IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
COURT - I
Appeal No.E/766/2011-DB
Arising out of: OIO No.04/DEM/DAMAN/2011, dt.28.02.2011
Passed by: Commissioner of Central Excise & Customs, Vapi
For approval and signature:
Mr. M.V. Ravindran, Hon ble Member (Judicial)
Mr. H.K. Thakur, Hon ble Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the .
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant:
M/s Bilag Industries P. Ltd.
Respondent:
CCE Daman
Represented by:
For Assessee: Shri S. Suriyanarayanan, Adv.
For Revenue: Dr. Jeetesh Nagori, Addl.Commissioner (AR)
CORAM:
MR.M.V. RAVINDRAN, HON BLE MEMBER (JUDICIAL)
MR. H.K. THAKUR, HON BLE MEMBER (TECHNICAL)
Date of Hearing:25.06.14
Date of Decision:23.07.14
Order No. A/11416 / 2014, dt.23.07.2014
Per: H.K. Thakur
1. This appeal has been filed by the appellant with respect to OIO No.04/DEM/DAMAN/2011, dt.28.02.2011 passed by Commissioner, Daman under which demand of Rs.2,34,40,629/- has been confirmed against the appellant, along with interest and equivalent penalty has also been imposed.
2. Facts of the case are that appellant is holding Central Excise Registration for the manufacture of excisable goods falling under Chapters 28, 29 & 38 of the Central Excise Tariff Act, 1985. Appellant is having a sister concern situated as M/s Bilag Industries (100% EOU), Plot No.143, 2nd Phase, GIDC, Vapi and a corporate office. During the course of an audit of the records of the appellant by the officers of the jurisdictional Central Excise, Customs & Service Tax Commissionerate, Daman in March, 08 & May, 08, it was observed that appellant had a captive power plant, located in its factory premises. The said noticee had used cenvatable inputs viz., furnace oil to generate electricity and also to produce steam. A part of this electricity and steam was supplied to its sister concern viz., M/s Bilag Industries P. Ltd (100% EOU), situated outside its factory premises. Further, it was also noticed that appellant had not reversed proportionate CENVAT Credit attributable to the furnace oil used in the production of electricity which had been supplied to its said sister concern and corporate office situated near its factory, in terms of Rule 6(3)(a)(iv) of the CCR, 2004 and that it had not paid 10% of the price of the steam transferred to its said sister concern, and corporate office situated at Plot No.306/3, 2nd Phase, GIDC, Vapi. The demands raised were confirmed by the adjudicating authority under OIO dt.28.02.2011 against which the present appel has been filed.
3. Shri S. Suriyanarayanan (Advocate) appearing on behalf of the appellant, as well as in the written submissions received on 04.07.2014, argued that the period involved in the present proceedings is 16.05.2005 to 31.12.2009. That the 100% EOU owned by the appellant is situated in an adjacent premises and is one of the units of the appellant and has no independent legal identity of its own. That the goods supplied to the 100% EOU cannot be treated as exempted goods for denying CENVAT Credit by virtue of Rule 6(6)(ii) of the CENVAT Credit Rules, 2004. That CENVAT Credit of inputs used for generation of electricity and steam used in appellant s sister concern and corporate office has been held to be admissible in view of the following judgments:-
i) Repro India Vs UoI
[2009 (235) ELT 614 (Bom.)]
