TaxTMI 
TaxTMI 
2014 (6) TMI 272
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....61,303/- which was utilised wrongly for payment of duty on the clearance of final products under Section 11A(2) of the Central Excise Act, 1944 along with appropriate interest under Section 11AB of the Central Excise Act, 1944. (c) Penalty of Rs.6,79,61,303/- under Rule 15(2) of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. 2. The appellants have also filed a miscellaneous application for placing additional evidence on record under Rule 23 of the CESTAT Procedure Rules, 1982. 3. The application for bringing additional evidence on record is admitted, as the evidence produced by the appellants were available at the time of adjudication and are very much relevant for arriving at the correct conclusion in the matter. 4. M/ s. JSW Power Ltd. ('JSWPL' - in short) filed an appeal against imposing of penalty of Rs.5,00,00,000/- under Rule 26 of the Central Excise Rules, 2002 read with Rule 15 of the CENVAT Credit Rules, 2004 5. As both the appeals have arisen from a common order and the facts are similar, therefore, both the appeals are heard together and dispos....
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....COL and (b) Show-cause notice dated 16.04.2007, for denial of the CENVAT credit - balance 50B on capital goods received during the period Sept.'05 to Mar.'06 and CENVAT credit availed on the capital goods during the period July, 2006. 10. The total denial of CENVAT credit for the entire period is Rs.6,79,61,303/- is on the following grounds: (a) The capital goods have not been received by M/ s.SISCOL in. its premises as the land where these capital goods were received was leased out to M/ s.JSWPL and the 'CPP' was not in the possession of M/ s. SISCOL to take credit; (b) Rule 4 of the CENVAT. Credit Rules, 2004 requires that goods should be received within the factory to take credit. The real manufacturer is only M/ s.JSWPL and as the land is leased out, the owners of the land is M/ s.JSWPL and not M/ s.SISCOL; and (c) Possession of capital goods was with M/s. JSWPL and not with M/S. SISCOL. 11. The adjudication took place and a detailed order was passed confirming the demand of Rs.6,79,61,303/- towards wrong credit availed by M/s.SISCOL and Rs.6,79,61,303/.., towards excise duty as M/s. SISCOL has utilised the credit for the payment of excise duty....
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....Haldia Petrochemicals Ltd. Vs Commissioner of Central Excise, Haldia reported in 2006 (197) E.L.T.97 (Tri.-Del.) (vi) M/s. German RemediesLtd. Vs Commissionerof Central Excise, Goa reported in 2002 (144) E.L. T.606 (Tri.-Mumbai); (vii) M/s. Ucbtog Ltd. Vs Commissionerof Central Excise, New Delhi reported in 2004 (165) E.L. T.226 (Tri.-Del.); (viii) M/s.Steel Authority of India Ltd. & Anr. Vs Commissionerof Central Excise, Bhubaneswar-II reported in 2006 (79) RL. T.33 (CESTAT-Del.); (ix) Mls.Sanghi Industries Ltd. Vs Commissioner of Central Excise, Rajkot reported in 2006 {76) RL. T. 132 (CESTAT-Del.); (x) M/s. Coromandel Fertilisers Ltd. Vs Commissioner of Customs. & Central Excise, Visakhapatnam reported in 2007-TIOL-09-CESTAT-BANG; (xi) Collector of Central Excise Vs M/s.Solaris Chemtech Ltd. reported in 2007 (214) E.L. T.481 (S.C.); (xii) ....
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....22.09.2005, M/s.JSWPL obtained loan from UTI Bank Ltd. Between Oct.'05 to Aug.'06, capital goods were received for the core installation of 'CPP' by M/ s.JSWPL (for Consignee M/ s.SISCOL') in the account of M/s.SISCOL., On these capital goods credit was taken by M/ s.SISCOL. These facts are not in dispute. The CENVAT credit taken by M/s.SISCOL was proposed to be denied by way of show-cause notices on the premise that the capital goods have not been received by M/s.SISCOL in its premises as the land on which these capital goods were installed has been leased out to M/ s.JSWPL,which was not in the possession of M/s. SISCOL,to take credit. 20. To counter this allegation of the appellants submitted that these capital goods are installed in their factory as defined in Section 2(e) of the Central Excise Act, 1944, which is reproduced herein below:- Factory means "any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process connected with the production of these goods is being carried on or is ordinarily carried on." 21. In this case....
