TaxTMI 
TaxTMI 
TaxTMI 
2017 (2) TMI 833
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....e Tariff Act, 1985, at their factory premises at Memco, Naroda, Ahmedabad. The Appellants Memco factory premise was visited by the Central Excise officers on 23.08.2007. On scrutiny of records relating to availment of CENVAT Credit, it was allegedly noticed that besides availing CENVAT Credit on various capital goods, inputs, at their CNG station at Memco, the Appellant had also availed CENVAT Credit on capital goods, and inputs at their various distribution points, described as their daughter stations. After completion of necessary investigation, it was alleged that the capital goods and inputs viz. Compressors, Dispensers, Ball Valves, Spares, Cables, CNG Storage Cascades installed at their different CNG outlets i.e. daughter stations/distribution centers were not eligible to CENVAT Credit amounting to Rs. 3,15,78,544/- availed during the period Jan.2007 to June 2007. The Appellants had paid back the said CENVAT Credit in cash against GAR7 challan on 24.09.2007 and 28.11.2007 under protest. Subsequently, a Show Cause Notice was issued to them on 24.12.2007 and adjudicated by the learned Commissioner on 31.03.2008, who confirmed recovery of CENVAT Credit and imposition of penalty ....
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....fiscation of capital goods and inputs with an option to redeem the same on payment of fine of Rs. 1.00 crore. Besides, Rs. 20.00 lakhs penalty was also imposed on them under Rule 25 and personal penalty of Rs. 5.00 laks on Shri Dharmesh A. Parekh, second Appellant under Rule 26 of the Central Excise Rules, 2002. Hence, the present appeals. 3. The learned senior advocate Shri Deven Parikh for the Appellant explaining the activities undertaken by the appellant submitted that the Appellant received natural gas at their City Gate Station (CGS) at Virat Nagar, Ahmedabad through transmission pipelines network of M/s GSPL. The natural gas received is distributed on continuous basis for sale as Piped Natural gas (PNG) to industrial, commercial and domestic consumers. The natural gas received is also distributed to CNG stations for conversion into compressed natural gas to be filled into the vehicles. The natural gas received from CGS is compressed with the help of compressors at 240 to 250 Bars kg/cm sq. The said compressed CNG later sold/dispensed through dispenser at the CNG stations/outlets. The dispensers at the CNG stations/outlets are directly connected through tubing of the compres....
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....hapters 26 & 27 of Central Excise Tariff Act, compression of natural gas is deemed to be a process of manufacture. It is his contention that compression means reducing the volume of the gas by compressing the quantity under pressure. The moment the pressure is removed, the natural gas returns to its expanded form and increase in volume. Thus, CNG must constantly be kept under pressure i.e. compressed, for it to be commercially marketable. Wherever, there is no online transportation facility of the gas and the same has to be transported by road from mother station to daughter station, it is important to ensure sufficient level of pressure to keep the natural gas compressed. The moment the pressure is reduced, in which case below 100 bars, the gas cannot be dispensed into the vehicles and thereby becomes non-marketable at the daughter stations. To ensure that the pressure at daughter stations is maintained, at most of the daughter stations, boosters have been installed. Since all vehicle owners cannot come to mother stations, for injecting CNG into their vehicles, hence the place of removal of CNG also to be considered as daughter station from where the same is sold/injected to the v....
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.... Credit Rules,2004 would not be applicable in strict sense because the scope of factory in both the definitions would not apply to those goods where manufacturing activity continues until the same is sold from the place of removal. The definition of factory would take into its scope any manufacturing process connected with the production of excisable goods and it does not limit or confined to four corners of one premise. Hence, both the mother station and the daughter station would qualify to come within the scope of the the word factory. It is his submission that the appellant would be entitled to CENVAT Credit of all the capital goods, inputs and input services used in the manufacture of final product i.e. CNG upto the place of removal as such place of removal having regard to the peculiar nature of goods, and the context in which the same has been sold, would be the extended factory i.e. daughter stations. Further, he has submitted that as place of removal is the place where CNG is dispensed into the vehicles, mother stations, online stations, daughter stations, and daughter booster stations, and Central Excise duty has been paid on the value on which the CNG sold to customers; ....
