TaxTMI 
TaxTMI 
2018 (9) TMI 822
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....power generated was also supplied/wheeled out to the other plants?" 3. Counsel for appellant has taken us to the definition of "Input". Rule 2(k) reads as under: " Rule 2. ................................................................. (k) "input" means- (i) all goods used in the factory by the manufacturer of the final product; or (ii) any goods including accessories, cleared along with the final product, the value of which is included in the value of the final product and goods used for providing free warranty for final product; or (iii) all goods used for generation of electricity or steam for captive use; or (iv) all goods used for providing any output service; but excludes - (A) light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol; (B) any goods used for - (a) construction of a building or a civil structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of any taxable service specified in sub-clauses (zn), (zzl), (zzm), (zzq), (zzzh) and (zzzza) of clause (105) of section 65 of....
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....r as they relate to a motor vehicle which is not a capital goods; or (BA) specified in sub-clauses (d) and (zo) of clause (105) of section 65 of the Finance Act, except when used by - (a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by him; or (b) a provider of output service as specified in sub-clause (d) of clause (105) of section 65 of the Finance Act, in respect of a motor vehicle insured or reinsured by him; or] (C ) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vacation such as Leave or Home Travel Concession, when such services are used primarily for personal use or consumption of any employee;] " and contended that in view of the specific averments which are made by counsel for the appellant, the Tribunal has relied upon the decisions. However, the appellant preferred the appeal on the following grounds : "E. BECAUSE the Id. CESTAT failed to appreciate that thus from the above decisions of the Hon....
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....apex level it is maintained by the appellant company. There are separate staff, separate finished goods. Simply because both the factories may have common boundaries that will not make it one factory. Accordingly, we are of the opinion that the view taken by the Tribunal does not appear to be well-founded and likewise, the view taken by the Commissioner, Central Excise. Accordingly, we allow both these appeals, set aside the order of the Tribunal passed on June 7, 2002 as well as the order passed by the Commissioner, Central Excise, New Delhi-III on September 28, 2001 in both the appeals. No order as to costs." G. BECAUSE the ld. CESTAT failed to appreciate that it is settled proposition of law that the sister units of the assessee respondent having different registration are distinct entities and cannot be treated as one and the same and -/ therefore under the Central Excise provisions the assessee respondent was not entitled to take cenvat credit in respect of those input and input services which were not used in or in relation to the manufacture of final products in their own factory. H. BECAUSE the ld. CESTAT grossly erred in permitting full Cenvat credit on i....
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....to the extent the excess electricity is transferred to other (ie. sister concern) units outside the factory of production the nexus between the process and permitted use gets disconnected. In such a case, it can not be said that electricity generated in used in or in relation to the manufacture of final product within the factory of production. Therefore, to the extent of Cenvat attributable to the inputs/ input services used/utilized in the production of excess electricity wheeled out to other units would not be admissible for Cenvat Credit as 'input & input services' used in such wheeled out electricity would not fall within the definition of Rule (k) & Rule (I) of the Cenvat Credit Rules, 2004 as enumerated in the foregoing para. 6. From the above it is clear that Cenvat Credit is only available to such input/ inputs services which is used in the generation of that quantum of electricity which has been used captively in the production of final product and the input/ input services which has been used in the generation of electricity which has been wheeled out to the sister concern units of the appellant is not considered as the input and input services in terms of definit....
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....sed in the manufacture of dutiable final product. The only dispute is relating to the usage of electricity captively within the plant of generation o also outside the generation unit by the same manufacturer. Considering that the electricity has been used in the manufacture of dutiable final products and also the fact that all units belong to the appellant the denial of credit is not justifiable in the present case. Further, it is a fact that if the appellant were to follow the procedure for input service distribution the credit eligibility on part of the electricity cleared to sister unit could not have been questioned and the credit -/ could have been passed on to the unit which is actually using the electricity or retained fully by the appellant himself without proportionate distribution. Such being the factual position, I find that the impugned orders are not sustainable. Further, the reliance placed in the impugned order on the ratio of Hon'ble Supreme Court in Maruti Suzuki Ltd. vs. CCE, Delhi III (supra) is not appropriate. In fact the appellate Authority records that the facts are different in both the cases but still goes ahead and applies the ratio. As mentioned earlier i....
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....It was further held that issue of admissibility of credit on supplies made to a 100% EOU was under litigation and different courts given different interpretations regarding admissibility of cenvat credit on inputs involved in the issue. Extended period of limitation not invocable." 8. He has also relied upon in Commissioner vs. Ultra Tech Cement Ltd., 2015 (320) E.L.T. A259 (S.C.), which reads as under: 1. Leave granted. 2. For the reasons given in our judgment delivered today in the case of Maruti Suzuki Ltd. v. Commissioner of Central Excise, Delhi-III Civil Appeal No. of 2009 - (arising out of S.L.P. (C) No. 3826 of 2009), the civil appeals herein filed by the Department are allowed and the matters stand remitted to the Adjudicating Authority who will in each case ascertain whether any excess electricity was wheeled out/cleared at a price in favour of joint ventures, vendors, sister companies etc. and, if so, the Adjudicating Authority will calculate and charge duty or reverse credit to that extent alone. However, as stated above, the Department will not impose penalty in that regard for the disputed period(s). 3. Subject to above, the civil appeals....
