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TMI Blog2022 (10) TMI 1005X X X X Extracts X X X X X X X X Extracts X X X X ..... er appellant Sh. Gurmit Singh Mann is the Chairman-cum-Managing Director of the appellant company. Simbhaoli Sugars have got one unit at P.O. Chilwaria, District Bahraich (U.P.) (hereinafter referred to as SSL, Chilwaria or the appellant-I) and the other unit is located at Simbhaoli (hereinafter referred to as SSL, Simbhaoli or the appellant-II). 3. Both the appellant units are equipped with power plant (co-generation plant) within their factory company unit, electricity is generated by use of steam and for fuel baggase is used. The steam produced in the power plant (boiler house) is used partly by the appellant unit for running the plant and machinery and part of the steam goes to the turbine in the power plant for generating electricity. Part of the electricity is captively used in the manufacturing of sugar molasses etc., by the appellant and surplus electricity is wheeled to U.P. Power Corporation Limited (UPPCL), against consideration. The electricity / electrical energy is covered under CETH 27160000 and is chargeable to Nil rate of duty. 3.1 The facts of the appeal filed by Chilwaria and Simbhaoli units of the appellant company M/s Simbhaoli Sugars Ltd., are similar and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n lease to the transferee/ SPPL against lease rent of Rs. 24 lacs per annum. The appellant subsequently also got the boundary of the land on which the plant is situated by separating area of the power plant in the Central Excise registration. 4. M/s Simbhaoli Power Private Limited is a 51% subsidiary of appellant company wherein the balance shares are held by M/s Sundicatum Captive Energy Singapore Pte Limited. 5. A search was conducted by the Officer of Department at the factory premises at Chilwaria on 13.10.2015 and panchnama was drawn. Some documents were also resumed and physical verification of finished goods was also done. Statement of Sh. K. N. Singh, General Manager (Finance) was also recorded on the same day who inter alia stated that sugar unit and distillery unit are running from the same premises. Further, SPPL is also functioning from adjacent premises on lease land belonged to the appellant. The land was leased out to the SPPL since 26.01.2013. SPPL was incorporated on 21.06.2011 and subsequently in 2013 they entered into joint venture with M/s Sundicatum Captive Energy Singapore Pte Limited. The said subsidiary company is operating the power plant wherein power is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He further stated that they have purchased the plant and machinery of the power plant from the appellant. He further stated that except the BTA they have not received any invoice relating to such transfer from the sugar company. It was further stated that they have not disposed or removed any of the plant and machinery received on transfer from the sugar company. They have only purchased only the plant and machinery, but not the land. Land and other facilities are being used by the power company under facility agreement for which they are making payment to SSL. They are also registered with Service Tax Department and are not availing credit of service tax on the input services nor have availed cenvat credit on excise duty on the capital goods. They also added some more plant and machinery worth Rs. 59 cr. but not availed any cenvat credit on the same. The power generated and supplied to SSL, Chilwaria have two components - one for which they are under agreement, is not valued, while for the other component which is called as surplus, is supplied at the market value and such market value is equal to the value on which power is supplied to UPPCL. 7. On perusal of Director's report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of M/s SPPL, Chilwaria and M/s SPPL, Simbhaoli respectively and thereby such transfer by BTA were nothing short of physical removal of cenvated P&M. Such transaction of sale of power unit and the simultaneous lease of premises were wisely resorted to by the noticees to avoid the tax liability on them on the ground that power unit was not physically removed from the premises. (iv) The above alteration of registered premises of both the said units as per Factories Act, was never reported to jurisdictional Central Excise Office/authorities. Such conduct on the part of assessee was to suppress such transfer of cenvatable P&M from the jurisdictional Central Excise Authorities. (v) The noticees were well aware with the legal position in this regard and deliberately did not pay the amount leviable as Central Excise Duty on transaction value of cenvatable P&M transferred, as discussed above. (vi) Sh. Gurmit Singh Mann, a