TaxTMI 
TaxTMI 
TaxTMI 
2018 (9) TMI 822
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....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 the Finance Act; (C ) capital goods except when used as parts or components in the manufacture of a final product;....
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....turer 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'ble Apex Court, which have been passed in relation to use of inputs and are equally applicable in the context of input and input services too, it is apparent that the assessee respondent is not entitled to CENVAT credit of the input s....
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....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 input and input services used in Captive Power Plant for generation of electricity (even though the entire electricity generated has not been used captively in the factory of the assessee respondent in or in relation to manufacture of their dutiable final products but a p....
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....t 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 definitions given here in above. Hence, credit taken on that quantity of electricity which has been wheeled out to the sister concern units is not admissible to the appellant. The ratio of the case laws cited by the appellant can not be applied in these cases." 6. He has also contended that the Tribunal in paras 3 to ....
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....g 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 in this order, the Hon'ble Supreme Court was dealing with 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 Supre....
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...., 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 filed by the Department are accordingly allowed with no order as to costs. and also relied upon decisions: 1. Punjab and Haryana High Court in Maruti Suzuki India Limited vs. Commr. Of Central Excise, -/ 2017 (5) G.S.T.L. 18 (P&H), wherein it has been observed as under: " Electricity that was wheeled out to third parties was not used in manufacture of assessee's final product - Therefor LNG ....
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....erein 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 Credit Rules, 2004 which reads as under: "Rule 3 - CENVAT Credit - ................................. (5) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal....
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....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 of very same assessee but situated at Chittorgarh, Rajasthan. This bench vide final order no. A/51895-51899/2016 held as under - "Heard both the sides and examined the appeal records. The short point for decision is whether or not the appellant is eligible to avail the credit on input services used in the generation of electricity which is partly cleared to their sister units who are also engaged in the manufacture of dutiable final products. The admitted fact is that the cenvat cre....
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....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 and has also cleared such electricity in favour of the grid for distribution. To that extent, in our view, assessee was not entitled to CENVAT credit. In short, assessee is entitled to credit on the eligible inputs utilized in the generation of electricity to the extent to which they are using the produced electricity within their factory (for captive consumption). They are not entitled to CENVAT credit to the extent of the excess electricity cleared at the contractual rates in favour of joint ventures, vendors etc., w....
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....4. 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 the manufacture of cement/caustic soda would not take place. Therefore, LSHS would come within the ambit of the expression "used in or in relation to the manufacture of the final product". Further, in the case of Collector of Central Excise v. Rajasthan State -/ Chemical Works 1991ECR465(SC) , it has been held that any operation in the course of manufacture, if integrally connected with the operation which results in the emergence of manufactured goods, would come within the term "manufacture". This is because of the words used in Rule 57A, namely, ....
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....oduct. 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 product. However, the doubt may arise only in regard to use of some articles not in the mainstream of manufacturing process but something which is used for rendering final product marketable or something used otherwise in assisting the process of manufacture. This doubt is set at rest by use of the words "used in relation to manufacture". In the present case, the LSHS is used to generate electricity which is captively consumed. Without continuous supply of such electricity generated in the plant it is not possible to manufacture cement, caustic soda etc....
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....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. 15. It is neither expedient nor desirable unless provided otherwise statutorily to have separate electricity generating sets for different manufacturing units. The approach of the Tribunal is pragmatic and in the interest of efficiency and economy." 12. We have heard counsel for the parties. 13. While considering the matter, by a detailed judgment of the Supreme Court in case of Maruti Suzuki India Limited (supra) came to the conclusion that if the product namely -/ electricity sold to third party or even sister concern, then it will not be entitled to Cenvat credit. 14. On the contrary, the AO observed as u....