TaxTMI 
TaxTMI 
2021 (8) TMI 1199
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.... By the impugned order, the Commissioner has held as follows: "40. Accordingly, I pass the following order - ORDER A. I determine and demand the amounts of Rs. 1,61,71,941/-, Rs. 1,12,96,991/- and Rs. 71,91,464/- in terms of rule 14 of the Cenvat Credit Rules, 2004 read with the then section 11A(2) of the Central Excise Act, 1944 [raised in the show-cause-cum demand notices dated 19.09.2007, 02.05.2008 and 29.12.2010 against M/s CIPLA Ltd. in terms of the provisions rule 14 of the CCR, 2004 read with the provisions of the then proviso to section 11A(1) of the CEA, 1944). The amount of Rs. 6,02,698/- paid during clearance of the capital goods is appropriated towards the total demand of Rs. 3,46,60,396/-and I finally determine and demand in terms of Rule 14 of the CENVAT Credit Rules, 2004 read with the then section 11A(2) of the Central Excise Act, 1944 the balance amount of Rs. 3,40,57,698/ [Rupees Three crores forty lakhs fifty seven thousand six hundred ninety eight only) and the same is directed to be paid forthwith. B. The assessee is also ordered to pay interest in terms of Rule 14 of the CCR, 2004 read with the then section 11AB of the CEA, 1944 ....
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....o December 2007. The said capital goods were installed in the Research & Development wing the appellant. The said input services were used in or in relation to the construction of the R&D wing. The learned Commissioner found that the R&D wing was not a part of the registered factory premises and, therefore, he took the view that the appellant was not entitled to CENVAT credit on the capital goods installed in the R&D wing or on the input services availed in or in relation to the construction of that wing. The main challenge in the present appeal is against this decision of the learned Commissioner. The learned counsel for the appellant submits that the relevant show-cause notices have only alleged that the R&D wing was situate away from the factory and had not categorically alleged that it was not within the registered factory premises. It is submitted that the adjudicating authority obtained a verification report from the Assistant Commissioner without notice to the appellant and relied on that report to decide on the CENVAT-credit issue against the appellant. It is submitted that no copy of the said report was supplied to the appellant and, therefore, an effective opportunity of ....
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....Revenue also against the Commissioner's order, which does not figure in today's cause-list. We have called for those records also and have heard both sides. We note that a crucial finding of the Commissioner has not been challenged by the Revenue and the same reads thus: "The admissibility of CENVAT credit on the capital goods used for research and testing purpose is not disputed. The same is allowed provided it is used in the factory that is registered." The only grievance raised in the Revenue's appeal is that the learned Commissioner confirmed the substantive demand against the assessee under a wrong provision of law. According to the Revenue, the adjudicating authority should have invoked Rule 14 of the CENVAT Credit Rules, 2004 instead of Section 11A of the Central Excise Act/Section 73 of the Finance Act, 1994. We further note that the Revenue, in their appeal, has only sought for remand of the case to the adjudicating authority. We are inclined to remand the case accordingly. 5. In the result, we set aside the Commissioner's order and allow both these appeals by way of remand, with a request to the learned Commissioner to pass fresh speaking order af....
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....pellants learned counsel submits- • In the remand proceedings, Commissioner is bound by the remand order and cannot have gone beyond the directions contained in remand order as per the order of the Hon'ble Apex Court in the case of Kamlakshi Finance Corporation 1991 (56) ELT 433 (SC)]. In the impugned order Commissioner has travelled beyond the directions contained in the remand order and has confirmed the demand for the reason that, R & D activity is not a manufacturing activity and the appellants did not informed the department in this regards. It is settled principle that department cannot make a new case in the remand proceedings (Kalyani Sharp India [2008 (226) ELT 197 (T)]). • Once the Commissioner accepts that the R & D Building is within the premises of the Appellant, the entire case of revenue falls. • Documentary evidences on record show that all the activities relating to construction of R & D Building were in the knowledge of the department. • The R & D activities undertaken are interconnected with manufacturing activities undertaken, and would be integral part of the factory as per Section 2(e) of the Central excise A....