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....iv) Triveni Engg. & Inds. Ltd Vs CCE 2014 (303) ELT 129 (Tri-Del); (v) CCE Vs Industrial Oxygen Co. Ltd 2004 (175) ELT 907 (Tri-Bang.); (vi) Hira Power & Steel Ltd Vs CCE, Raipur 2008 (229) ELT 408 (Tri-Del); and (vii) Steel Authority of India Ltd Vs CCE Bhubaneshwar-II 2007 (219) ELT 960 (Tri-Del.) Advancing the alternative argument, he has submitted that even if it is assumed that mobile cascades are used for storing of CNG, then also CENVAT Credit is available in view of the following decisions:- (i) Goyal Mg Gases Pvt. Ltd. Vs CCE Ghaziabad 2005 (192) ELT 715 (Tri-Del); (ii) CCE Vs West Coast Industrial Gases Ltd 2003 (155) ELT 11 (SC); (iii) STS Chemical Ltd Vs CCE Mumbai-II 2001 (132) ELT 704 (Tri-Mumbai). 3.8 On the same analogy, CENVAT Credit on stationary cascades is also eligible as they were used for clearance of CNG prior to the place of removal. It is his contention that the stationary cascades are used for storing the CNG and then connected the same to the dispensers through pipeline for further distribution to their customers. 3.9 Distinguishing the decision of this Tribunal in the case of Mahanagar Gas Ltd Vs CCE Mumbai II 2015-TIOL-497-CESTAT-MUM, the learned Adv....
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....04.2009. It is his contention that therefore, the benefit of CENVAT Credit is available from the date of application and not from the date approval of registration and the delay caused in grant of such registration cannot act as prejudice to the Appellants benefit. In support, he has referred to the following judgments:- (i) State of U.P. Vs Haji Ismail Noor Mohammed & Co.- 1998 (3) SCC 398; (ii) Vimal Enterprises Vs Union of India 2006 (195) ELT 267; (iii) CCE Vs M.P.V. & Engg. Industries 2003 (153) ELT 485 (SC); (iv) York Print & Pack Vs Collr of C.Ex., Calcutta-I 2002 (147) ELT 1092 (Tri-Kol.); (v) CCE Vs Zoloto Malleables 2002 (284) ELT 523 (Tri-Del.); (vi) Arora Soap & Detergents Vs CCE Meerut 1999 (111) ELT 140 (Tri-Del.) 3.11 Further, he has submitted that obtaining centralized registration cannot be a condition precedent for availment of CENVAT Credit. In support, he has referred to the following judgments:- (i) Beico Inds. Pvt. Ltd. 2014 (36) STR 551 (Tri-Ahmd); (ii) Portal India Wireless Solutions Pvt. Ltd. 2012 (27) STR 134 (Kar.); (iii) Imagination Technologiesm P. Ltd 2011 (23) STR 661 (Tri-Mum); C.Metric Solution Pvt. Ltd. 2012 (286) ELT 58 (Tri-Ahmd) 3.12 It is his....
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.... the entire facts were within the knowledge of Department, hence larger period of limitation cannot be invoked against them. In support, he has referred to the following judgments:- (i) Commissioner Vs Meghmani Dyes & Intermedites Ltd 2013 (288) ELT 514 (Guj.); (ii) CCE Bangalore Vs Pragathi Concrete Products (P) Ltd 2015 (322) ELT 819 (SC); (iii) Metal Tubes Vs CCE New Delhi 2000 (126) ELT 1260 (Tri); (iv) CCE Bangalore-II Vs ITC Ltd 2010 (257) ELT 514 (Kar.) [approved in Commissioner Vs ITC Ltd 2013 (295) ELT A 64 (SC)] (v) Steel Authority of India Ltd Vs Collr.of CEx. 1993 (67) ELT 868 (Tri) [maintained in Collr. Vs Steel Authority of India Ltd 1996 (83) ELT A 106 (SC)] 3.14 Further, he has submitted that there was no intention to evade payment of duty and accordingly penalty is not imposable on them. In support, he has referred to the following judgments:- (i) CCE Vs HMM Ltd 1995 (76) ELT 497 (SC); (ii) Godrej Soaps Vs CCE Mumbai 2004 (174) ELT 25 (Tri-LB); and CCE Aurangabad Vs Balkrishna Industries 2006 (201) ELT 325 (SC) 3.15 Further, challenging the personal penalty on the employee of the Appellant, the learned Advocate submitted that he is mere an employee and not the de....