whole time Director of the company and the then Chairman of the company, when decision was taken to transfer the said cenvatable P&M, without payment of amount equal to central excise duty leviable on transaction value, has wilfully avoided the above payment in vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertainly amounted to nothing short of physical removal of the power unit, in respect of which modvat credit have been availed by ACC. 13. The Adjudicating Authority further observed referring to clause 2.1.3 of BTA that the capital goods transferred were mainly of movable nature and capable of being passed on by physical delivery of possession. Consequently the contention of appellant regarding transfer of immovable plant and machinery, and thus the same being non excisable, was rejected. 14. On the objection of limitation to invocation of extended period of limitation raised by the appellant, it was held that in view of the ruling of Hon'ble Karnataka High Court in the case of ACC, wherein the facts are similar but still the appellant have not discharged their duty liability. 15. Being aggrieved with the impugned order the appellants are in appeal before this Tribunal. Separate appeal has also been filed by the Chairman Sh. G.S. Mann on whom penalty under Section 26 has been imposed. 16. Learned Counsel for the appellants Sh. S. C. Kamra inter alia urges as follows:- 16.1 That the provisions of Rule 3(5A) of CCR, 2004 are applicable when the capital goods, on which CENVAT cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther". Relevant portion of para -38 from the said judgment is reproduced below:- "38. the It is submitted on behalf of the appellants that Explanations to Rule 9 and Rule 49 are ultra vires the provision of Clause (b) of sub-section (4) 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 warehouse 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 "pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In para-9, the Tribunal also relied upon the observations of the Supreme Court on the word "removal". 21. That in appeal, the Hon'ble Madras High Court upheld the Tribunal's order in the case of Dalmia Cements (Bharat) Ltd. (supra) holding that - (a) rule 3(5) only speaks about removal of goods under the cover of invoice referred to in rule 9 on inputs or capital goods on which CENVAT credit has been taken; (b) in the present case, the High Court found that there was no removal of goods under the cover of invoice as provided in rule 9 of CCR, 2004 and there is nothing in rule 3(5) to invoke the deeming fiction as insisted by the adjudicating authority; (c) the language of rule 3(5) is simple and plain. When the inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, the credit availed in respect of inputs or capital goods shall be paid. This situation has not arisen in the present case as no invoice was issued for removal of goods from the factory premises and the said rule is not applicable in the case of the assessee. 22. That the CBEC has accepted the aforesaid order of the Madras High Court in the case of Dalmia Cements Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of leasehold interest in the land / immovable property used for the said captive power plant. As per the Revenue, since the capital goods were transferred by the respondent to M/s BESCL, the goods stood removed and accordingly the respondent was liable to pay an amount equal to duty of excise on the inputs and capital goods installed in the captive power plant on which CENVAT/MODVAT credit was taken. The Tribunal, Principal Bench, New Delhi took note of Apex Court observations of the word "removal" and also the Tribunal's judgment in the case of L.G. Balakrishnan & Bros Vs. CCE, Trichy and held that the provisions of rule 3(5) of CCR, 2004 are not attracted and affirmed the order of the Commissioner in favour of the respondent/assessee. 25.2 Against the Tribunal's judgment, Revenue filed appeal before the Chhatisgarh High Court, who were of view that the appeal filed by the Revenue does not deserve to be entertained and as a result the appeal filed by the Revenue was dismissed in limine. 25.3 That the Madras High Court in the case of M/s TVS Srichakra Ltd. Vs. Commissioner of CGST & C. Ex., - 2021-VIL-674-MAD-CE examined the applicability of rule 3(5) of CCR, 2004 in a case w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Even by observing these facts, the court held that in the absence of "physical removal" of capital goods from the factory premises of the assessee, the provisions of rule 3(5)/(5A) are not attracted. The appellant also relies on the following judgments:- (a) L.G. Balakrishnan & Bros Vs. CCE, Trichy - 2016 (340) ELT 708 (Tri-Chen). (b) Jamna Auto Industries Ltd. Vs. CCE, Indore - 2001 (130) ELT 181 (Tri-Del) . (c) Hero Motors Ltd. Vs. CCE, Ghaziabad -2014 (310) ELT 729 (Alld-HC). 