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....sibility of CENVAT credit on the capital goods used for research and testing purpose is not disputed. The same is allowed provided it is used in the factory that is registered." It is settled principle that the findings which have been recorded earlier and if not challenged by way of the appeal to the appropriate forum, become final and binding on both the parties. Hence the issue of eligibility of the CENVAT Credit in respect of the Capital Goods, installed in the R & D building cannot be raised once again in the remand proceedings. The only issue that was to be addressed by the Commissioner in these proceedings was limited to the use of the Capital Goods and Input Service in the factory of the manufacturer. 4.3 Commissioner has in para 20.2 and 20.3 of his order quoted the definition of Capital Goods and Input Services as per the CENVAT Credit Rules, 2004 and thereafter proceeded to decide on the admissibility of CENVAT credit stating as follows: "21. lt is apparent that for a manufacturer to avail Cenvat Credit on Capital goods and Input Services, the same have to be invariably used by the manufacturer In his "factory" whether directly or indirectly, in or in rela....
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....e in the manufacturing process and without its use it is impossible to manufacture the final product. Therefore, none of the categories in the inclusive part of the definition would constitute relevant consideration per se. They become relevant only when the above crucial requirement of being "used in or in relation to the manufacture" stands complied with. In our view, one has to therefore read the definition in its entirety. 17. As stated, the definition is in three parts, namely, specific part, inclusive part and place of use. All the three parts are required to be satisfied before an input becomes an eligible input. 18. It may be noted from the CENVAT Credit Rules of 2004 visa- vis CENVAT Credit Rules of 2002 that the word "for" in the inclusive part after the words "steam used" is substituted by the words "used in or in relation to the manufacture of final products". In other words, the crucial requirement of the definition clause is restated by the Legislature. We may note that the CENVAT Credit Rules of 2004 came in force in September, 2004. In some of the cases in batch before us the show cause notice goes right up to January 2005, hence, CENVAT Credit Rul....
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....the assessee's letter dated 10th May, 2007 and which have not been disowned by the assessee that "the work of Research and Development is basically to conduct study, research and development of organic chemicals, bulk drugs or active pharmaceutical ingredients and development of formulations manufactured from bulk drugs, that the research work done is not pertaining to or related to the products manufactured by the assessee at Vikhroli unit, that the work in the R & D is an independent work not related to the manufacturing activity of the assessee's Vikhroli factory; there is no manufacture of any final product in the newly constructed Research and Development building as all the input/ raw materials used for research are wholly consumed and no final marketable product emerges". Since the assessee has not denied the facts leveled in the demand notice, it is apparent that the same stand true. 22.1 To substantiate further, I quote the letter dated May 10, 2007 of the assessee where they have submitted that they are NOT taking any input credit for use in R & D activities. Thus it makes further clear that activities of R & D building are not amounting to manufacture in terms o....
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....(3) The registration under sub-rule (1) shall be subject to such conditions and safeguards and procedure as may be specified by notification by the Board. 26. It is amply clear that assessee ought to have incorporated within the existing certificate the new R&D building so as to notify to the department that the same is also connected with the manufacturing activity. This further establishes that no activities relating to manufacturing process in terms or section 2(f) of the CEA, 1944 was carried in the said R&D building. In their written submission dated 14.12.2011 the assessee has mentioned that the newly constructed R&D building was not included in the registration certificate due to lack of provision in the law. I am surprised at such a submission made by an assessee M/s Cipla Ltd. who are in the business of manufacturing since decades; they are not a small industrial unit so as to claim ignorance of the niceties of the Central Excise law. As is said, Ignorance or law is no excuse. The provisions of law as reproduced above are clear and it does not require rocket science to understand that the construction and existence of the R&D building ought to have been declared t....
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....uilding other than the 'manufacturing premises' and not incorporated in the registration certificate, these decisions cannot come to the rescue of the assessee. 31. lt is, therefore, clear that the Cenvat Credit on the capital goods/equipments installed in the R&D building and the services received in the R&D building is not available to the assessee and the same has been rightly demanded in the show-cause notices as having been wrongly availed in contravention of the provisions of rule 2(a), rule 2(1) and rule 3 of the Cenvat Credit Rules, 2004. In such an eventuality, there could not have been any possibility of utilization of the same for clearance of finished products manufactured in the factory. Similarly, the capital goods removed from the factory premises after its 'demolition to the Research and Development Building without reversing any Cenvat Credit is improper and in contravention of the provisions of rule 3(5) of the CCR, 2004. 32. I may also mention that it is not the case that after the demolition of the manufacturing premises the assessee has surrendered their registration certificate. They have in none of their written or oral submissions informed ....