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....pplication to the Chief Commissioner purposefully to take undue advantage. Besides, the Appellant failed to produce complete information to the Department, therefore, they cannot claim innocence and the extended period of limitation is rightly applied against them. It is his contention that the benefit of the circular issued by the Board in 2008 is only prospective in nature and even though Centralised Registration has been allowed, but it is clarified that no CENVAT Credit would be admissible. He has submitted that the purpose of seeking Centralized Registration was not for availing CENVAT credit but compliance of various procedural formalities in discharging the duty at one place i.e. mother stations, instead of all daughter stations separately. 5. Heard both sides and perused the records. The undisputed facts are that the Appellant are engaged in the manufacture of compressed Natural Gas (CNG) at three locations viz. Memco, Maninagar and Jamalpur, designated as mother stations, which are sold/distributed through different locations known as daughter stations/daughter booster stations. The dispute centers around eligibility to CENVAT Credit on capital goods, inputs and input ser....
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....dule to the Excise Tariff Act; (ii) pollution control equipment; (iii) components, spares and accessories of the goods specified at (i) and (ii); (iv) moulds and dies, jigs and fixtures; (v) refractories and refractory materials; (vi) tubes and pipes and fittings thereof; and (vii) storage tank used - (1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office; or (2) for providing output service; [(B) motor vehicle designed in the name of provider of output service for providing taxable service as specified in sub-clauses (f), (n), (o), (zr), (zzp), (zzt) and (zzw) of clause (105) of Section 65 of the Final Act; [(k) inputmeans - (i) all goods, except light diesel oil, high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of elec....
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....bunal has concluded as follows:- "5.2 We find on perusal of records that the contentions raised by the learned Counsel for the appellants are devoid of merits for more than one reason:- (i) Firstly, it is undisputed that the compression of natural gas takes place at Mother Station where the appellants have installed various machines where the compression of natural gas is considered as an activity of manufacturing. Hence, CENVAT Credit availed on such capital goods at mother station is quite rightly undisputed. Subsequent to compression, the CNG which comes into existence is filled in the cascades into bottle/cylinder which is used for transporting the CNG to DBS, wherein the same are filled by using compressors into the vehicles. In our considered view these cascades are only transporting the CNG which has already come into existence as a manufactured product and is a marketable commodity. The argument of the learned Counsel that the CNG needs recompression into DNS in order to fill the product into vehicle is without any merits inasmuch CNG is already a marketable commodity, and the activity of recompression is neither incidental nor ancillary for manufacture of CNG at DBS as....
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.... requires" appearing in Rule 2 of CCR,2004, the criteria of use of input/capital goods cannot be restricted to the declared factory premises, where the activity of compression of natural gas takes place, but also extended to the daughter booster stations from where the CNG is dispensed. 12. With regard to the argument that for the purpose of allowing CENVAT Credit on inputs and capital goods, it is to be seen where the goods are ultimately sold by reading the definition of 'place of removal' prescribed at Section 4 of Central Excise Act, 1944, in our opinion, does not rest on a sound basis, in absence of any such reference in the respective meaning of 'input' and capital goods assigned under Rule 2 of Cenvat Credit Rules,2004. However, it is necessary to refer to the meaning of place of removal prescribed at Section 4 of Central Excise Act, 1944 which reads under:- (c) place of removal means (i) a factory or any other place or premises of production or manufacture of the excisable goods; (ii) a warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty; (iii) a depot, premises of a consi....
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.... awarded by the Oil and Natural Gas Commission. The drilling operations were carried on at oil rigs/vessels, which were situated outside the territorial waters of India and until around November, 1993, the Appellants, and all other similarly situated companies which were engaged in oil and gas exploration and exploitation were permitted to trans ship stores to the oil rigs without levy of any customs duty regardless of the fact whether oil rigs were operating within a designated area or non-designated area. From November, 1993 onwards, the Revenue Authorities refused to permit companies engaged in onward offshore operations, to trans ship stores to the oil rigs, without payment of customs duty. The Honourable Supreme Court was confronted with the issue whether oil rigs engaged in operations in the exclusive economic zone/ continental shelf of India, falling outside the territorial waters of India, are "foreign going vessels" as defined by Section 2(21) of the Customs Act, 1962, and are entitled to consume imported stores thereon without payment of customs duty in terms of Section 87 of the Customs Act, 1962. Answering the said question their Lordships observed as: 77. The Counsel....
