TaxTMI 
TaxTMI 
2013 (9) TMI 453
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....ure of fertilizers under International Competitive Bidding (ICB). (b) On that much quantity of Naphtha, attributable to electricity generated in captive power plant/co-generation plant, used for manufacture of exempt goods viz. LPG (Domestic) and Superior Kerosene Oil (PDS) (c) On that much quantity of Naphtha, attributable to electricity generated in captive power plant/co-generation plant, used for allied activities like lighting in the artillery roads/yard, administrative building, canteen/cafeteria. 2.2 The demand has been confirmed by the learned Commissioner on the basis that for allowing exemption under Notification No. 67/95-C.E., final product should not be exempt from duty or chargeable to nil rate of duty as the said notification shall not apply to inputs used in or in relation to manufacture of final products which are exempt from the whole of the duty of excise or additional duty of excise leviable thereon or are chargeable to nil rate of duty. He further found that lighting in the artillery roads/yard, administrative building, canteen/cafeteria would not have relation to manufacture of dutiable final products. 2.3 Appeal N....
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....bsp; Chennai Petroleum - 2009-TIOL-642-CESTAT-MAD (e) The intention of the Govt, has been made known by Rajkot Commissionerate Trade Notice No. 56/2001, dated 21-6-2001 [2001 (131) E.L.T. T42], clarifying that clinker or other inputs, manufactured from Cenvat availed inputs and captively used in the manufacture of cement exempted for supply to earthquake relief, was eligible for exemption under Notification No. 67/95 on reversal of credit on inputs. (f) Exemption to goods manufactured and used as inputs within the factory is available if the same are used in or in relation to manufacture of final products under preceding Notification No. 217/86-C.E., dated 2-4-1986 as well as succeeding (present) Notification No. 67/95-C.E., dated 16-3-1995. The said expression "in relation to manufacture of final products" mentioned in the said Notification is identical to the expression mentioned under Rule 2(k) of CCR, 2004/erstwhile Rule 57A of CER, 1944 for allowing cenvat/modvat credit. Therefore, the words "in relation to the manufacture" have been used to widen and expand the scope, meaning and content of the expression....
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.... E.L.T. 122 (Bom.) (v) Upheld by Hon'ble Supreme Court - 2008 (226) E.L.T. A181 (S.C.) (vi) Raymond Ltd. - 2000 (117) E.L.T. 104 (T) (vii) This judgment has been approved by Hon'ble Supreme Court in Gujarat State Fertilizers & Chem. Ltd. - 2008 (229) E.L.T. 9 (S.C.) 3.5 Indirect use of exempted materials also would satisfy the requirement under Notification No. 67/95 which view gets persuasive support from the ratio of following judgments : (i) Rajasthan State Chemicals - 1991 (55) E.L.T. 444 (S.C.) (ii) Indian Oil Corpn. Ltd. - 2002 (148) E.L.T. 1021 (T) (iii) Ferro Alloys Corpn. - 2003 (159) E.L.T. 1030 (T) (iv) IFFCO - 1996 (86) E.L.T. 177 (S.C.) 3.6 Allowing of input service credit to outdoor catering (canteen) would render persuasive support for availability of exemption to electricity consumed in canteen/cafeteria, under Notification No. 67/95 : (i) Ultratech Cement - 2010 (260) E.L.T. 369 (Bom.) = 2010 (20) S.T.R. 577 (Bom.) (ii) GTC Industries - 2008 (12) S.T.R. 468 (Tri-.LB) 3.7 The following ....
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....t been verified by the adjudicating authority. In fact, the adjudicating authority has not dealt with this issue and there is no finding in the impugned order regarding the reversal of CENVAT credit on the inputs stated hereinabove by the appellants. Therefore, matter needs examination on this issue and should be remanded. He further submitted that for the use of electricity in allied activities, the definition of input has been clearly defined in Rule 2(k) of the CENVAT Credit Rules, 2004 and the definition of the phrase 'any other purpose' has been elaborated in the order of Hon'ble High Court of Bombay in the case of Indorama Synthetics (India) Ltd. v. CCE, Nagpur reported in 2007 (219) E.L.T. 122 (Bom.) and relied on by this Tribunal in the case of MCC PTA India Corporation Pvt. Ltd. - 2010 (249) E.L.T. 370 (Tri.-Kol.) wherein it was held that credit of duty paid on fuel used in generation of electricity used in canteen of office building is not available. He further submitted that in Appeal No. E/1346/2007, the appellant's claim that they buy power from Tata Power used for pumping. The said averment was not accepted by the learned Commissioner. Moreover the table which shows t....
