... inputs the goods should have been used in or in relation to the manufacture of finished goods. In case of the Capital Goods, the use of Capital Good within the factory of manufacturer whether in or in relation to manufacture of the finished products or otherwise shall make them eligible as Capital Goods in terms of the definition. The observations made by the Commissioner that these capital goods should have been used by the manufacturer in his factory whether directly or indirectly, in or in relation to the manufacture of final products do not find support from the definition of Capital Goods. Since the Capital Goods after the demolition of manufacturing sheds, were shifted within the registered premises from the from the manufacturing shed to the Research and Development Building, the same cannot be said to have been removed from the factory. Undisputedly the CENVAT Credit taken against these Capital Goods when they were received was not disputed by the revenue - In the decision of DELHI CLOTH GENERAL MILLS CO. LTD. VERSUS JOINT SECRETARY, GOVERNMENT OF INDIA [ 1978 (2) TMI 205 - DELHI HIGH COURT] , taking of the goods from one place in the registered premises/ factory to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise Act, 1944 [raised in the show-cause-cum demand notices dated 19.09.2007, 02.05.2008 and 29.12.2010 against M/s CIPLA Ltd. in terms of the provisions rule 14 of the CCR, 2004 read with the provisions of the then proviso to section 11A(1) of the CEA, 1944). The amount of ₹ 6,02,698/- paid during clearance of the capital goods is appropriated towards the total demand of ₹ 3,46,60,396/-and I finally determine and demand in terms of Rule 14 of the CENVAT Credit Rules, 2004 read with the then section 11A(2) of the Central Excise Act, 1944 the balance amount of ₹ 3,40,57,698/ [Rupees Three crores forty lakhs fifty seven thousand six hundred ninety eight only) and the same is directed to be paid forthwith. B. The assessee is also ordered to pay interest in terms of Rule 14 of the CCR, 2004 read with the then section 11AB of the CEA, 1944 on the said amount as determined above. C. In respect of the contraventions mentioned in show cause notice dated 19/09/07 (supra) covering the period from April, 2004 to March, 2007, I impose a penalty of i. ₹ 1,08,19,179/- [Rupees: One Crore eight lakhs nineteen thousand one hundred seventy nine only] in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant was not entitled to CENVAT credit on the capital goods installed in the R D wing or on the input services availed in or in relation to the construction of that wing. The main challenge in the present appeal is against this decision of the learned Commissioner. The learned counsel for the appellant submits that the relevant show-cause notices have only alleged that the R D wing was situate away from the factory and had not categorically alleged that it was not within the registered factory premises. It is submitted that the adjudicating authority obtained a verification report from the Assistant Commissioner without notice to the appellant and relied on that report to decide on the CENVAT-credit issue against the appellant. It is submitted that no copy of the said report was supplied to the appellant and, therefore, an effective opportunity of contesting the Revenue's case was denied to them. In other words, according to the learned counsel, natural justice was denied to them. The learned counsel has also invited our attention to certain documents available on record. One of these documents is an application dated 25.4.2006 submitted by the appellant to the Assistant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for research and testing purpose is not disputed. The same is allowed provided it is used in the factory that is registered. The only grievance raised in the Revenue's appeal is that the learned Commissioner confirmed the substantive demand against the assessee under a wrong provision of law. According to the Revenue, the adjudicating authority should have invoked Rule 14 of the CENVAT Credit Rules, 2004 instead of Section 11A of the Central Excise Act/Section 73 of the Finance Act, 1994. We further note that the Revenue, in their appeal, has only sought for remand of the case to the adjudicating authority. We are inclined to remand the case accordingly. 5. In the result, we set aside the Commissioner's order and allow both these appeals by way of remand, with a request to the learned Commissioner to pass fresh speaking order after supplying to the assessee a copy of the verification report dated 13.1.2009 and giving them a reasonable opportunity of being heard. The sole grievance raised by the Revenue before us may also be considered by the learned Commissioner. 2.2 The third show cause notice dated 29.12.2010 was issued to the appellant observing as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the directions contained in the remand order and has confirmed the demand for the reason that, R D activity is not a manufacturing activity and the appellants did not informed the department in this regards. It is settled principle that department cannot make a new case in the remand proceedings (Kalyani Sharp India [2008 (226) ELT 197 (T)]). Once the Commissioner accepts that the R D Building is within the premises of the Appellant, the entire case of revenue falls. Documentary evidences on record show that all the activities relating to construction of R D Building were in the knowledge of the department. The R D activities undertaken are interconnected with manufacturing activities undertaken, and would be integral part of the factory as per Section 2(e) of the Central excise Act, 1944. Ground Plan shows R D Building as integral part of the factory premises Since R D building is located within the registered premises of the appellant, denial of CENVAT credit on the capital goods used therein is not justified as has been held in case of Maruti Suzuki [2016 (9) TMI 627 CESTAT and Hero Motocorp Ltd {2018 (7) TMI 421 CESTAT]. CENVAT Credit is available on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... D building cannot be raised once again in the remand proceedings. The only issue that was to be addressed by the Commissioner in these proceedings was limited to the use of the Capital Goods and Input Service in the factory of the manufacturer. 