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....ory or in the premises of the provider of output service at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent. of the duty paid on such capital goods in the same financial year: Provided that the CENVAT credit in respect of capital goods shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year if such capital goods are cleared as such in the same financial year. Provided further that the CENVAT credit of the additional duty leviable under sub-section (5) of 'section 3 of the Customs Tariff Act, in respect of capital goods shall be allowed immediately on receipt of the capital goods in the factory of a manufacturer. (b) The balance of CENVATcredit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer, or in the premises of the provider of output service, if the capital goods, other than components, spares and accessories, refractories and refractory materials, moulds and dies and goods falling under heading 6805, grinding wheels and the like, and parts thereof falling under headi....
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....ct 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. (7) The CENVAT credit in respect of input service shall be allowed, on or after the day which payment is made of the value of input service and the service tax paid or payable as is indicated in invoice, bill or, as the case may be, challan referred to in rule 9." 26. On a bare reading of the said rule, the CENV AT credit is available on receipt of the inputs in the factory of the manufacturer or in the premises of provider of output service. As per Rule 4(b) of the CENVAT Credit Rules, it is also a condition that the goods shall be in possession of the manufacturer of the final products. So in the factual matrix o~ the case, it is to be seen that whether the capital goods were installed in the factory o(M/ s.SISCOL and are being used by them and they are having the possession of the same or not. In the case of Steel Authority of India Ltd. Vs Commissionerof Central Excise, Bhubaneshwar-II reported in 2007 (219)....
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....hey procured capital goods i.e. Rotor/Insurance Spares and availed the benefit of MODVAT credit and utilised the same towards payment of duty on their, final products. However, the said Rotor assembly was not installed by them in their, factory premises and as such was not used in the 'CPP', for which the same was purchased. The said 'CPP' was subsequently sold by them to M/s. SAIL Power Supply Co. Ltd. (M/s.'SAIL PSCL' in short) during March 2001. The Rotor/Insurance spares were also sold by the appellant-company to M/s. SAIL PSCL along with the power plant. In that case, show-cause notice was issued for denial of CENVAT credit on the capital goods which were not installed and used. The said matter was referred to the Larger Bench of this Tribunal but the Larger Bench of this Tribunal returned the reference as in the referral order the reason of differences were not 28. In another case of Steel Authority of India Ltd. Vs Commissioner of Central Excise, R.aipur reported in 2009 (236) E.L. T. 711 (Tri-Del.), the relevant facts of the said case are that the appellants had a 'CPP' installed within their factory premises. The appellants, had entered i....
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....re power Unit to M/ s.Tata Electric Company ('TEC' - in short) for a consideration. For selling their power unit, the assessees have also leased in favour of the purchaser the land on which the said power unit was installed. Therefore, a show-cause notice was issued for demand of excise duty on the capital goods on which the assessees have taken the credit. In that case, it was held by the Hon'ble High Court of Karnataka, that they are to reverse the CENVAT credit. The facts of the said case are also not relevant to the facts of the instant case, as in that case, the power plant installed was sold to a third party and as per CENVAT Credit Rules, the CENVAT credit is required to be reversed on the capital goods which have been cleared as such. The assessees are required to reverse the CENVAT credit availed as per Rule 4(b) of the CENVAT Credit Rules, 2004. In this case, 'CPP' was installed by M/ s.JSWPL, which was merged with M/ s.JSWSL and later on M/s.SISCOL was also merged with M/ s.JSWSL. In that scenario, it is to be seen for what purpose 'CPP' was installed by whom and form whom. As M/ s.JSWPL and M/ s. SISCOL have merged with M/ s.JSWSL, therefore,....
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.... s.Stee/Authori!J of India Ltd. - 2007 (219) E.L.T.960 (Tri.-Del), M/s.Chemplast Sanmar Ltd. - 2004(177) E.L. T.446 (Tri.-Chennai) and M/s. Vikram Cement - 2006 (197) E.L. T.14 5 (S. C.), we find that the appellants are entitled to CENVAT credit on the capital goods which were being used for manufacturing of 'CPP' by Ml s.]S\VPL, which is being used by the appellants to manufacture their final iron and steel. 34. In view of these observations, the impugned order is set aside and the appeals are allowed with consequential relief, if any. (To be pronounced in open court on 05-11-2012) Separate Order 21-08-2012 35. I have gone through the order recorded by the Judicial Member and also consldered the case records and arguments raised by both sides during hearing. Since I have a different view on this matter, I am recording this order. 36. Under the Cenvat Credit Scheme a manufacturer of excisable goods is allowed to take credit of excise duty paid on inputs and ca pitaf goods - used in the manufacture of excisable goods and utilize - such credit for payment of excise duty on final products manufactured byhlm. In this case we are concerned with taking of credtt....