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.... Customs Act, 1962 and would be charged to duty accordingly. Further, mineral oils produced in the EEZ or Continental Shelf of India would be deemed to be produced in India and subject to levy of central excise duties under the Central Excise Act, 1944. 78. Similarly, in Circular No. 22/2002 dated 23-4-2002 [2002(142) E.L.T. T20], the said notification i.e. S.O. 189(E) has been clarified in para 3 as under :- "3. The implication of the said notification is that mineral oils extracted or produced in the EEZ and Continental Shelf of India if brought to the mainland shall not be treated as import and therefore, no customs duty shall be leviable on such mineral oils. Likewise, the goods supplied from the mainland to a place in EEZ or Continental Shelf of India in connection with any activity related to mineral oil extraction or production shall not be treated as export under the Customs Act, 1962 and consequently, no export benefits can be availed of on such supplies. Another implication of the said notification is that bringing of any goods from any other country to any place in EEZ or Continental Shelf of India in connection with any activity related to extraction or production o....
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....an a certain thing, it is possible for the word to have a somewhat different meaning in different sections of the Act depending upon the subject or context. That is why all definitions in statutes generally begin with the qualifying words , similar to the wards used in the present case, namely unless there is anything repugnant in the subject or context." 16. In the present case the appellant could not bring out any particular rule of Cenvat Credit Rule,2004 in which the defined expressions input and capital goods be read differently in the context of the said Rule. Besides, the meaning of input and capital goods cannot be changed and read differently depending on the nature of raw material/finished goods, which will lead to absurdity and chaos in the administration of the CENVAT credit scheme. It is the principle of statutory interpretation that the result of an interpretation which leads to absurdity be avoided. The principal criteria for eligibility to CENVAT Credit on inputs rests on its use in or in relation to manufacture of final products in the factory and for capital goods its use in the factory of production. 17. The other argument of the learned Advocate is that once t....
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.... see any relevance to apply the aspect of availability of centralized registration to the eligibility of CENVAT Credit on the inputs and capital goods at their daughter stations. 19. Therefore, we are of the view that the Appellants are not eligible to CENVAT Credit of duty paid on dispensers, mobile cascades, stationary cascades, compressors, spare parts etc. installed & used at their daughter booster stations/ daughter stations, at their registered factory premises at Memco, Jamalpur and Maninagar. 20. Now coming to the dispute of input service tax credit, at para 27.3 of the impugned Order, the Ld. Adjudicating authority has disallowed it observing that the administrative/Registered office of the Appellant was not registered as input service distributor and no invoice, bills, challans were issued in the name of the three registered Units. The issue of eligibility of CENVAT Credit on input service where the Input service distributor is not registered has been settled by the Gujrat High Court in the case of CCE Vs. Dashion Ltd. 2016 (41) STR 884(Guj.). Their Lordships observed as: "7. The second objection of the Revenue as noted was with respect of non-registration of the unit....
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....to Sep.2007). The appellant has claimed that they had availed credit from February 2007 only after due intimation to the department. If the said claim is correct, then only a portion of the demand would be under extended period limitation. The second demand notice was issued to the to the appellant on 04th May 2009 demanding inadmissible credit on input services for the period from August 2006 to May 2007, thus, the entire demand rests on extended period of limitation. 23. It is submitted on behalf of the appellant that on 11.10. 2005 they had applied for centralised registration of all the premises i.e. mother stations as well the daughter stations. They informed all the facts to the Department in the said letter and also subsequently during the course of correspondences with the Department on the business of compression and distribution of CNG from the mother and daughter stations respectively. Further, it is submitted that on 27.02.2007, they made their intention clear by addressing a letter to the department to avail Cenvat credit on capital goods and thereafter availed the credit. With regard to the second demand notice, it is submitted that in response to the communication r....
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....law and all facts had been disclosed to the department. Hence, imposition of equivalent penalty on the appellant under rule 15(2) of Cenvat Credit Rules,2004 read with section 11AC of Central Excise Act,1944 is unsustainable in law. We receive support from the judgement of the judgement of Honourable Gujrat High Court in Dashion Ltd.s case(supra). Their Lordships observed as: "8. Coming to the question of penalty, right from the show cause notice stage till the final disposal of the show cause notice proceedings, we find little evidence to support the allegations of wilful misstatement, suppression, fraud or collusion on the part of the assessee. In fact, perusal of the show cause notice would show that the entire basis of the Revenue was wrongfully availment of the credit. Mere wrongfully availment without element of mens rea and that too for the purpose of evading payment of duty would not be sufficient to impose penalty. The adjudicating authority, without any basis or evidence, merely mechanically recorded that the assessee had, by reason of wilful misstatement, suppression of fact or in contravention of the provisions of the Rules, evaded payment of central excise duty. He w....