4.3 Commissioner has in para 20.2 and 20.3 of his order quoted the definition of Capital Goods and Input Services as per the CENVAT Credit Rules, 2004 and thereafter proceeded to decide on the admissibility of CENVAT credit stating as follows: 21. lt is apparent that for a manufacturer to avail Cenvat Credit on Capital goods and Input Services, the same have to be invariably used by the manufacturer In his factory whether directly or indirectly, in or in relation to the manufacture of final products. 21.1 This proposition also gets support from the law laid down by the Hon ble Supreme Court in the case of Maruti Suzuki Ltd. 2009(240)ELT 641(SC). Paragraphs 9, 16, 17 18 of the said decision are extracted below 9. Coming to the statutory definition of the word input in Rule 2(g) in the CENVAT Credit Rules, 2002, it may be noted that the said definition of the word input can be divided into three parts, namely : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific part, inclusive part and place of use. All the three parts are required to be satisfied before an input becomes an eligible input. 18. It may be noted from the CENVAT Credit Rules of 2004 visa- vis CENVAT Credit Rules of 2002 that the word for in the inclusive part after the words steam used is substituted by the words used in or in relation to the manufacture of final products . In other words, the crucial requirement of the definition clause is restated by the Legislature. We may note that the CENVAT Credit Rules of 2004 came in force in September, 2004. In some of the cases in batch before us the show cause notice goes right up to January 2005, hence, CENVAT Credit Rules, 2004 also apply to those cases. In short, an item would fall within the category of inputs as defined only on compliance with all the three parts of the definition clause. 21.2 The aforesaid decision of the Hon ble Supreme Court has also been followed by the Hon ble Gujarat High Court in the case of Gujarat Heavy Chemicals Ltd. 2011(22)STR610(Guj.). Paragraphs 10 11 are extracted below 10. Definition of input service is expressed in the form of means and includes . Means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacturing activity of the assessee s Vikhroli factory; there is no manufacture of any final product in the newly constructed Research and Development building as all the input/ raw materials used for research are wholly consumed and no final marketable product emerges . Since the assessee has not denied the facts leveled in the demand notice, it is apparent that the same stand true. 22.1 To substantiate further, I quote the letter dated May 10, 2007 of the assessee where they have submitted that they are NOT taking any input credit for use in R D activities. Thus it makes further clear that activities of R D building are not amounting to manufacture in terms of section 2(f) of the Central Excise Act, 1944. 23. The definition of the term factory is very clear in this regard- it means means any premises, including the precincts thereof, wherein or in any part of which excisable goods 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; 23.1 It is clear that the premises including the precincts should be where the manufacturing activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 14.12.2011 the assessee has mentioned that the newly constructed R D building was not included in the registration certificate due to lack of provision in the law. I am surprised at such a submission made by an assessee M/s Cipla Ltd. who are in the business of manufacturing since decades; they are not a small industrial unit so as to claim ignorance of the niceties of the Central Excise law. As is said, Ignorance or law is no excuse. The provisions of law as reproduced above are clear and it does not require rocket science to understand that the construction and existence of the R D building ought to have been declared to the department. 27. The onus is on the assessee when it comes to availment of Cenvat Credit under the CCR, 2004. Rule 9 (5) of the CCR, 2004 in very clear terms mentions that burden of proof regarding the admissibility of the CENVAT credit shall lie upon the manufacturer taking such credit. 28. Having not done what is mandatorily required to be done, the assessee cannot brush aside this requirement as being procedural and stake their claim for substantial benefits as provided in the Cenvat Credit Rules, 2004. 29. Incidentally, as mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ality, there could not have been any possibility of utilization of the same for clearance of finished products manufactured in the factory. Similarly, the capital goods removed from the factory premises after its demolition to the Research and Development Building without reversing any Cenvat Credit is improper and in contravention of the provisions of rule 3(5) of the CCR, 2004. 