ii) Aurobindo Pharma Ltd Vs CCE
[2011 (265) ELT 358 (Tribunal)]
iii) CCE Bangalore Vs Biocon Ltd
[2012 (279) ELT 101 (Tri-Bang)]
iv) Sanghi Industries Ltd Vs CCE Rajkot
[2014 (302) ELT 0564 (Tri-Ahmd)]
It is also the case of the appellant that the corporate office of the appellant is situated in the registered premises as contained in the site plan submitted to the Excise Department at the time of registration. That the corporate office is concerned only with the manufacturing and business activities of the appellant and the findings of the adjudicating authority in Para 4.10 (inner page-18) of the OIO is not correct. It was also argued by the Ld.Advocate appearing on behalf of the appellant that the supply of electricity to corporate office situated within same factory has been decided in favour of the appellant vide CCE Vs Solaris Chem Tech Ld 2008 (225) ELT 443 (Tri-Bang). That in Indo Rama Synthetics (India) Ltd Vs CCE Nagpur 2007 (219) ELT 122 (Bom.), upheld by Supreme Court, credit was denied only for electricity supplied to residential premises within the factory. That the decision of Kolkata bench of Tribunal MCC PTA India Corporation Pvt.Ltd. Vs CCE 2010 (249) ELT 370 (Tri-Kolkata) and Larger Bench decision in Hindustan Petroleum Corporation Ltd Vs CCE Mumbai-II 2013 (287) ELT 102 (Tri-Mum) have been wrongly decided while interpreting the functions of offices within the factory premises. Though these decisions have held differently, but still the issue has not attained finality as Kolkata High Court has admitted appeal of the assessee in the case law of MCC PTA India Corporation Pvt.Ltd. Vs Commissioner (supra) on the same issue. That the decision of the Supreme Court in the case of Maruti Suzuki Ltd Vs CCE 2009 (240) ELT 0641 (SC) is no more a binding precedent in view of the reference made to larger bench in Ramala Sahkari Chini Mills Ltd, Uttar Pradesh Vs CCE, Meerut-I, (2010) 14 SCC = 2010 (260) ELT 0321 (S.C.) doubting the ratio in Maruti Suzuki Ltd judgment. Ld.Advocate also contested that the demand is predominantly time barred due to the fact that conflicting views were expressed by Courts on this issue during the relevant period.
4. Dr. Jeetesh Nagori (AR) appearing on behalf of the Revenue argued that as per the judgment of the Apex Court in the case of Maruti Suzuki Vs CCE [2009 (240) ELT 0641 (S.C.)] the CENVAT Credit of fuel used for generating electricity and steam, supplied to its sister concern and the corporate office is not admissible as the same are situated outside the factory premises. Ld. A.R. thus defended the order passed by the lower authority.
5. Heard both sides and perused the case records. The issue involved in this appeal is whether the electricity and steam used is sold and whether the corporate office is situated within the registered premises of the appellant. It is observed from the ground plan submitted by the appellant at the time of taking Central Excise Registration that the corporate office looking after the manufacturing and business activities, is situated in the registered premises of the appellant. The issue involved in this appeal has already been decided in favour of the assessees by this very Bench in the case of Sanghi Industries Ltd Vs CCE Rajkot (supra). In Para , 11, 12, 13 & 14 of this judgment, we have held as follows:-
8. Appellant has argued that as per their own case reported as [2006 (206) ELT 575 (Tri. Del.)] the Power plant can be a job worker of the appellant and that the inputs sent by the appellant to the job worker power plant, for generation of electricity brought back to the appellant for manufacture of final product, were held to be eligible for CENVAT Credit. We find that the DMW unit and the Administrative Block, are situated within the Clinker unit of the appellant and use of electricity is these units has to be considered as a use in connection with the manufacture of final product clinker. Therefore, proportionate credit of inputs sent by the Clinker unit to the Power plant under Rule 4(5)(a) corresponding to generation of electricity used in the DMW plant and Administrative Block, will be eligible as CENVAT Credit in the same manner as has been held by this Tribunal in the appellan s own case reported as 2006 (206) ELT 575 (Tri. Del.). However, CENVAT Credit is not available with respect to such quantities of inputs which have been used by the Clinker unit for supplying electricity to the DMW plant for making de-mineralized water for the Gujarat Water Board for supplies to nearby villages.
9. ...
10. ...
