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TMI Blog2023 (7) TMI 427X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent on which the credit has been availed are indeed capital goods in terms of Rule 2(a) of the CENVAT Credit Rules as is evident from the fact that the credit arrangement has been restricted in the impugned show cause notice to 50% in each year. The Tribunal in several earlier decisions has held that the prerequisite for availment of CENVAT credit in respect of capital goods in the factory of manufacturer is its receipt in the factory and use in the manufacture of dutiable final product. The Tribunal in a similar factual matrix in the case of GUJARAT AMBUJA CEMENTS LTD. VERSUS COMMISSIONER OF C. EX., CHANDIGARH [ 2000 (8) TMI 178 - CEGAT, NEW DELHI ], held that they are eligible to the benefit of Modvat credit on parts, components and accessories of DG sets in terms of the provisions of Rule 57-T(7) of the Central Excise Rules, we do not deem it necessary to pronounce upon the other submissions of the appellants. The impugned order is restored - Appeal dismissed. - EXCISE APPEAL NO. 50688 of 2021 - FINAL ORDER No. 50856 /2023 - Dated:- 10-7-2023 - MR. DILIP GUPTA, PRESIDENT AND MS. HEMAMBIKA R PRIYA, MEMBER (TECHNICAL) Shri O P Bisht, Authorized Represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting up of TGT Plant inside the factory premises, accordingly, the Contractor is the real manufacturer of TGT Plant who is entitled to take credit and not the Respondent, according to Rule 3(1), Rule 2(a)/Rule 2(k) of the Credit Rules. 2. Upon erection and commissioning of TGT Plant at site, the same becomes an immovable property, therefore the same is an exempted goods for which no credit is admissible in light of CBEC Circular No. 58/1/2002-CX dated 15.1.2002. 3. Upon commissioning of TGT Plant, the ownership of the said Plant transferred from the Contractor to the Respondent after issuance of performance acceptance certificate, accordingly, Cenvat credit has been wrongly availed on parts, components used in assembly of TGT Plant which at that time,was not in their possession. 5. The aforesaid demand was raised invoking extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act, 1944 on the ground that the fact regarding assembling/manufacture of TGT Plant by Thermax Ltd. came to the knowledge of department only at the time of audit by department, which would otherwise have escaped attention. The impugned Show cause notice was transferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice that decision of higher court are binding unless the same is set aside by higher court. Accordingly, the ratio of the said decisions are applicable and Cenvat credit is admissible. 8. Being aggrieved with the aforesaid impugned Order-in- Appeal dated 16.12.2020, the Department has preferred the present Appeal before the Hon ble Tribunal. 9. While reiterating the findings of the adjudicating authority, learned authorised representative emphasized the following: i) The Cenvat credit is not admissible to the respondent, as they were not the manufacturers of the final product TGT plant, as the contractor viz., Thermax Ltd. was actual manufacturer. ii) TGT plant was handed over only after its commissioning and ownership passed on the respondent only after issuance of performance acceptance certificate. iii) When the Cenvat credit was taken by the respondent, on capital goods used in the assembly /manufacture of the TGT plant, the said TGT plant was not in their possession. iv) TGT plant manufactured at site is exempted from payment of duty, hence no credit is admissible on inputs/capital goods used in the manufacture of TGT plant. He placed reliance on Hon ble Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince the TGT plant was exempted was incorrect. The respondent had admittedly availed credit on the parts/spares/components of TGT plant on the basis of the invoices issued in its name and not on the complete plant erected and commissioned by the contractor. He contended that the extended period is not in invokable as the department had complete access to all statutory records, including the credit records of the respondent. 12. We have heard the authorised representative and the learned counsel for the respondent. We note that the respondent had availed credit on goods mentioned in the invoices provided by the contractor to the respondent. The goods on which such credit was taken are components, spares and/or accessories of goods classifiable under chapter 84, 85 or 90 of the First Schedule to the Central Excise Tariff Act, 1985. It is not disputed that the component/parts of TGT plant were received in the factory premises of the respondent under duty paid invoices which was in the name of the respondent. Admittedly, the TGT plant was manufactured out of such parts/spares/components and such plant was used in the manufacture of the dutiable final product. There is no dispute tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the impugned order that it is only complete DG sets which are capital goods within the meaning of Rule 57- T(7) is not correct since credit of duty, if paid on DG sets, would have been availed of by the appellants herein under the provisions of Rule 57- Q itself, as DG sets were undoubtedly used in the factory of the appellants who are the manufacturers of final products - the place where the DG sets were assembled is the factory premises of the appellants cannot be treated as the factory of WDIL - and resort to the provisions of Rule 57-T(7) need not be made by the appellants for availing credit on complete DG sets. In the above view of the matter, we hold that the finding of the Commissioner in para 23 of the impugned order that the benefit of Modvat credit under Rule 57-T(7) is not admissible, is not correct. 8. In view of the fact that we are accepting the alternative submission of the assessees that they are eligible to the benefit of Modvat credit on parts, components and accessories of DG sets in terms of the provisions of Rule 57-T(7) of the Central Excise Rules, we do not deem it necessary to pronounce upon the other submissions of the appellants. 9. In the resu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n inputs (other than capital goods) used in or in relation to the manufacture of the final products, and Rule 57Q relating to credit to be taken of duty paid on capital goods. Rule 57A, specifically provides that the inputs must be used in or in relation to the manufacture of the finished product. There is no such requirement in Rule 57Q. All that it requires is that the capital goods must be used in the manufacture of the specified final products. The requirement that the capital goods must be used in or in relation to the manufacture of the final product is absent. That this difference in wordings is deliberate is clear from the circular of the Board explaining the changes made in the budget of 1994 part of which relates to credit on capital goods incorporated in the Central Excise Rules. Paragraph 71.5 of this circular emphasises that There is no reference to the expression used in or in relation to the manufacture of final products . It goes on to say that capital goods acquired by a manufacturer for use in his factory are eligible to Modvat credit. 6. The manufacturer, in each case, acquired the components of the generating set, not for use in the manufacture of the gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it on capital goods and therefore cannot be accepted. 8. The appeals are accordingly dismissed. 12.3 This judgment was upheld by the Bombay High Court, relying on the Supreme Court s judgment in Escorts Ltd., vs Commissioner of Central Excise, Delhi [2004(171)ELT145(SC)]. The two judgments mentioned supra was affirmed by the Supreme Court in Commissioner of Central Excise, Chandigarh vs Ambuja Cements Ltd. [2022(65)GSTL3(SC)], wherein the court held as follows: 3. The short question which is posed for consideration of this Court is whether, in the facts and circumstances of the case, the High Court/Tribunal were justified in allowing Modvat credit on parts, components and accessories of Diesel Generating Power Plant [DGPP] sets to assessee? 4. On appreciation of evidence and considering the material on record, the High Court has specifically observed and found that DGPP sets on which Modvat credit is allowed is part and parcel of the factory of the respondent which is ultimately used in the manufacture of end product cement. Therefore, Sl. No. 5 of the Table appended to Rule 57Q shall be attracted and therefore the assessee shall be entitled to the Modvat credit on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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