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....trary the tribunal has taken note of various documents while remanding and stated "One of these documents is an application dated 25.4.2006 submitted by the appellant to the Assistant Commissioner for issuance of installation certificate in respect of certain capital goods with accessories, which were imported and installed in the R&D wing. Another document is a certificate of installation dated 5.5.2006 issued by the factory manager in respect of the said capital goods with accessories. Yet another document is an installation report dated 23.3.2006 of M/s. Inkarp Instruments Pvt. Ltd. A letter dated 8.5.2006 of the Range Superintendent, addressed to the Assistant Commissioner, recommending issuance of installation certificate to the appellant, is also seen on record." If the Superintendent has himself recommended for issuance of installation certificate for these capital goods in Research and Development Building then how come Assistant Commissioner has made the observations as reproduced above in the verification report dated 14.01.2009. Admittedly the Appellant were registered for undertaking the manufacturing activities in the premises as per the approved ground plan of the pre....
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....ollection of any excise duty cannot arise unless and until the goods are removed from the factory." 4.8 The phrase, "means any premises, including the precincts thereof", used in Section 2 (e), ibid, is pari materia to the phrase used in the Section 2 (m) of the Factories Act,. Hon'ble Supreme Court while interpreting the Section 2(m) of Factories Act, in case of Grauer & Weil (India) Ltd 1994 (74) ELT 481 (SC)] held as follows: "11. From a bare perusal of the definition of factory under Section 2(m) of the Factories Act, it is patent that if on any premises including the precincts thereof ten or more workers are working or were working on any day of the preceding twelve months, and in any part thereof a manufacturing process is being carried on with the aid of power it would be a factory. Ordinary, meaning of the word `premises' is a piece of land including its buildings or a building together with its grounds or appurtenances and precincts mean the areas surrounding a place. The words "any premises including the precincts thereof" under Section 2(m) are therefore wide enough to include all buildings with its surroundings which form part of one unit. If therefore in su....
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....uilding is not the office of the appellant factory. The only question which needs to be examined whether these Capital Goods are used in the factory of manufacturer. The phrase used in the definition of Capital Goods, is not the same as that in the definition of "inputs" where it is stated that to qualify as inputs the goods should have been used in or in relation to the manufacture of finished goods. In case of the Capital Goods, the use of Capital Good within the factory of manufacturer whether in or in relation to manufacture of the finished products or otherwise shall make them eligible as Capital Goods in terms of the definition. The observations made by the Commissioner that these capital goods should have been used by the manufacturer in his "factory" whether directly or indirectly, in or in relation to the manufacture of final products do not find support from the definition of Capital Goods. 4.11 Tribunal has in the case of Mother Dairy [2005 (183) ELT 303 (T-Mum)] after considering the definition of factory under section 2(e) of the Central Excise Act, 1944 held as follows: "5. After hearing both sides, perusal of the records and case laws, we are of the opini....
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....on of capital goods under the erstwhile Rule 57Q of the Modvat Rules in the case of USV Limited (supra), wherein it was held that the capital goods installed in research laboratory situated in the appellant's factory premises are eligible for benefit of Modvat credit even if not used in the factory of manufacture of finished goods. The Hon'ble Supreme Court has taken a similar view in the case of CCE, Coimbatore v. Jawahar Mills Limited - 2001 (132) E.L.T. 3 (S.C.). This decision was also delivered in the context of erstwhile Rule 57Q. Similar views were also been taken in the cases of CCE, Meerut-II v. India Glycols Limited - 2006 (196) E.L.T. 221 (Tri.) and CCE, Meerut-II v. India Glycols Limited - 2008 (230) E.L.T. 39 (Uttarakhand). In the light of the above decisions we find that the issue is settled in favour of the appellant. 10. In line with the above discussions, we find that the demand for reversal of Cenvat credit is not sustainable inasmuch as it is allowable under the definition of capital goods under the Cenvat Credit Rules. Accordingly, we set aside the impugned orders and allow the appeals." 4.13 This decision in the case of Maruti Suzuki was followed by ....