11. It was argued by the appellant that the judgment of M/s Maruti Suzuki Ltd vs CCE Delhi III is not applicable to their case because the electricity is not sold to the sister concern which was a fact in the case before Apex Court when deciding the case of M/s Maruti Suzuki Ltd (Supra). In the present proceedings there is no evidence on record that electricity is sold by the clinker unit to the grinding unit. It is further observed that this distinction was recently brought to the notice of Hon. Madras High Court in the case of CCE., Chennai I vs M/s SRF [2013 (298)ELT 521 (Mad.)] where the following observations were made by Madras High Court in Para 17 and 18 :
17. The Learned Counsel for the assessee distinguished the judgment of the Supreme Court in Maruti Suzuki Ltd vs Commissioner of Central Excise, Delhi III (2009) 9 SCC 193 = 2009(240)ELT 641 (SC) on the ground that the issue in the said judgment relates to the entitlement of credit on eligible inputs utilized in generation of electricity to the extent to which excess electricity cleared at the contractual rates in favour of sister units, vendors, joint ventures etc., which was sold at price. However, in the case of hand, electricity was wheeled out only in favour of sister units and as such, there was no element of sale.
18. The order passed by the CESTAT does not contain any discussion about the contention now raised by the assessee or the distinguishing features. CESTAT by following the earlier decision of the Tribunal, held that the assessee is entitled to credit inspite of the fact that electricity so generated was used in the other units also. The CESTAT has not decided the question as to whether the electricity supplied to the other units of the assessee situated in different premises are also entitled to the credit. The sale made to the other concern was also not made referred to the order passed by the Tribunal.
12. Appellant has also agitated that procedural irregularities or non-compliance can not be made the grounds for denying admissible cenvat credit when electrify supplied has been used for making goods on which duty is payable. It was argued that Rule 4(5)(a) and Rule 4(6) of the Cenvat Credit Rule 2004 the clinker unit could have sent clinker under job work to the grinding unit and cleared the final goods on payment of duty from the grinding unit. The said Rule 4(5)(a) and Rule 4(6) the Cenvat Credit Rules 2004 are reproduced below :
Rule 4: Conditions for allowing CENVAT credit-
(5) (a) The CENVAT credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re-conditioning, or for the manufacture of intermediate goods necessary for the manufacture of final products or any other purpose, and it is established from the records, challans or memos or any other document produced by the manufacturer or provider of output service taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred eighty days, the manufacturer or provider of output service shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise, but the manufacturer or provider of output service can take the CENVAT credit again when the inputs or capital goods are received back in his factory or in the premises of the provider of output service.
(6) The Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction over the factory of the manufacturer of the final products who has sent the input or partially processed inputs outside his factory to a job-worker may, by an order, which shall be valid for a financial year, in respect of removal of such input or partially processed input, and subject to such conditions as he may impose in the interest of revenue including the manner in which duty, if leviable, is to be paid, allow final products to be cleared from the premises of the job-worker.
13. From the above provisions of Cenvat Credit Rue 2004 it is evident that Cenvat Credit of inputs will be admissible to an assessee when the inputs are sent to a job worker and after undertaking the required manufacturing processes the final products can also be cleared on payment of duty from the premises of the job worker subject to imposition of certain conditions. In the procedures prescribed under the Cenvat Credit Rules 2004, therefore, provisions exist to allow the credit of inputs sent to a job worker when such inputs are used outside the factory premises of the manufacturer taking cenvat credit, however subject to some conditions. In the case of appellant power plant has been held and accepted by the adjudicating authority to be a job worker of the clinker unit. On the same analogy grinding unit could also act as a job worker of clinker unit for manufacturing cement. In such situations both the clinker and the electricity supplied to the grinding unit by the power plant can be treated as inputs supplied to job worker (grinding unit) for which credit has been taken by the clinker unit. As all the registered units belong to the same group of companies, therefore, what has not been done by the appellant is not following properly the prescribed procedures. Alternately, appellant could have sold proportionate electricity generating fuel to its grinding unit by reversing proportionate Cenvat credit which could have been availed as cenvat credit by the grinding unit as per the law laid down by CESTAT, Mumbai in the case of M/s Indo Rama Textiles Ltd vs CCE, Nagpur [2007(220)ELT 471 (Tri. Mumbai)] relied upon by the appellant.