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....1957), (herein after referred to as the said Special Importance Act), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts - (i) capital goods as defined in rule 3 of the CENVAT Credit Rules, 2002 manufactured in a factory and used within the factory of production; (ii) goods specified in column (1) of the Table hereto annexed (hereinafter referred to as input) manufactured in a factory and used within the factory of production in or in relation to manufacture of final products specified in column (2) of the said Table; from the whole of the duties of excise leviable thereon which is specified in the Schedules to the Central Excise Tariff Act, 1985 (5 of 1986) or additional duty of excise leviable thereon, which is specified in the Schedule to the said Special Importance Act; Provided that nothing contained in this notification shall apply to inputs used in or in relation to the manufacture of final products which are exempt from the whole of the duty of excise or additional duty of excise leviable thereon or are chargeable to nil rate of duty, other than those goods which are cleared,- (i) ....
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....12) E.L.T. 234 (T)] made the following observations : "7.2. It is the contention of the appellants that the reversal satisfies the conditions of Notification 67/95 read with Rule 6 of Cenvat Credit Rules, 2002. Notification 67/95 grants exemption from payment of duty on an intermediary product which is captively consumed for manufacture of excisable goods. Molasses is an excisable product. When molasses is used in the manufacture of some other excisable product, then the molasses captively consumed need not discharge any duty burden. However the entitlement to Notification 67/95 is subject to a condition. The condition is that the final product should be dutiable or otherwise the exemption would not be applicable. According to Revenue when molasses is used in the manufacture of Rectified Spirit, the Rectified Spirit, which emerges, is not excisable. Therefore, the Notification benefit cannot be available. This is the main contention of the Revenue for denying the benefit of Notification to molasses captively consumed. However, it is the appellants' contention that the molasses is not completely used for the production of exempted/non-dutiable product because a part of Recti....
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....y product which is captively consumed for manufacture of excisable goods. Molasses is an excisable product. When molasses is used in the manufacture of some other excisable product, then the molasses captively consumed need not discharge any duty burden. However, the entitlement to Notification 67/95 is subject to a condition. The condition is that the final product should be dutiable or otherwise the exemption would not be applicable. According to Revenue, when molasses is used in the manufacture of Rectified Spirit, the Rectified Spirit, which emerges, is not excisable. Therefore, the Notification benefit cannot be available. This is the main contention of the Revenue for denying the benefit of Notification to molasses captively consumed. However, it is the appellant's contention that the molasses is not completely used for the production of exempted/non-dutiable product because a part of Rectified Spirit is converted to Denatured Spirit, which is dutiable. Our attention was invited to amendment to Notification No. 67/95-C.E. by Notification No. 31/2001-C.E., dated 1-1-2001. In terms of the said amendment, the appellants are entitled for the benefit of exemption Notification in a....
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.... dated 16-3-1995 as amended at Naphtha cleared availing exemption under Notification No. 4/2006-C.E., dated 1-3-2006 for manufacture of fertilizers under ICB and on the quantity of naphtha, attributable to electricity generated in captive power plant/co-generation plant, used for manufacture of exempt goods viz. LPG (Domestic) and Superior Kerosene Oil (PDS). 14. As contended by the learned Advocate that electricity used for allied facilities within the refinery like lighting in the artillery roads/yard, administrative building, canteen/cafeteria that they are integral part of the refining process, without which the refinery would not be able to function. In fact. Yard lighting refers to the lighting that is on the roads in between the process units and the tank farms to facilitate movement of men and machinery in the refinery. Canteen is a statutory requirement in a factory of their size without which the refinery would not be legally permitted to function. Administration building houses the functions that relate to the refinery activities and due to safety factors they are house separately from the process units. Therefore the contention of the appellant is that these act....
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....ance Industries Ltd. (supra) we allow the exemption for Naphtha, attributable to electricity generated in captive power plant/co-generation plant, used for allied activities like lighting in the artillery roads/yard, administrative building, canteen/cafeteria. 17. With regard to the Appeal No. E/1346/2007, the appellant has already clarified and filed an affidavit by Shri Suranjan Pal, Chief Manager Operation - MPSPL certifying that MPPL never uses refinery power for pumping and finished goods and the said affidavit has proved by the appellant by filing purchase invoices/statement that during the impugned period they have purchased power from Tata Power Company and not used the refinery power for pumping and finished goods and the adjudicating authority has merely denied the claim of the appellant without any evidence, which is not correct view. Hence, the denial is not sustainable. 18. In view of the above observations, both the appeals are allowed by setting aside the impugned orders. (Pronounced in open Court on.............. Sd/- Ashok Jindal Member (Judicial) 19. [Per : Sahab Singh, Member (T)]. - I have perused the order proposed by Member ....
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....ch has been used in the manufacture of electricity, which has been further used for non-manufacturing activities, is required to discharge duty liability inasmuch as duty required to be paid on the same will not be available as credit to the appellant. Paras 7 & 8 of the said decision are reproduced below :- 7. We, however further note that a part of the electricity so generated was also used by the appellant for non-manufacturing activities like residential premises, guest house, canteen etc., in which case the appellant would not have been entitled to credit of duty paid on the fuel. Such legal proposition stands confirmed by the Hon'ble Supreme Court in the case of CCE v. Solaris Chemtech Ltd. - 2007 (214) E.L.T. 481 (S.C.). Apart from laying down that Low Sulphur Heavy Stock used as fuel in the manufacture of electricity is an eligible input for the purposes of Modvat credit, it has been held that the inputs used in electricity generated which is consumed by residential colony of factory worker families, schools etc., will not be eligible inputs for the purposes of Modvat credit. As such that part of the fuel, which has been used in the manufacture of electricity, which....