27. That w.r.t. interpretation of wordings of an exemption notification, the Hon'ble Supreme Court in the case of Excon Building Material Mfg. Co. Pvt. Ltd., Vs. CCE, Bombay - 2005 (186) ELT 263 (S.C.) held that where wordings of a notification are clear then plain language of the notification must be given effect to. The Apex Court further affirmed the judicial principle that an interpretation which is not borne out by the plain wordings of the notification cannot be given. It is submitted that rule 3(5)/(5A) of CCR, 2004 require removal of capital goods on which MODVAT/CENVAT credit was availed by the manufacturer in the past. The wordings of the rule require removal or physical shifting of the cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wvg. Mills Vs. Union of India and held that in the absence of physical removal of goods / power plant, the assessee was not required to pay duty on the capital goods sold by the appellant to Bhilai Electric Supply Co. Ltd. (BESCL). (c) Even after ACC judgment, the Tribunal at Bangalore in the case of Ultra Tech Cement Ltd. Vs. CCE, Bang-I - 2014 (310) ELT 554 (Tri-Bang) has followed the judgment of Tribunal Chennai in the case of Dalmia Cements (Bharat) Ltd. Vs. CCE - 2008 (224) ELT 484 (Tri-Chen) and in the absence of physical removal of capital goods, the duty demanded by the Department was set aside. (d) The Karnataka High Court has also dismissed the appeal filed by the Revenue challenging the order of CESTAT, Bangalore in Ultra Tech Cement case on 01.04.2015 as reported in 2015 (321) ELT A-150 (Kar). (e) Even in ACC case, the assessee-ACC has filed an appeal before the Supreme Court challenging the order of the Karnataka High Court and thus the matter is subjudice. 30. That the appellant submits that in the following judgments relied upon by the Department, have simply relied upon Karnataka High Court judgment in ACC case and the ruling of the Apex Court on the interpr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evade payment of duty by suppression, collusion, wilful misstatement or suppression of facts, etc. with an intent to evade payment of duty. 34. That in view of the merits of the case and also the duty demand not sustainable on limitation, the appellants are not liable to any penalty u/r 15(2) r/w section 11AC. 35. Appeal No. E/50381/2021-DB 35.1 That this appeal has been filed by the co-appellant Sh. Gurmit Singh Mann, Chairman of M/s Simbhaoli Sugars Ltd. against personal penalty of Rs. 1.0 cr. imposed by the adjudicating authority u/r 26 of CER, 2002. 35.2 That the appellant submits that the co-appellant was working as Chairman of the company. For imposition of personal penalty u/r 26(1), it is mandatory that (i) the person charged should have been dealing with the excisable goods; and (ii) the person should have pre-knowledge or reason to believe that the goods dealt by him are liable to confiscation. It is submitted that both the above ingredients were not fulfilled in the case of co-appellant and as such no personal penalty was warranted against him. 36. Opposing the appeals, ld. Authorised Representative appearing for the Revenue inter alia submits that the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration, has not been revealed to the Department, monthly return did not reveal any transfer of capital goods. The copy of BTA was not provided to the Department before 27.11.2019, and in case of SSL, Brijnathpur not before 26.08.2015. Despite delineating the premises of the power plant and leasing the same to the transferee company, the appellant did not apply for change of ground plan before the Department. Thus, issue of show cause notice by invoking extended period of limitation is correct. 39. Having considered the rival contentions, we find that the issue is no longer res integra. The provisions of Rule 3(5A) of Cenvat Credit Rules, 2004 are attracted when the capital goods on which cenvat credit has been taken, are removed after being used whether as capital goods or scrap and waste. The Rule provides payment of amount equal to excise duty leviable on the transaction value, wherever the amount of cenvat credit was taken, as reduced by depreciation, which is 2.5% for each quarter during which the asset was used (on straight line method). However, if the asset is removed as waste and scrap then duty as applicable on waste and scrap, has to be paid on the transaction value. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o cast duty liability on the manufacturer/seller of excisable goods. What is important is the physical removal of excisable goods from the factory of the manufacturer. 