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.... in this appeal the issue whether the person who paid for the goods took the benefit of depreciation on the duty paid on the capital goods is not coming out clearly. It appears that this issue is not examined. 39. On the other hand definition of capital goods as given in Rule 2 (a} and the Rule 3 (1) and Rule 4 (2) (a) allowing taking of credit are clear enough that credit is to be taken on capital goods received in the factory of the manufacturer. Interestingly there has been amendment to Rule 2(a) and Rule 4(2) (a) by Notification 3/2011-NT dated 01-03-2011 to the effect that in the case of captive power plants credit can be taken even if the plants are outside the factory. 40. In this case Cenvat credit was taken by .SISCOLduring the period Sep OS to July 06. (From 31-08-06, SISCOLhad taken over the power plant from JSWPL.). SISCOL had not paid for the value of the goods or . excise duty payable thereon when .credit was taken. Such payments could not be seen in the books of accounts of SISCOL, when credit was taken. The value of the goods and excise duty thereon were paid by JSWPL on the date on which credit was taken by SISCOL. These are two different companies. Th.ere....
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.... Solaris Chemtach Ltd- 2007 (214) ELT 481 (SC) Inputs Yes Yes 10 Finolex Industries Ltd. vs. CCE -2003 (156) ELT 96 Capital But appurtenant to Goods the factory Yes No. 11 Chemplast Sanmar Ltd Vs. CCE-2004 (177) ELT 446 12 Gujarat Ambuja Cements Ltd Vs. CCE-2001 (130) ELt 129 Capital Goods Yes Yes 13 Konark Met Coke Ltd- 2007 (207) ELT 4 70 Capital goods Yes No 43. There are other decisions of the type mentioned at S. No 5 where the ,job-worker was allowed to take credit notwithstanding the fact that the job-worker had not paid the value of the capital goods or excise duty on the capital goods from his funds. Three such cases are,- (i) CCE Vs. Sunrise Chemical Industries-2010 (262) E.L.T.110(Guj); (ii) Prolite Engineering Co Vs. UOI-1995 (75) ELT 257 (Guj); (iii) Evergreen Engineering co. Pvt. Ltd. Vs. CCE-2012 (278) E.L.T. 328 (Tri. - Mumbai); 44. In the present case SISCOL....
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....cture of exempted products. So if such power plant sells major part of the electricity generated, credit cannot be denied to the neighbor so long as part of such electricity is used by that neighbor. In this case such a situation dld not exist and electricity generated was fully used. by SISCOL. However such free bending of the Rules is not desirable because it can defeat some of the basic criteria in the Rules like the one that) the person who purchased the goods cannot capitalize the duty amount and claim depreciation. The person who pays for the value of goods and duty may take credit and claim, depreciation and another person who uses the goods can claim the credit and the department may not know about the misuse because the books of accounts of the owner is not audited normally as in this case wherein the owner of the goods is not a Central Excise assessee. The owner may even refuse permission for such audit and the information can be extracted only through a procedure 'of issue of summons. Further it can also lead to a situation where someone sets up a power plant supplies part of the electricity to a manufacturer who takes credit and sells the rest of the electricity to ....
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....red to a situation when the land lord could not get a tenant evicted and in between the land lord came in possession of an alternate property for his requirement. In my view duty I ability on a specific point of time cannot decided with a future event when such a course of action is not specificallt authorized by law. Such an approach will cause too many cases of re-opening of tax incidence both in favor of assessees and in favour of Revenue and is not a practicable approach.' The tax liability from the date of future event can be certainly looked into. If credit was taken during a period when the assessee was not entitled to take credit, there is loss caused to Revenue at least to the extent of interest for the period for which there was no eligibility for the credit. However while deciding matters off penalty these future event can be taken into account. 50. Now there is a need to examine the main decision relied upon by the appellant which is the decision of the Apex Court in State of UP and Others Vs. Renusagar Power Company and others (AIR 1988 SC 1737). Here the facts were that M/s HINDALCOhad set up a, power plant through a 100B0/o subsidiary namely Renusaqar Power Co....
