TaxTMI 
TaxTMI 
2014 (8) TMI 332
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....emand notice was issued to the Appellant on 25.06.2009, alleging that the Appellant had wrongly availed & utilized the said CENVAT Credit of Rs.,2,37,20,987; an amount of Rs. 1,89,04,377/- was availed after the sale of the said capital goods and Rs. 48,16,610/- was availed before sale but not reversed after sale of such capital goods to M/s JKETL. It was alleged that the Appellant had contravened Rules 3(5B),2(a)(A) and 3(5) of the Central Credit Rules, 2004. On adjudication, the ld. Commissioner has confirmed the demand and imposed equivalent penalty on the Appellant under Rule 15 of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. Hence, the present Appeal. 2.1. On conclusion of the hearing before this Tribunal, both sides have been directed to file their written submission within four weeks; the Appellant filed it on 07.03.2014 and the Revenue filed their submission on 30.07.2014. 3. Elaborating the facts, the ld. Advocate for the Appellant submits that the Appellant is an unit of M/s. J.K.Paper Mills Ltd. having its manufacturing unit at Rayagada, Orissa, wherein they are engaged in the manufacture of Pulp, paper and paper-board fallin....
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.... they had violated Rule 3(5) of the CCR, 2004, inasmuch as after the sale and removal of the capital goods from the factory, they failed to reverse the CENVAT Credit availed on the capital goods. 3.3. Ld. Advocate for the Appellant challenging the impugned Order raised two preliminary objections. It is his contention that the impugned Order has gone beyond the scope of the show cause notice in confirming the demand of Rs. 1.89 crore under Rule 3(5) of CCR, 2004, when the show cause notice was issued to them alleging, contravention of Rule 3(5B) of CCR,2004. In support, he has referred to the decision of the Hon'ble Supreme Court in the case of Sacci Allied Products Ltd. Vs. Commissioner of C.Ex., Meerut 2005(183)ELT 225. Secondly, he has submitted, no penalty could be imposable on the Appellant, as the Appellant had disclosed all the facts to the Department, right from 10.03.2008, much before taking credit in their books and after such disclosure of facts, the Department had not changed the Ground Plant of the factory, accepting that the capital goods are within the factory. 3.4. Further he has submitted that Rule 3(5) of the CCR, 2004, on the basis of which the demand has be....
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....goods from the factory of the Appellant is necessary and since there was no physical removal of the capital goods from their factory, accordingy, the denial of credit on the capital goods, is incorrect. In support, he has referred to the judgment of this Tribunal in the case of Dalmia Cements (Bharat) Ltd. vs. CCE, Tiruchirapalli, 2008(224)ELT 484(Tri.-Chennai). The meaning of 'removal', as employed in the said Rule 3(5) of CCR,2004 ought to be understood, as physical removal from the factory. In understanding the meaning of removal he has referred to the ratio in the case of J.K. Spinning and Weaving Mills Ltd. & Another vs. UOI and Others, 1987(32)ELT 234(SC). 3.7. Further, he has submitted that if there is any omission in enacting the CENVAT Credit Rules for circumstance on the issue of retention of the credit after sale of the capital goods, without its physical removal, such an eventuality is 'caususomissus' which cannot be supplied by the courts. In support, he has referred to the decision of the Hon'ble Supreme Court in Singareni Collieries Co. Ltd. vs. Vemuganti Ramakrishnan Rao & Others reported as JT 2013(11)SC 539. 3.8. Further, he has submitted that even assuming ....
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....so alleged that the appellant had contravened rule 2(a)(A) of the CCR,2004 by not using the capital goods in their factory. He has submitted that after receipt of the capital goods in the factory, the appellant sold the capital goods for due consideration to JKETL, which is a separate legal entity, engaged in the manufacture of 'Lime' out of the 'Lime Sludge'. Referring to the conversion Agreement the Ld. A.R. Submitted: "Para 6.1 JK ENVIRO shall build and install a Lime Recovery Plant including a rotary lime sludge re-burning kiln along with production gas generation plant for burning of lime sludge based on modern and efficient design for the land situated at Jaykaypur, District Rayagada, in Orissa and for the land situated at Songarh Gujarat for the sum of approximately Rs. 36.83 crores and Rs. 31.85 crores respectively, for JKPL ("lime extraction process" or "Conversion")". "Para 6.2 For the purposes of Conversion and rendering its services, expertise and advise to JKPL, JKPL shall pay to JK ENVIRO conversion cha....