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....7 (Mad.), wherein it has been observed as under: "....Furnace oil/Naphtha used in generation of electricity and steam, part of which was transferred to adjacent unit. Held : Assessee was entitled to credit on Furnace oil/Nephtha only to the extent to which they were using electricity and steam within their factory." -/ 4. Sanghi Industries Ltd. vs. Commissioner of Central Excise, Rajkot, 2014 (302) E.L.T. 564 (Tri. Ahmd.), wherein it has been observed as under: " .... Factory - Clubbing of Sister units situated in different premises having different registration cannot be considered as same factory. Appellants' contention that such units should be treated as same factory as the transmission lines and road linking such units under their possession and control rejected." 9. Therefore, he contended that the view taken by the Tribunal is required to be reversed and he is not entitled to the extent of the electricity which is given to the sister concern. To that extent, the matter is required to be remitted back in view of the decisions referred herein above. 10. Counsel for appellant has taken us the CESTAT more particularly Rule 3(5) and 6 of Cenvat Cr....
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....d applies the ratio. As mentioned earlier in this order, the Hon'ble Supreme Court was dealing the sale of electricity to outside parties and not to clearance of electricity to another manufacturing unit of the appellant. The input service credits attributable to the electricity sold to utility companies are not available to the appellants as held by the Hon'ble Supreme Court. This, the appellants are not contesting and have already reversed the amount towards such input service credits." 2. D.B. Judgment of Tribunal in - M/s Hindustan Zinc Ltd. vs. CCE & ST, Jaipur-II, Appeal No.E/2068, 2067/2012-EX (DB) wherein it has been observed as under: "5. on careful consideration of the submissions made by both the sides and perusal of records we find that the issue is regarding reversal of Cenvat credit attributable to the power generated and transferred to their sister concern. It is the case of the Revenue that the input services are not used in respect of the power which is generated and captively consumed. We find no merits in the arguments put forth by the adjudicating authority in -/ denying the cenvat credit to appellant as in an identical issue in respect....
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....e aforesaid findings of facts are not disputed. The grievance was that the aspect of undervaluation has not been considered by the Tribunal at all. Grievance would have merited acceptance if the ultimate exercise would have benefited the Revenue by collection of duty in the coffers of the exchequer. In the facts of the present case, admittedly no such benefit accrues to the exchequer. In the circumstances, if the Tribunal has chosen not to determine an academic issue, it is not possible to state that any legal infirmity exists in the impugned order of the Tribunal. 4. Maruti Suzuki Ltd. vs. Commissioner of Central Excise Delhi-III, 2009 (240) ELT 641 (S.C.) wherein it has been observed as under: "20. To sum up, we hold that the definition of "input" brings within its fold, inputs used for generation of electricity or steam, provided such electricity or steam is used within the factory of production for manufacture of final products or for any other purpose. The important point to be noted is that, in the present case, excess electricity has been cleared by the assessee at the agreed rate from time to time in favour of its joint ventures, vendors etc. for a price a....
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.... no merit in this civil appeal filed by the Department. At the outset, we may clarify that electricity is not an excisable item. Further, in this batch of civil appeals we are concerned with the electricity which is generated inside the plant by heating of LSHS and which is captively consumed and used to manufacture cement/caustic soda. Rule 57A, quoted above, has an Explanation clause which stated as to what inputs are included in MODVAT credit. Explanation Clause (c) refers to "input used as fuel". This clause was introduced by Notification No.4/94. At that time the Government made it clear that inputs used as fuel were entitled to MODVAT credit. That fuel either utilized directly or for generating electricity, as an intermediary product, is integrally connected with several operations which results in the emergence of the final product, namely, cement/caustic soda. It is important to note that without utilization of LSHS, it is not possible to manufacture cement/caustic soda. The electrolysis process is dependent on continuous flow of electricity. If there is disruption in the supply of electricity from the Electricity Board then the entire plant of the assessees would fail and ....
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....however, in the present case, as stated above, the expression "used" in Rule 57A uses the words "in relation to the manufacture of final products". The words "in relation to" which find place in Section 2(f) of the said Act has been interpreted by this Court to cover processes generating intermediate products and it is in this context that it has been repeatedly held by this Court that if manufacture of final product cannot take place without the process in question then that process is an integral part of the activity of manufacture of the final product. Therefore, the words "in relation to the manufacture" have been used to widen and expand the scope, meaning and content of the expression "inputs" so as to attract goods which do not enter into finished goods. In the -/ case of J.K. Cotton Spinning and Weaving Mills, Co. Ltd. v. The Sales Tax Officer, Kanpur and Anr. [1965]1SCR900 , this Court has held that Rule 57A refers to inputs which are not only goods used in the manufacture of final products but also goods used in relation to the manufacture of final products. Where raw-material is used in the manufacture of final product it is an input used in the manufacture of final prod....
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....ed below: Rule 57AA. Definitions - For the purpose of this section- (a)............. (b)............. (c)............. (d) 'Inputs' means all goods, except High Speed Diesel oil and Motor Spirit used in or in relation to the manufacturer of the final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils cleared along with the final products, goods used as paint, or as packing materials or as fuel or for generation of electricity uses for manufacture of final products or for any other purpose within the factory of production. 14. The learned counsel produced various orders passed by the different Tribunals and they all do support the impugned order of the Tribunal. The learned counsel for the appellant could not refer any statutory regulation or rule to take a different view of the matter. It is logical that if two units are being run at one place, producing two different items and the electricity is supplied to both of them by a common generator, the Modvat facility shall be available to both the manufacturing units, unless statutorily provided otherwise. ....