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....ons, - some of which have been noted. 66. The veil on corporate personality even though not lifted sometimes, is becoming more and more transparent in modern company jurisprudence. The ghost of Salomon's case still visits frequently the hounds of Company Law but the veil has been pierced in many cases. Some of these have been noted by Justice P.B. Mukharji in the New Jurisprudence. (Teqore Law Lecture 183). 67. It appears to us, however, that as mentioned the concept of lifting the corporate veil is a changing concept and is of expanding horizons. We think that the appellant was in error in not treating Renusagar's power plant as the power plant of Hindalco and not treating it as the own source of energy. The respondent is liable to duty on the same and on that footing alone; this is evident in view of the principles enunciated and the doctrine now established by way of decision of this .Court in Life Insurance Corpn of India, (supra) that in the facts of this case sections 3(1)(c) and 4(1)(c) of the Act are to be interpreted accordingly. The person generating and consuming energy were the same and the corporate veil should be lifted. In the facts of this case Hind....
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....s with no relationship through shareholding when credit was taken. By lifting the corporate veil of SISCOL one cannot see - JSWPLat the time of taking credit. There was only an intention on the part of JSWPLto take over SISCOLat a future date. The legal status of the companies involved cannot be done first by lifting of corporate veil and then by adopting future intentions of parties as the next criterion. 53. There is a further issue in this matter. Traditionally lifting of corporate veil has been done for denying a claim of the parties concerned which claim is set up through subterfuges of separate entities and not for granting a benefit to the parties who for their own reasons hold themselves to be different. Nevertheless the Apex Court has expanded the concept to grant a benefit by lifting corporate veils of two companies because of the peculiar facts of the case .and also because the Governments themselves were considering the two companies to be one and the same in many matters. The issue to be decided was meaning of the expression "own source of generation" in which case there can be a doubt whether a subsidiary company's resources are the resources of a holding compa....
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.... case. These issues can be decided finally after a view is taken on the eligibility for credit on the dates on which credits were taken. POINT OF DIFFERENCEIN OPINIOIN 56. In the facts and circumstances of the case,- Whether it is proper to allow Cenvat Credit of excise duty paid on excisable capital goods paid for and used by JSWPLto be taken by SISCOL from October 2005 onwards as held by Judicial Member? Or Whether it is proper to allow Cenvat Credit of excise duty paid on excisable capital goods paid for and used by JSWPLto be taken by SISCOL from 31-08-2006 when the two companies got merged as held by Technical Member? (Pronounced on ) The registry is directed to take appropriate steps for resolving the above difference in views. Per Pradip Kumar Das 57. The point of difference of opinion has already been set out above. 58. The facts of the case have also been narrated by the learned Judicial Member in his order. 59. The learned Advocate Shri Shivdass on behalf of the Appellant, supported the order of the learned Judicial Member and also made the submissions at length. He has filed a written synopsis with compilation of the case laws in support ....
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....oper to allow cenvat credit of excise duty paid on excisable capital goods paid for and used by M/s.JSWPL; to be proper taken by SISCOL from October 2005 as held by the learned Judicial Member OR from 31.8.2006 as held by learned Technical Member. The learned advocate on behalf of the appellant submitted that the consequence of the order of learned Technical Member is that the appellant is liable to pay interest of Rs.22,71,971/- for the period prior to 31.8.2006, as no depreciation was claimed by the company and penalty of Rs.25,00,000.00. 63. The Ld. Authorised Representative on behalf of the Revenue contended that in terms of lease agreement dated 17.1.2005, M/s.SISCOL leased out a portion of land to M/s.JSWPL for the purpose of setting up a Power Plant. On 31.8.2006, the lease deed was terminated and by a tripartite agreement between M/s. SISCOL, M/s.JSW Steel Ltd. and UTI Bank Ltd., the Power Plant was transferred to M/s.SISCOL. Prior to 31.8.2006, M/s.SISCOL had not received the capital goods in their factory premises. Goods were not in possession of or ownership of M/s.SISCOL. There was no relation of principal manufacturer and job worker between SISCOL and JSWPL. The gro....
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.... obviously means power generation plant supply only to the parent company. bbThis definition also states that captive generating plant means a power plant set up by any person or company to generate electricity for his own use. In the instant case, there is no dispute between the parties because power generated by Renusagar Power Plant was exclusively supplied to the appellant company, and, therefore, in our considered view, the power plant is captive power plant of the appellant. As such, the input service used in the power plant would entitle the appellant to claim Cenvat credit because power generated in the power plant is essential for the concerned final product. In our aforesaid view, we are supported by the judgment of Hon'ble. In this case, since as discussed above, the Renusagar Power Plant is a captive power plant of the Appellant 64.4. In view of the above decision, it is apparent that capital goods/input/input service used on power plant situated at a different premises CENVAT credit is admissible subject to exclusive supply of power by the impugned plant to the assessee manufacturing unit. In the present case, the capital goods were used to set up power plant for ge....