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.... of their own final product, in which case, they would be entitled to the benefit. We agree with the submission of the learned Advocate that in case no charge of electricity is being reimbursed by these companies to the appellant and the entire electricity is used for loading of the appellants own production in the pipe lines, the same would be liable to benefit or for Modvat credit in respect of fuel. It was held by the Tribunal that the entire electricity is used for loading of the appellant's own production in the pipe lines, the same would be liable to the benefit or for Modvat credit in respect of fuel. The issue regarding supply of electricity for allied activities like lighting in the artillery roads/yard, administrative building, canteen/cafeteria was not at all before the Tribunal. Therefore, I am of the view that the ratio of the judgment in the case of M/s. Reliance Industries Ltd. is not applicable to the present case. 24. On the other hand, it was held by the Hon'ble Bombay High Court in the case of Indo Rama Synthetics (India) Ltd. supra that the furnace oil used in generation of electricity must have nexus with manufacture of goods in the factory. For the ....
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....ed for exemption on that much of naphtha, attributable to electricity generated in captive power plant/co-generation plant, used for allied activities like lighting in the artillery roads/yard, administrative building, canteen/cafeteria. Sd/- Sahab Singh Member (Technical) 26. My learned Brother Member (Technical) is having a difference of opinion on the issue regarding the exemption on the quantity of Naphtha attributable to electricity generated in captive power plant/co-generation plant, used for allied activities like lighting in the artillery roads/yard, administrative building, canteen/cafeteria. As this issue is not related to Appeal No. E/1346/2007, therefore the Appeal No. E/1346/2007 is allowed. 27. In Appeal No. E/317/2009, the Member (Technical) is having a difference of opinion; therefore the same is placed before the Hon'ble Vice President/HOD for appointing a 3rd Member to decide the issue. DIFFERENCE OF OPINION 28. Following difference of opinion is placed before the Hon'ble Vice President/HOD :- (a) Whether the exemption on the quantity of Naphtha attributable to electricity generated in captive power plant/co-generation ....
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....ed as the fuel for the Gas Turbine Generators in the cogeneration power plant. The appellants are claiming the benefit of Notification No. 67/95-C.E. in respect of the Naphtha. The demand is raised on the ground that the electricity so generated is being used in the manufacture of dutiable as well as exempted final product and also for refinery road lighting, canteen and administrative office in the refinery. The only difference of opinion referred to the third Member is whether the Naphtha regarding which the benefit of Notification No. 67/95-C.E. is availed is used as fuel for generation of electricity and the part of electricity is used for road lighting, canteen and administrative office in the refinery. As the same is not used for the manufacture of goods, hence the appellants are not entitled for the benefit of Notification in respect of such quantity of Naphtha which is used in generation of electricity used for road lighting, canteen and administrative office. 32. The contention is that the road, canteen and administrative office are integral parts of the refinery without which the refinery would not have been able to function. Road lighting referred to the light i.....
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..... 481 (S.C.) and in the case of Indorama Synthetics (India) Ltd. v. CCE reported in 2009 (219) E.L.T. 122 (Bom.) and the dismissal of the appeal against the decision of the Bombay High Court filed by M/s. Indorama Synthetics (India) Ltd. by the Hon'ble Supreme Court as reported in 2008 (226) E.L.T. A181. The contention is that the Hon'ble Bombay High Court in the above decision specifically held that credit in respect of the inputs used for generation of electricity which is supplied to the residential complex is not available, as the residential complex situated within the factory premises are neither connected nor related to the manufacture of the final product. 34. I find that the only issue before me for consideration is whether the exemption under Notification No. 67/95-C.E. on the quantity of Naphtha attributable to the electricity generated in the captive power plant used for allied activities such as lighting of the road, administrative office and canteen is available to the appellant. The Notification provides exemption from payment of duty to the capital goods as well as specified inputs manufactured in the factory and used within the factory of production in or i....
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....ble to inputs used for generation of electricity provided, the electricity is used for manufacture of final products or for any other purpose connected with or related to the manufacture of the final products. In other words, the use of electricity must have nexus with the goods manufactured in the factory. For example, where the electricity is used in the production of an intermediate product within the licensed premises for use in the final product or use of electricity in the godowns or workshop established by the assessee within the licensed premises to facilitate storage/repair of the machinery used in the production of the final products, it would be covered within the meaning of the word 'any other purpose' in Rule 57B(iv) of the Central Excise Rules, 1944. 21. The fact that the residential complexes are situated within the licensed premises would not entitle the assessee to avail credit of duty paid on furnace oil used in the manufacture of electricity supplied to the residential complexes. It is necessary to establish that the electricity is used for any purpose connected with or related to the production of final products. In our opinion, supply of electricity to ....