32. I may also mention that it is not the case that after the demolition of the manufacturing premises the assessee has surrendered their registration certificate. They have in none of their written or oral submissions informed that the said registration certificate, they have for the manufacturing premises has been surrendered for de- registration. In fact, they have mentioned in their reply dated 21.06.2011 that the registration certificate is not yet surrendered. In their submission being the copy of the Grounds of appeal before the Hon ble CESTAT, they have adverted to Chapter 2, paragraph 6 of the Supplementary Manual and submitted that amendment in existing registration certificate is only envisaged when there is a transfer of business or change in the constitution. 1 am unable to subscribe to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A letter dated 8.5.2006 of the Range Superintendent, addressed to the Assistant Commissioner, recommending issuance of installation certificate to the appellant, is also seen on record. If the Superintendent has himself recommended for issuance of installation certificate for these capital goods in Research and Development Building then how come Assistant Commissioner has made the observations as reproduced above in the verification report dated 14.01.2009. Admittedly the Appellant were registered for undertaking the manufacturing activities in the premises as per the approved ground plan of the premises. The approved ground plan of the registered premises is reproduced below: 4.6 Undisputedly the premises marked as R D Building is located within the registered premises, as per Rule 174 (i) of the Central Excise Rules, 1944 (as they existed at the time when the ground plan was approved) and Rule 9 of the Central Excise Rules, 2002. From the wording of Section 6 of Central Excise Act, 1944 and Rule 9 of the Central Excise Rules, 2002 it is quite apparent that these provisions are in respect of the registration of the person who undertakes the manufacturing activity etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cincts thereof ten or more workers are working or were working on any day of the preceding twelve months, and in any part thereof a manufacturing process is being carried on with the aid of power it would be a factory. Ordinary, meaning of the word `premises is a piece of land including its buildings or a building together with its grounds or appurtenances and precincts mean the areas surrounding a place. The words any premises including the precincts thereof under Section 2(m) are therefore wide enough to include all buildings with its surroundings which form part of one unit. If therefore in such an area ten or more workers are working and in any part thereof manufacturing process is being carried on with the aid of power it would be a factory within the meaning of Section 2(m). 4.9 What emerges from the above case laws is that in the registered premises, appellant should undertake the activities relating to manufacture of the finished goods, it is not necessary that each and every part of the premises should be dedicated to manufacturing of the finished goods, there can be number of parts which undertake the activities such as storage of the raw material and finished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem eligible as Capital Goods in terms of the definition. The observations made by the Commissioner that these capital goods should have been used by the manufacturer in his factory whether directly or indirectly, in or in relation to the manufacture of final products do not find support from the definition of Capital Goods. 4.11 Tribunal has in the case of Mother Dairy [2005 (183) ELT 303 (T-Mum)] after considering the definition of factory under section 2(e) of the Central Excise Act, 1944 held as follows: 5. After hearing both sides, perusal of the records and case laws, we are of the opinion that the definition of the factory as given in Section 2(e) is comprehensive enough to say that the activities of storing and using the furnace oil has been done by the appellant within the factory and as such we do not see any justification for dis-allowance of the credit and imposition of the penalty. We, therefore, set aside the impugned order and allow the appeal filed by the appellant. 4.12 Since the Capital Goods after the demolition of manufacturing sheds, were shifted within the registered premises from the from the manufacturing shed to the Research and Development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eerut-II v. India Glycols Limited - 2006 (196) E.L.T. 221 (Tri.) and CCE, Meerut-II v. India Glycols Limited - 2008 (230) E.L.T. 39 (Uttarakhand). In the light of the above decisions we find that the issue is settled in favour of the appellant. 10. In line with the above discussions, we find that the demand for reversal of Cenvat credit is not sustainable inasmuch as it is allowable under the definition of capital goods under the Cenvat Credit Rules. Accordingly, we set aside the impugned orders and allow the appeals. 4.13 This decision in the case of Maruti Suzuki was followed by the tribunal in the case of Hero Motocorp Limited [2018 (7) TMI CESTAT Chandigarh] In view of the decision referred above we have no hesitation in holding the Research and Development Building located in the registered premises of the Appellant, is the part of the factory of manufacture of the appellant and hence the credit availed on the Capital Goods installed in the said premises cannot be denied on that ground. 4.14 As we have held the Research and Development Building to be the part of the factory/ registered premises of the Appellant, CENVAT Credit on the input services for use in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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