14. From the above observations and the case laws relied upon by the appellant, it is inferred that procedures existed at the relevant time to avail cenvat credit on inputs sent to the power plant as job worker. The only irregularity committed by the appellant was that they did not follow the prescribed procedures. It has been a settled position of law now that a substantial benefit of cenvat credit cannot be denied for not following the prescribed procedures when it is not disputed that inputs on which credit is taken have been utilized for manufacture of final product on which Central Excise Duty has been paid/payable. In the case of sister concerns such captive consumption of materials become a case of revenue neutral exercise. It is not the case of the Revenue that electricity supplied to the grinding unit and its jetty has been diverted elsewhere. Further, it is economical in the modern competitive working to have a larger power plant catering to power requirements of various units of the same group of companies rather than having small power plants for each unit. Accordingly, cenvat credit with respect to inputs, sent to the power plant by the clinker unit for generation of electricity sent to grinding unit, can not be denied to the appellant for not following the prescribed procedures of Rule 4(5)(a) and Rule 4(6) of the Cenvat Credit Rules 2004 which allowed the appellant to send the clinker to grinding unit under job work and then clear the finished goods from the job worker s factory premises when diversion of inputs/electricity is not alleged by the Revenue.
It has also been rightly contested by the appellant that supplies made to a 100% EOU cannot be considered as exempted goods. In view of the above observations and the case-laws relied upon by the appellant CENVAT Credit has been correctly availed. The issue of admissibility of such credit was under litigation and different courts have given different interpretations regarding admissibility of CENVAT Credit on inputs involved in this issue. Accordingly, it is also held that extended period is not invokable in the present proceedings against the appellant.
6. Appeal filed by the appellant is allowed.
(Pronounced in Court on 23.07.2014)
(M.V. Ravindran) (H.K. Thakur)
Member (Judicial) Member (Technical)
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WEST ZONAL BENCH AT AHMEDABAD
COURT - I
Appeal No.E/766/2011-DB
Arising out of: OIO No.04/DEM/DAMAN/2011, dt.28.02.2011
Passed by: Commissioner of Central Excise & Customs, Vapi
For approval and signature:
Mr. M.V. Ravindran, Hon ble Member (Judicial)
Mr. H.K. Thakur, Hon ble Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the .
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant:
M/s Bilag Industries P. Ltd.
Respondent:
CCE Daman
Represented by:
For Assessee: Shri S. Suriyanarayanan, Adv.
For Revenue: Dr. Jeetesh Nagori, Addl.Commissioner (AR)
CORAM:
MR.M.V. RAVINDRAN, HON BLE MEMBER (JUDICIAL)
MR. H.K. THAKUR, HON BLE MEMBER (TECHNICAL)
Date of Hearing:25.06.14
Date of Decision:23.07.14
Order No. A/11416 / 2014, dt.23.07.2014
Per: H.K. Thakur
1. This appeal has been filed by the appellant with respect to OIO No.04/DEM/DAMAN/2011, dt.28.02.2011 passed by Commissioner, Daman under which demand of Rs.2,34,40,629/- has been confirmed against the appellant, along with interest and equivalent penalty has also been imposed.
2. Facts of the case are that appellant is holding Central Excise Registration for the manufacture of excisable goods falling under Chapters 28, 29 & 38 of the Central Excise Tariff Act, 1985. Appellant is having a sister concern situated as M/s Bilag Industries (100% EOU), Plot No.143, 2nd Phase, GIDC, Vapi and a corporate office. During the course of an audit of the records of the appellant by the officers of the jurisdictional Central Excise, Customs & Service Tax Commissionerate, Daman in March, 08 & May, 08, it was observed that appellant had a captive power plant, located in its factory premises. The said noticee had used cenvatable inputs viz., furnace oil to generate electricity and also to produce steam. A part of this electricity and steam was supplied to its sister concern viz., M/s Bilag Industries P. Ltd (100% EOU), situated outside its factory premises. Further, it was also noticed that appellant had not reversed proportionate CENVAT Credit attributable to the furnace oil used in the production of electricity which had been supplied to its said sister concern and corporate office situated near its factory, in terms of Rule 6(3)(a)(iv) of the CCR, 2004 and that it had not paid 10% of the price of the steam transferred to its said sister concern, and corporate office situated at Plot No.306/3, 2nd Phase, GIDC, Vapi. The demands raised were confirmed by the adjudicating authority under OIO dt.28.02.2011 against which the present appel has been filed.