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.... in case such a device/method is accepted as legal then every manufacturer of exempted final products(viz. JKETL) would make available the non-cenvattable credit of capital goods to the buyers (viz. JKPL) who allowed them to set up the plant within the factory premises, which would completely go against the sprit of the CENVAT Credit Scheme. 5. Heard both sides and perused the record. The issue for determination is: whether after receipt of various capital equipments of Lime Klin Plant in the factory, on which CENVAT Credit has been availed before/after sale by the Appellant, to another unit, namely, M/s JKETL, situated within the same premises, the appellant are entitled to avail/retain the CENVAT credit in their books and utilize it towards payment of duty on their finished products or otherwise. 5.1. Advancing the preliminary objection, the Ld. Advocate submitted that the demand Notice was issued for recovery of Credit of Rs. 1.89 crore being availed after sale of the Capital equipments, machineries, etc. in violation of Rule 3(5B) of CCR,2004; Rs. 48.16 lakhs before sale of the said capital items in violat....
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.... was whether CENVAT Credit availed on capital goods, namely, Checking Fixtures and Jigs & Fixtures, cleared by M/s Hyundai Motors to the Appellant, for the manufacture of auto parts, would be admissible to the Appellant, since M/s. Hyundai Motors continued to be the owner of the said capital goods. It is an admitted fact that while clearing the said Checking Fixtures and Jigs & Fixtures M/s Hyundai Motors had reversed the credit under Rule 57S of the erstwhile Central Excise Rules,1944. The Tribunal, following the principle laid down in Sharda Motors Industries Ltd. vs. CCE, Chennai-II, 2002(150)ELT 159(Tri.-Del.), observed that the ownership is not relevant in availing the credit on such Jigs & Fixtures in the hands of the Appellant, who was entrusted the job of manufacture of auto parts using the said Jigs and fixtures. 5.4. In CCE, Ludhiana vs. Pepsi Foods (supra), the appellant had received capital goods viz. moulds from M/s. Pepsico Ltd. against an endorsed bill of entry and invoice which were not in the name of the respondent, M/s. Pepsi Foods Ltd., but were in the name of M/s. Frito Lay India. In this context, i....
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....en the supplier/owner had removed the moulds/capital goods, to the job-worker, on reversal of credit/payment of duty under erstwhile Rule 57S, and the job-worker even though not the owner of the said goods used the same in the manufacture of finished goods and accordingly, availed the credit. But, the circumstances in the present case are totally different, in as much as, the Appellant even after sale of the capital items, without reversal of the credit availed, utilized itself in the clearance of the finished goods, hence, the principle of law laid down in the above cases, in our humble view, not applicable to the facts of the present case. 5.8. The next argument vehemently advanced by the ld. Advocate is on the criterion of the 'removal' of the capital goods, from the premises of the Appellant, for recovery/reversal of credit under Rule 3(5) of the CCR,2004 from the Appellant. It is the contention of the ld. Advocate that even though the equipments, machineries etc. had been sold by the Appellant to M/s. JKETL, since these capital goods continued to remain within the registered premises of the Appellant, and as....
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....oo taken out of their context. The observations must be read in the context in which they appear to have been stated. To interpret words, phrases and provisions of a statute, it may become necessary for Judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes. 36. In Som Mittal v. Government of Karnataka, it has been observed that judgments are not to be construed as statutes. Nor words or phrases in judgments to be interpreted like provisions of a statute. Some words used in a judgment should be read and understood contextually and are not intended to be taken literally. Many a time a Judge uses a phrase or expression with the intention of emphasizing a point or accentuating a principle or even by way of a flourish of writing style. Ratio decidendi of a judgment is not to be discerned from a stray word or phrase read in isolation(emphasis supplied). 5.11. From the aforesaid observations of the Hon'ble Supreme Court it is crystal clear th....
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....ontain any definition of 'place of removal', but provide that excisable goods produced or manufactured in any place or premises at an intermediate stage and consumed or utilised for the manufacture of another commodity in a continuous process, shall be deemed to have been removed from such place or premises immediately before such consumption or utilisation. Clause (b) of sub-section (4) of Section 4 has defined 'place of removal', but it has not defined 'removal'. There can be no doubt that the word 'removal' contemplates shifting of a thing from one place to another. In other words, it contemplates physical movement of goods from one place to another. 39. It is well settled that a deeming provision is an admission of the non-existence of the fact deemed. Therefore, in view of the deeming provisions under Explanations to Rules 9 and 49, although the goods which are produced or manufactured at an intermediate stage and, thereafter, consumed or utilised in the integrated process for the manufacture of another commodity is not actually removed, shall be construed and regarded as removed. The Legislature is quite competent to enact a deeming provision for the purpose of assuming th....
