2019 (9) TMI 1194 - AT - Central Excise

Appeals Granted: Cenvat Credit for Plant Inputs Upheld

The Tribunal allowed the Appeals, overturning the Commissioner's decision and granting the Appellants the Cenvat credit for inputs and capital goods used ... CENVAT Credit - inputs/capital goods - inputs and capital goods purchased by the Appellants for setting up its Fly Ash Handling Plant at the site of Chandrapur Super Thermal Power Station (CTSPS), for exclusive use by the Appellants for manufacture of cement in their factory - denial of credit merely on the ground that the said Plant is not situated within the factory premises of the Appellants - period involved is January, 2007 to June, 2007 and July, 2007 to March, 2008. HELD THAT:- Only because the flay ash handling plant is situated 60 kms. away from the factory premises of the Appellant, it cannot be a ground to deny the Cenvat Credit Cenvat credit on capital goods used in the Fly Ash Handling Plant. ‘Captive’ does not mean that it has to be within the factory premises only. In VIKRAM CEMENT VERSUS CCE, INDORE [2006 (2) TMI 1 - SUPREME COURT], the Hon’ble Supreme Court has specifically held that explosives in the mines are used for manufacture of final products and hence Modvat credit cannot be denied even though not used in the factory. The Hon’ble Supreme Court has made it clear that if the capital goods are used by the assessee for their own use, be it inside the factory premises or outside the factory premises, they are entitled for Modvat credit. In the instant matter, the Fly Ash so handled at the plant is used entirely in the appellant’s factory for the manufacture of dutiable products and hence the said plant can be said to be a captive plant and therefore in view of the aforesaid decisions of the Hon’ble Supreme Court, the Appellants are entitle for the Cenvat Credit. Credit allowed - appeal allowed - decided in favor of appellant. Issues:- Whether the Cenvat Credit for inputs and capital goods used in setting up a Fly Ash Handling Plant can be denied because the plant is not located within the factory premises of the AppellantsRs.Analysis:1. Issue of Cenvat Credit Denial: The central issue in this case revolved around the denial of Cenvat credit to the Appellants for inputs and capital goods used in establishing a Fly Ash Handling Plant outside their factory premises. The department contended that since the plant was situated 60 kms away from the factory, the Appellants were not entitled to avail Cenvat credit. Show cause notices were issued for the periods January 2007 to June 2007 and July 2007 to March 2008, leading to Orders-in-Original confirming the denial of credit. On appeal, the Commissioner upheld the original orders, prompting the Appellants to challenge the decision.2. Appellant's Argument: The Appellant argued that the Fly Ash Handling Plant was crucial for their cement manufacturing process, with fly ash being a primary raw material. They emphasized that the plant was a captive unit exclusively supplying fly ash to their factory, ensuring a seamless manufacturing process. Citing various legal precedents, including decisions by the Hon'ble Supreme Court, the Appellant contended that the distance of the plant from the factory should not be a basis for denying Cenvat credit on capital goods used in the plant.3. Legal Precedents: The Appellant relied on significant legal judgments such as Vikram Cement v. CCE and Madras Cements Ltd. v. CCE to support their argument that the location of capital goods does not affect the eligibility for Cenvat credit as long as they are used for the assessee's own manufacturing process. The Appellant highlighted that the purpose of Cenvat credit is to prevent double taxation and that the fly ash produced at the plant was exclusively utilized in their factory, making it a captive unit.4. Commissioner's Decision: The Commissioner, however, rejected the Appellant's appeal, maintaining that the distance of 60 kms between the factory and the Fly Ash Handling Plant was a crucial factor in denying the Cenvat credit. The Commissioner's decision was based on the premise that the plant being outside the factory premises was sufficient grounds for disallowing the credit, despite the exclusive use of fly ash in the Appellant's manufacturing process.5. Tribunal's Ruling: The Tribunal, in its detailed analysis, disagreed with the Commissioner's approach, emphasizing that the location of the plant should not be the sole determinant for denying Cenvat credit. Citing the legal principles established by the Hon'ble Supreme Court, the Tribunal held that if the capital goods are used for the assessee's own manufacturing process, whether inside or outside the factory premises, the credit should be allowed. The Tribunal found no merit in the Commissioner's distinction based on distance and emphasized the exclusive use of fly ash in the Appellant's factory as a crucial factor in determining the eligibility for Cenvat credit.6. Final Decision: Consequently, the Tribunal allowed the Appeals, overturning the Commissioner's decision and granting the Appellants the Cenvat credit for inputs and capital goods used in the Fly Ash Handling Plant. The Tribunal's ruling underscored the importance of the exclusive use of materials in the manufacturing process over the physical location of the plant, aligning with established legal precedents and principles governing Cenvat credit eligibility.(Order pronounced in the open Court on 22/08/2019)