3. Shri S. Suriyanarayanan (Advocate) appearing on behalf of the appellant, as well as in the written submissions received on 04.07.2014, argued that the period involved in the present proceedings is 16.05.2005 to 31.12.2009. That the 100% EOU owned by the appellant is situated in an adjacent premises and is one of the units of the appellant and has no independent legal identity of its own. That the goods supplied to the 100% EOU cannot be treated as exempted goods for denying CENVAT Credit by virtue of Rule 6(6)(ii) of the CENVAT Credit Rules, 2004. That CENVAT Credit of inputs used for generation of electricity and steam used in appellant s sister concern and corporate office has been held to be admissible in view of the following judgments:-
i) Repro India Vs UoI
[2009 (235) ELT 614 (Bom.)]
ii) Aurobindo Pharma Ltd Vs CCE
[2011 (265) ELT 358 (Tribunal)]
iii) CCE Bangalore Vs Biocon Ltd
[2012 (279) ELT 101 (Tri-Bang)]
iv) Sanghi Industries Ltd Vs CCE Rajkot
[2014 (302) ELT 0564 (Tri-Ahmd)]
It is also the case of the appellant that the corporate office of the appellant is situated in the registered premises as contained in the site plan submitted to the Excise Department at the time of registration. That the corporate office is concerned only with the manufacturing and business activities of the appellant and the findings of the adjudicating authority in Para 4.10 (inner page-18) of the OIO is not correct. It was also argued by the Ld.Advocate appearing on behalf of the appellant that the supply of electricity to corporate office situated within same factory has been decided in favour of the appellant vide CCE Vs Solaris Chem Tech Ld 2008 (225) ELT 443 (Tri-Bang). That in Indo Rama Synthetics (India) Ltd Vs CCE Nagpur 2007 (219) ELT 122 (Bom.), upheld by Supreme Court, credit was denied only for electricity supplied to residential premises within the factory. That the decision of Kolkata bench of Tribunal MCC PTA India Corporation Pvt.Ltd. Vs CCE 2010 (249) ELT 370 (Tri-Kolkata) and Larger Bench decision in Hindustan Petroleum Corporation Ltd Vs CCE Mumbai-II 2013 (287) ELT 102 (Tri-Mum) have been wrongly decided while interpreting the functions of offices within the factory premises. Though these decisions have held differently, but still the issue has not attained finality as Kolkata High Court has admitted appeal of the assessee in the case law of MCC PTA India Corporation Pvt.Ltd. Vs Commissioner (supra) on the same issue. That the decision of the Supreme Court in the case of Maruti Suzuki Ltd Vs CCE 2009 (240) ELT 0641 (SC) is no more a binding precedent in view of the reference made to larger bench in Ramala Sahkari Chini Mills Ltd, Uttar Pradesh Vs CCE, Meerut-I, (2010) 14 SCC = 2010 (260) ELT 0321 (S.C.) doubting the ratio in Maruti Suzuki Ltd judgment. Ld.Advocate also contested that the demand is predominantly time barred due to the fact that conflicting views were expressed by Courts on this issue during the relevant period.
4. Dr. Jeetesh Nagori (AR) appearing on behalf of the Revenue argued that as per the judgment of the Apex Court in the case of Maruti Suzuki Vs CCE [2009 (240) ELT 0641 (S.C.)] the CENVAT Credit of fuel used for generating electricity and steam, supplied to its sister concern and the corporate office is not admissible as the same are situated outside the factory premises. Ld. A.R. thus defended the order passed by the lower authority.