43. We note that in the case of CCE, Raipur Vs. Bhilai Steel Plant - 2017-VIL-01-CESTAT-DEL-CE, the respondent under a comprehensive business restructuring plan and to streamline the production / power generation related activities, transferred the ownership of their captive power plant installed within their factory to M/s Bhilai Electric Supply Company Ltd. (BESCL) under an agreement. Under the agreement, the respondent delivered all movable and immovable properties including building, works, plant and machinery to M/s BESCL. A deed of lease was also executed to effect the transfer of leasehold interest in the lands / immovable properties used by the captive power plant. The Department took a view that since the respondent and M/s BESCL are separate legal entities, the inputs and capital goods which were transferred by the respondent to M/s BESCL, stood removed and the respondent was required to pay an amount equal to the duty of excise leviable on the inputs and capital goods installed in the captive power plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to recover CENVAT credit on the ground that the inputs and capital goods were no longer in the ownership and control of the appellant, and as such on sale and transfer of Chain Division to a new legal entity, the items are deemed to be cleared attracting the provisions of rule 3(5) of CCR, 2004. By taking note of dicta of the Apex Court in the case of J.K. Spinning & Weaving Mills (supra) about the meaning of the word "removal", the Tribunal held that the provisions of rule 3(5) of CCR, 2004 were not applicable. 45. We find that the Tribunal has also applied the interpretation of the term "removal" as given by the Apex Court in the case of J.K. Spg. & Wvg. Mills in the transactions involving leasing of plant and machinery as a whole. In the case of Dalmia Cements (Bharat) Ltd., Vs. CCE, Tiruchirapalli - 2008 (224) ELT 484 (Tri-Chen.), the assessee set up power plant in their factory premises and also took CENVAT credit of duty paid on inputs and capital goods received in the factory for the purpose of setting up of power plant. Subsequently, the assessee leased out the entire power plant to another entity M/s Keshav Power Pvt. Ltd. (KPPL) under a lease deed for a period of 10 ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar objection has been raised by the Department in other cases and such objections were overruled by the Tribunal and even by the High Courts. The Allahabad High Court in the case of Hero Motors Ltd., Vs. CCE, Ghaziabad - 2014 (310) ELT 729 (Alld), where the assessee transferred the business of manufacture of IC engines to M/s HBSA Pvt. Ltd. on lease basis. The manufacturing facility of HBSA was demarcated within the factory premises of the assessee and was shown accordingly in the layout plan filed by HBSA for obtaining central excise registration. The plan forms part of the registration certificate granted to the HBSA. The High Court observed that notwithstanding the change in the layout plan, the plant and machinery remained installed at the same premises and were never removed from that premises despite the fact that the separate registration certificate was obtained by HBSA. The High Court held that as the capital goods remained installed in the same premises and despite the premises were transferred on lease, the capital goods even if they were deemed to be installed in the premises of HBSA, rule 57S of erstwhile CER, 1944, would not be attracted. The provisions of clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral Excise Rules, 1944. We find that before the High Court, the observations made by the Supreme Court in the case of J.K. Spg. Mills as to the expression "removal" were not placed for consideration. Secondly, the assessee - company M/s ACC has filed an appeal before the Supreme Court, which has admitted the appeal and thus the matter is sub judice. Further, after the decision in the ACC case, the Karnataka High Court has re-examined the issue once again in the case of Commissioner Vs. Ultra Tech Cement Ltd.,- 2015 (321) ELT A150 (Kar.) and dismissed the appeal filed by the Revenue, affirming the decision of this Tribunal reported in 2014 (310) ELT 554 (Tri-Bang). For these reasons, we do not wish to follow the old judgment of Karnataka High Court in the case of ACC. 50. The Ld. AR has also cited the following judgments in the synopsis filed by him:- (a) Pure Drinks Ltd. Vs. Union of India - 2012 (281) ELT 51 (Del) (b) CCE, Chandigarh-I Vs. Krypton Outsourcing Ltd. - 2010 (256) ELT 768 (Tri-Del) (c) J.K. Papers Ltd. Vs. CCE, Bhubaneswar-I - 2014 (309) ELT 359 (Tri-Kol) We find that all the above judgments were passed in favour of the Revenue by relying upon the Karnataka ..... X X X X Extracts X X X X X X X X Extracts X X X X
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