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TMI Blog2022 (11) TMI 1091X X X X Extracts X X X X X X X X Extracts X X X X ..... parate locations would not result in there being considered to be not part of the same factory premises. An important factor which has to be taken note of in this context is that an agreement was executed between the Government of Odisha and KMCL on 28th June, 2000 where under a land to an extent of 249.45 acres on which both the Coke Oven Plant as well as the CPP Plant were located had subsequently been transferred to KMCL. Selling of 75% of the power to NINL - HELD THAT:- There is indeed no restriction under the CENVAT Scheme that after captive use of power, the surplus power cannot be sold to any other party. The only restriction is that the capital goods are not to be exclusively used for manufacture of exempted products . It is nobody s case that the final manufactured products of KMCL or that of NINL are exempted products . In this context, it should be noticed that power/ electricity is not a final product. It is generated in the CPP of KMCL and is used in the manufacture of excisable goods in the Coke Oven Plant. In COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX, JAIPUR VERSUS SHREE CEMENT LIMITED [ 2018 (9) TMI 822 - RAJASTHAN HIGH COURT ], a similar ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eant for another company/assessee (NINL) for manufacture of final products which are different and distinct i.e. KMCL manufactures Coke and NINL manufactures Steel as the final product? (ii) Whether under Rule 57AA of the Central Excise Rules, 1944 or Rule 2 of CENVAT Credit Rules, 2001, the capital goods used in the power plant of KMCL is Cenvatable when the final products (Power) is non excisable? (iii) KMCL having consciously established the Captive Power Plant within the premises of another company (NINL) which requires 75% of power, whether CENVAT Credit can be allowed on capital goods for the captive power plant when it is not exclusively used in the manufacture of Coke, that too when the coke oven plant is situated at a different place? (iv) Whether the Captive Power Plant of KMCL, consciously installed centrally within the premises of NINL to meet 75% of NINL s power, satisfies the definition of factory under Section 2(e) of the Central Excise Act, 1944? 4. The background facts are that KMCL set up a Metallurgical Coke Plant along with a Captive Power Plant (CPP) for its own consumption as well as for sale of power to NINL. KMCL applied for registration on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edominately to cater to the requirements, not of KMCL, but of NINL. It must be mentioned here that according to the Department, 75% of the power generated in the CPP was meant for NINL. Thus, it was contented by the Department that the entire power and steam generated in the CPP was not being used in the manufacture of final products of KMCL but in the manufacture of final products of NINL, which was a different factory and, therefore, such CENVAT/Credit could not be availed of. 9. The Department contended that the CC Rules specifically mentioned that capital goods and inputs for the purposes of the said Rules should be used in or in relation to the manufacture of final products within the factory of production. Use of the capital goods or inputs outside the factory of manufacture of final products and/or any use not in or in relation to the manufacture of the final products would render the said inputs/capital goods ineligible for the purposes of availment of CENVAT Credits. Accordingly, on 26th September, 2002 the Commissioner, Central Excise Customs passed an adjudication order disallowing the above CENVAT Credit and imposing penalty of Rs.1 Lakh on KMCL under Rule 173Q of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely by the registered premises of NINL. (iii) The power or electricity produced by KMCL was not an excisable commodity, therefore, CENVAT Credit of duty paid on the capital goods and inputs used in the power plant was not admissible in terms of Rule 57AH of the CE Rules read with Rule 12 of the CC Rules. 75% of the power generated in the Captive Power Plant was in fact used by NINL and not KMCL. The power generated should have been meant for manufacture of excisable goods inside the factory premises but in the instant case, the power has been sold to other unit. The unit could not fulfil the conditions of Rule 57AA of Central Excise Rules, 1944/ Rule 2 of the CENVAT Credit Rule, 2001. 12. Mr. Mishra, learned Senior Standing Counsel for the Appellant, also drew attention to the following finding in the order of the Commissioner: From the above, it is evident that the Power Plant of KMCL is running with the help of blast furnace gas generated as a by-product in another separate registered factory i.e. NINL. In view of this, there is no inter-linkage of processes between the Power Plant and the final products to be manufactured in the Coke Oven Plant of KMCL. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Blast Furnace Coke for exclusive use by NINL. The idea was to make the industrial unit an Integrated Conventional Iron and Steel Plant. Thus, NINL and KMCL were to be inter-dependent both technologically and operationally. Both the plants were to be inter-linked and inseparable. The manufacturing activity in the Coke Oven Plant could not be conceived without power supply from the Power Plant. 15. Although the Coke Oven complex and CPP were in different locations, they belonged to the same factory and satisfied the requirement that the said goods are to be used in the factory of the manufacturer of final products . The only restriction for availing credit under the CENVAT Scheme was that the capital goods were not to be exclusively used for manufacture of exempted products. In the present case, the manufactured goods for which the registration certificate has been issued are dutiable final products. Accordingly, CENVAT Credit was admissible on the capital goods. Further, there was no restriction under the CENVAT Scheme that after Captive use of power, the surplus power cannot be supplied to any other party. The power/electricity was not a final product of KMCL and was used direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other words, merely because the Coke Oven Plant and the CPP may have been in two separate locations would not result in there being considered to be not part of the same factory premises. 19. An important factor which has to be taken note of in this context is that an agreement was executed between the Government of Odisha and KMCL on 28th June, 2000 where under a land to an extent of 249.45 acres on which both the Coke Oven Plant as well as the CPP Plant were located had subsequently been transferred to KMCL. 20. As regards the selling of 75% of the power to NINL, there is indeed no restriction under the CENVAT Scheme that after captive use of power, the surplus power cannot be sold to any other party. The only restriction is that the capital goods are not to be exclusively used for manufacture of exempted products . It is nobody s case that the final manufactured products of KMCL or that of NINL are exempted products . In this context, it should be noticed that power/ electricity is not a final product. It is generated in the CPP of KMCL and is used in the manufacture of excisable goods in the Coke Oven Plant. 21. In Commissioner of Central Goods S.T., Jaipur v. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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