5. Heard both sides and perused the case records. The issue involved in this appeal is whether the electricity and steam used is sold and whether the corporate office is situated within the registered premises of the appellant. It is observed from the ground plan submitted by the appellant at the time of taking Central Excise Registration that the corporate office looking after the manufacturing and business activities, is situated in the registered premises of the appellant. The issue involved in this appeal has already been decided in favour of the assessees by this very Bench in the case of Sanghi Industries Ltd Vs CCE Rajkot (supra). In Para , 11, 12, 13 & 14 of this judgment, we have held as follows:-
8. Appellant has argued that as per their own case reported as [2006 (206) ELT 575 (Tri. Del.)] the Power plant can be a job worker of the appellant and that the inputs sent by the appellant to the job worker power plant, for generation of electricity brought back to the appellant for manufacture of final product, were held to be eligible for CENVAT Credit. We find that the DMW unit and the Administrative Block, are situated within the Clinker unit of the appellant and use of electricity is these units has to be considered as a use in connection with the manufacture of final product clinker. Therefore, proportionate credit of inputs sent by the Clinker unit to the Power plant under Rule 4(5)(a) corresponding to generation of electricity used in the DMW plant and Administrative Block, will be eligible as CENVAT Credit in the same manner as has been held by this Tribunal in the appellan s own case reported as 2006 (206) ELT 575 (Tri. Del.). However, CENVAT Credit is not available with respect to such quantities of inputs which have been used by the Clinker unit for supplying electricity to the DMW plant for making de-mineralized water for the Gujarat Water Board for supplies to nearby villages.
9. ...
10. ...
11. It was argued by the appellant that the judgment of M/s Maruti Suzuki Ltd vs CCE Delhi III is not applicable to their case because the electricity is not sold to the sister concern which was a fact in the case before Apex Court when deciding the case of M/s Maruti Suzuki Ltd (Supra). In the present proceedings there is no evidence on record that electricity is sold by the clinker unit to the grinding unit. It is further observed that this distinction was recently brought to the notice of Hon. Madras High Court in the case of CCE., Chennai I vs M/s SRF [2013 (298)ELT 521 (Mad.)] where the following observations were made by Madras High Court in Para 17 and 18 :
17. The Learned Counsel for the assessee distinguished the judgment of the Supreme Court in Maruti Suzuki Ltd vs Commissioner of Central Excise, Delhi III (2009) 9 SCC 193 = 2009(240)ELT 641 (SC) on the ground that the issue in the said judgment relates to the entitlement of credit on eligible inputs utilized in generation of electricity to the extent to which excess electricity cleared at the contractual rates in favour of sister units, vendors, joint ventures etc., which was sold at price. However, in the case of hand, electricity was wheeled out only in favour of sister units and as such, there was no element of sale.
18. The order passed by the CESTAT does not contain any discussion about the contention now raised by the assessee or the distinguishing features. CESTAT by following the earlier decision of the Tribunal, held that the assessee is entitled to credit inspite of the fact that electricity so generated was used in the other units also. The CESTAT has not decided the question as to whether the electricity supplied to the other units of the assessee situated in different premises are also entitled to the credit. The sale made to the other concern was also not made referred to the order passed by the Tribunal.
12. Appellant has also agitated that procedural irregularities or non-compliance can not be made the grounds for denying admissible cenvat credit when electrify supplied has been used for making goods on which duty is payable. It was argued that Rule 4(5)(a) and Rule 4(6) of the Cenvat Credit Rule 2004 the clinker unit could have sent clinker under job work to the grinding unit and cleared the final goods on payment of duty from the grinding unit. The said Rule 4(5)(a) and Rule 4(6) the Cenvat Credit Rules 2004 are reproduced below :
Rule 4: Conditions for allowing CENVAT credit-
(5) (a) The CENVAT credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re-conditioning, or for the manufacture of intermediate goods necessary for the manufacture of final products or any other purpose, and it is established from the records, challans or memos or any other document produced by the manufacturer or provider of output service taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred eighty days, the manufacturer or provider of output service shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise, but the manufacturer or provider of output service can take the CENVAT credit again when the inputs or capital goods are received back in his factory or in the premises of the provider of output service.
