2015 (11) TMI 45 - AT - Central Excise

Appellant's CENVAT Credit eligibility ruling modified.

M/s. Brahmani River Pellets Ltd. Versus Commr. of Central Excise, Customs & Service Tax, BBSR-I

The appellant was found ineligible for CENVAT Credit at the Jajpur Plant for inputs, capital goods, and input services used at the Barbil Plant. Unified ... Single registration in central excise - two separate units at a distance of 221 km - Held that:- Merely because the exempted iron ore concentrate manufactured at a separate plant and transported through pipe line for exclusive use in the manufacture of iron oxide pellets, to another factory situated 221 kms away would not make the two factories as one and the same. In our opinion also, the transfer of raw materials i.e. iron ore concentrate in slurry form through pipe line from Barbil factory to Jajpur Pellet factory cannot be construed that the Barbil plant is a captive plant of the Jajpur factory and entitled to a single Registration. CENVAT Credit - captive consumption - whether the appellant s Jajpur Unit engaged in the manufacture of Iron oxide pellets, a dutiable product, are eligible to avail CENVAT Credit on inputs, capital goods and input services used in or in relation to manufacture of iron ore concentrate at their Barbil Plant, which were ultimately be transferred to their manufacturing unit at Jajpur for manufacture of the said dutiable pellets falling under Chapter 26 of CETA, 1985 - Exemption under Notification No. 4/06-CE dated 1/03/2006 - Held that:- Out of iron ore fines(uneven sizes) iron ore concentrates in slurry form are manufactured and transported/cleared through pipelines to their pellet plant. The said iron ore concentrate became chargeable to duty w.e.f 01.03.2011. Therefore, it cannot be said that the inputs were directly used by bringing the same from the mines to the pellet plant at Jajpur. On the other hand, in the benefication plant the Iron Ore fines are converted into Iron ore concentrates in slurry form. In our opinion, therefore, the ratio laid down in Vikram Cement s case is not applicable to the facts of the present case. Consequently, the Appellants are not eligible to avail credit at their Pellet plant at Jajpur on the duty paid on the inputs , Capital goods and input services which are used in or in relation to the manufacture of Iron Ore concentrates at the benefication plant at Barbil. However, we find force in the contention of the ld. Advocate that in procuring the iron ore concentrate in slurry form through pipe line from their Barbil plant to Jajpur plant, the services used, fall within the scope of input services being specifically covered under the inclusive part of the definition of input service as prescribed at Rule 2(l) of Cenvat Credit Rules, 2004, hence, eligible to cenvat credit at their Jajpur Plant. Extended period of limitation - CENVAT credit had been availed at Jajpur factory, on an interpretation of the relevant provisions of the CENVAT Credit Rules and principle of law laid down by the Hon ble Supreme Court in Vikram Cement s case & other cases and also the demand notice is issued for the normal period without invoking suppression, mis-statement etc., therefore, in these circumstances penal provision, in our view is not attracted. Regarding levy of interest for availing the credit we find that a new plea has been raised by the Appellant, whereby it is claimed that they have availed the CENVAT credit at Jajpur plant in their books of accounts only on theoretical basis; actual production of iron ore concentrate(which become dutiable from 01.03.2011) at Barbil plant commenced from 06.06.2013. In our opinion these facts need to be scrutinized and thereafter the applicability of interest provision be accordingly decided in the light of the principles of law settled in this regard. - Appeal disposed of. Issues Involved:1. Eligibility of CENVAT Credit at Jajpur Plant for inputs, capital goods, and input services used at Barbil Plant.2. Unified registration for both Jajpur and Barbil Plants.3. Admissibility of input services used in transporting iron ore concentrate from Barbil to Jajpur.4. New plea regarding CENVAT Credit eligibility at Barbil Plant post-2013.5. Imposition of penalty and levy of interest.Issue-wise Detailed Analysis:1. Eligibility of CENVAT Credit at Jajpur Plant for inputs, capital goods, and input services used at Barbil Plant:The appellant's Jajpur Plant, engaged in manufacturing iron oxide pellets, claimed CENVAT Credit for inputs, capital goods, and input services used at their Barbil Plant. The Barbil Plant manufactures iron ore concentrate, which is an intermediate product used at Jajpur. The adjudicating authority concluded that since the Barbil Plant is a separate factory situated 221 km away from Jajpur, the CENVAT Credit is not admissible at Jajpur. The Tribunal upheld this reasoning, stating that the two plants are distinct and cannot be considered as one factory for CENVAT Credit purposes.2. Unified registration for both Jajpur and Barbil Plants:The appellant argued for a unified registration for both plants, claiming they are interlinked. The adjudicating authority rejected this, analyzing the definition of 'factory' under Section 2(e) of the CEA, 1944, and concluded that the two plants, situated 221 km apart, cannot be treated as one factory. The Tribunal agreed, emphasizing that the transportation of iron ore concentrate through a pipeline does not integrate the two plants into a single factory.3. Admissibility of input services used in transporting iron ore concentrate from Barbil to Jajpur:The Tribunal found merit in the appellant's contention that input services used in transporting iron ore concentrate from Barbil to Jajpur through pipelines fall within the scope of 'input services' under Rule 2(l) of the CENVAT Credit Rules, 2004. Therefore, CENVAT Credit on these input services is admissible at the Jajpur Plant.4. New plea regarding CENVAT Credit eligibility at Barbil Plant post-2013:The appellant raised a new plea that they are eligible for CENVAT Credit at Barbil Plant post-2013, as they obtained Central Excise registration on 26/11/2012 and commenced production of dutiable iron ore concentrate from 06/06/2013. The Tribunal noted that this issue was raised for the first time and requires verification by the department to ascertain if the appellant merely recorded the CENVAT Credit at Jajpur without utilizing it before the actual production commenced at Barbil.5. Imposition of penalty and levy of interest:The Tribunal found no grounds for imposing a penalty since the CENVAT Credit was availed based on an interpretation of relevant rules and precedents. However, the applicability of interest needs to be determined based on the verification of the new plea regarding the eligibility of CENVAT Credit at Barbil Plant post-2013.Summary of Findings:(a) The appellant is not eligible for CENVAT Credit at Jajpur Plant for inputs, capital goods, and input services used at Barbil Plant during the period from November 2009 to August 2010. The unified registration for both units is also not allowed.(b) CENVAT Credit is admissible for input services used in transporting iron ore concentrate from Barbil to Jajpur.(c) The new plea regarding CENVAT Credit eligibility at Barbil Plant post-2013 needs verification by the department.(d) No penalty is imposed for availing CENVAT Credit at Jajpur Plant during the specified period. The applicability of interest will be determined based on the verification of the new plea.The impugned order is modified accordingly, and the appeal is disposed of on these terms.