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....vident from the following documents:- (i) The Corporate Data Restructuring Cell's order dated 14.10.2004 records that the cut-off date is 31.03.2004 from which date onwards Jindal group within 1 month thereof proposed to take over SISCOL. Para 13 of the Order records that the Jindal group was appointed for merger of SISCOL with its major group steel company with prior approval of the respective vendors. This shows that as early as 2004, the merger of SISCOL with Jindal Steel Ltd., is a foreclosed decision taken by the Corporate Data Restructuring Cell. (ii) The communication dated 06.01.2005 to the Deputy Chief Inspector of Factories, Salem shows that 2 x 30 MW captive power plant is proposed to be installed inside the SISCOL premises to meet the present and future requirements of SISCOL. This communication clearly shows that JSW Power did not consider the land as that of theirs but that of SISCOL's. (iii) The Lease Agreement for the land is dated 17.01.2005. The Lease Agreement is between SISCOL and JSW Power Ltd., Clause C reads as SISCOL req....
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....entire power that is generated in JSW Power Ltd., is for the captive consumption of SISCOL Ltd. alone. (h) The start-up power for the captive power plant is given by SISCOL. (i) The captive power plant to generate power of 2 x 30 MW cannot operate without the 3 boilers at SISCOL area; the cake oven gas from SISCOL; waste heat recovered gas from SISCOL; water from SISCOL; coal from SISCOL; coal transferred by trucks through SISCOL land; start up of a power plant from SISCOL and power distribution station at SISCOL area. 67. For the purpose of proper appreciation of this issue, in so far as the Power Plant a Captive Power Plant, it would constitute integral part of manufacturing activities of M/s.SISCOL, it is appropriate to examine the facts of the case, in precise manner, as under :- (i) M/s.SISCOL had become a sick industrial company as on 30.6.2004 in terms of Section 3(1) of Sick Industrial Companies (Special Provision) Act, 1985 as evident from "Summery Record of Proceedings of Hearing on 23.8.2005" of BIFR. (ii) There was a proposal dated 14.10.2004 for restructuring of debts of M/s.SISCOL under the CDR (Corporate Debt Restructuring) mechanism by CDR cell. It is....
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....nbsp; "JSW Power Limited (JPL) is a JSW Group Company, having its registered office at 5-1, G. Deshmukh Marg, Mumbai 400 026. JPL with mutual interest with Southern Iron And Steel Company Limited (SISCOL), Pottaneri/M Kalipatti villages, Mettur Taluk, Salem District, Tamil Nadu, which has recently been taken over by JSW group is proposed to install 2 x 30 MW Captive Power Plant (One is coal based and the other one is Coke Oven waste gas recovery boiler) inside the SISCOL premises to meet the present and future power requirements of SISCOL." (vi) TNEB (Tamil Nadu Electricity Board) by letter dt. 21.7.2006 addressed to M/s.SISCOL approved as SISCOL captive power plant located in the company's premises. The relevant portion of the said letter is reproduced below :- "Approval is hereby accorded to M/s.Southern Iron and Steel Company Ltd., Mettur Elecy. Distn. Circle for parallel operation of 1 x 30 MW (Out of 2 x 30 MW0 Captive Power Plant located in the Company's premises at Pottaneri, Mettur Taluk, Salem District with TNEB's Grid as per Sub-Section (2) of Sec....
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....duct of M/s.SISCOL. It is recorded in the CDR Cell report that there was proposal of merger of M/s.SISCOL with SJG, which is corroborated by Director's report dt. 26.4.2005 of JSWPL balance sheet. It is mentioned in "Unit III Debentures Trust Deed" dated 22.9.2005 of M/s.JSWPL that with a view to finance its 2 x 30 MW plant at SISCOL, the company has approached the Debenture holders. JSWPL declared to TNEB by letter dated 6.1.2005 that Captive Power Plant is installed inside the SISCOL premises to meet the present and future power requirements of SISCOL. Further, TNEB approved as SISCOL Captive Power Plant located in the company's premises. 68.3. Rule 4 (3) of CCR 2004 provides that the cenvat credit in respect of the capital goods shall be allowed to a manufacturer, even if the capital goods are acquired by him on lease, hire purchase or loan agreement, from a financing company. Rule 4(3) has a wide amplitude in so far as it would cover the cases of various types of financial arrangements for availing credit on the capital goods. It is contemplated that under this sub-rule (3) of Rule 4 would cover the cases where the ownership of the capital goods does not vest in the ....