(6) The Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction over the factory of the manufacturer of the final products who has sent the input or partially processed inputs outside his factory to a job-worker may, by an order, which shall be valid for a financial year, in respect of removal of such input or partially processed input, and subject to such conditions as he may impose in the interest of revenue including the manner in which duty, if leviable, is to be paid, allow final products to be cleared from the premises of the job-worker.
13. From the above provisions of Cenvat Credit Rue 2004 it is evident that Cenvat Credit of inputs will be admissible to an assessee when the inputs are sent to a job worker and after undertaking the required manufacturing processes the final products can also be cleared on payment of duty from the premises of the job worker subject to imposition of certain conditions. In the procedures prescribed under the Cenvat Credit Rules 2004, therefore, provisions exist to allow the credit of inputs sent to a job worker when such inputs are used outside the factory premises of the manufacturer taking cenvat credit, however subject to some conditions. In the case of appellant power plant has been held and accepted by the adjudicating authority to be a job worker of the clinker unit. On the same analogy grinding unit could also act as a job worker of clinker unit for manufacturing cement. In such situations both the clinker and the electricity supplied to the grinding unit by the power plant can be treated as inputs supplied to job worker (grinding unit) for which credit has been taken by the clinker unit. As all the registered units belong to the same group of companies, therefore, what has not been done by the appellant is not following properly the prescribed procedures. Alternately, appellant could have sold proportionate electricity generating fuel to its grinding unit by reversing proportionate Cenvat credit which could have been availed as cenvat credit by the grinding unit as per the law laid down by CESTAT, Mumbai in the case of M/s Indo Rama Textiles Ltd vs CCE, Nagpur [2007(220)ELT 471 (Tri. Mumbai)] relied upon by the appellant.
14. From the above observations and the case laws relied upon by the appellant, it is inferred that procedures existed at the relevant time to avail cenvat credit on inputs sent to the power plant as job worker. The only irregularity committed by the appellant was that they did not follow the prescribed procedures. It has been a settled position of law now that a substantial benefit of cenvat credit cannot be denied for not following the prescribed procedures when it is not disputed that inputs on which credit is taken have been utilized for manufacture of final product on which Central Excise Duty has been paid/payable. In the case of sister concerns such captive consumption of materials become a case of revenue neutral exercise. It is not the case of the Revenue that electricity supplied to the grinding unit and its jetty has been diverted elsewhere. Further, it is economical in the modern competitive working to have a larger power plant catering to power requirements of various units of the same group of companies rather than having small power plants for each unit. Accordingly, cenvat credit with respect to inputs, sent to the power plant by the clinker unit for generation of electricity sent to grinding unit, can not be denied to the appellant for not following the prescribed procedures of Rule 4(5)(a) and Rule 4(6) of the Cenvat Credit Rules 2004 which allowed the appellant to send the clinker to grinding unit under job work and then clear the finished goods from the job worker s factory premises when diversion of inputs/electricity is not alleged by the Revenue.
It has also been rightly contested by the appellant that supplies made to a 100% EOU cannot be considered as exempted goods. In view of the above observations and the case-laws relied upon by the appellant CENVAT Credit has been correctly availed. The issue of admissibility of such credit was under litigation and different courts have given different interpretations regarding admissibility of CENVAT Credit on inputs involved in this issue. Accordingly, it is also held that extended period is not invokable in the present proceedings against the appellant.
6. Appeal filed by the appellant is allowed.
(Pronounced in Court on 23.07.2014)
(M.V. Ravindran) (H.K. Thakur)
Member (Judicial) Member (Technical)
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