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....d availed the MODVAT Credit on the said capital goods under Rule 57Q of the erstwhile Central Excise Rules,1944. The said captive power plant, thereafter, was sold to M/s. Tata Electric Company for a total consideration of Rs. 90.00 crore. The power generated in the said captive power plant had been sold to the Appellant by M/s Tata Power. While selling the power unit, the assessee had also leased the portion of land, on which the power unit was installed in the factory premises, for a period of twenty years, in favour of the said purchaser. The following question of law formulated before the Hon'ble High Court, on a reference taken by the Revenue , which reads as:- Whether the Tribunal was justified in holding that the capital goods in respect whereof MODVAT credit was availed by the assessee company were not removed by it from the premises of its factory even though it sold the entire power unit to M/s. Tata Electric Company for a consideration of Rs. 90 crores and leased to the said purchaser for 20 years the premises wherein the unit was installed and thus it did not contravene any provisions of Central....
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....nd without proper appreciation of the said transactions in the light of the relevant provisions of the Central Excise Act and the Rules has allowed the appeal of the assessee-company and set aside the Order-in-Original passed by the Commissioner of Central Excise, Belgaum. In the circumstances, we answer the above question of law in the 'negative' and against the assessee. 5.16. The above judgment of Karnataka High Court has been followed by the Honble Delhi High Court in the case of Pure Drinks Ltd. Vs. UOI, 2012(281)ELT 51(Del.) & by the Tribunal in Commissioner of Central Excise Vs. krypton Outsourcing Ltd. 2010 (256) ELT768(Tri.-Del.) 5.17. Drawing analogy from the facts and circumstances referred to in the said case, we find more or less similar situations involved in the present case also. Here, the Appellant had sold lime kiln plant situated inside the factory premises for a consideration and the lime manufactured out of the lime sludge by M/s. JKETL, had been supplied to the Appellant who in turn consumed in the manufacture of their finished goods. Therefore, we do not have any hesitation to apply the principle laid down by the Hon'ble Karnataka High Court in the sai....
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....ascertained and vital for arriving at a conclusion as to whether the principle laid down in Associated Cements' case (supra), would be applicable to the facts of the present case. 5.21. The ld. Advocate also argued that even assuming that the said installations were outside the factory premises of the plant, CENVAT Credit would still be admissible to the Appellant in view of the ratio laid down by the Hon'ble Supreme Court in Vikram Cements case (supra). We do not find force in the said argument, as in the said case, the assessee had not divested with the ownership or control of the said capital goods, used outside the factory i.e. in captive mines, in favour of any third party, like the present case, hence, the principle in the said case would not come to the rescue of the Appellant. 5.22. The ld. Advocate further argued that there was no provision under the CENVAT Credit Rules to meet the circumstances of the present case and it is a 'caususomissus' which cannot be supplied by the courts. We do not agree with the contention of the ld. Advocate for the Appellant. The admissibility of....
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....an interpretation of law. 5.24. In view of the above analysis, we are firmly of the view that the ratio laid down by the Hon'ble Karnataka High Court in Associated Cement's(Case), is applicable to the present case and accordingly we have no hesitation to hold that once the ownership and control of the equipments, machineries are transferred to another legal entity, even if it is situated in the same factory premises, it would be construed as removal within the meaning of Rule 3(4) of the CENVAT Credit Rules,2004 and CENVAT Credit on the capital goods availed by the transferor is liable to be recovered. For the above reason, the other issue raised, that is, that CENVAT credit on capital goods not to be denied if the intermediate product is exempted, becomes academic and accordingly the same are not deliberated in the present Order. We are of the view that the conclusion reached by the Tribunal in the case of M/s Dalmia Cement's case(Supra) delivered earlier to the decisions of the Hon'ble Karnataka High Court in Associated Cements case and Hon'ble Delhi High Court, in Pure Drinks Case(supra) and also being contrary to these judgments, no more could be considered as good law. &....