TaxTMI 
TaxTMI 
2022 (6) TMI 3
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....for which they had erected and installed a captive power plant. They claimed the CENVAT credit of the Capital Goods, used for setting up the Captive Power Plant. 2.2 Revenue disputed the admissibility of the credit in respect of the capital goods used for setting up, erection and commissioning of the said power plant and show cause notice was issued to the respondents, alleging that: "10. From the discussions made herein above, it appears that an exempted / non excisable product i.e. electricity is generated in the CPP by using the Capital goods on which CENVAT Credit was availed and the same has been entirely sold to MSEDCL for financial consideration. They have not utilized a single unit of electricity so generated in the manufacture of their final product during the period December 2009 till 2.5.2011. This act of the assessee has led to exclusive utilization of capital goods in the manufacture of exempted / non-excisable goods i.e. "Electricity". Thus, they did not use the electricity so generated, for captive consumption, instead sold it totally to outside agency for monetary consideration. In view of these facts, it appears that the CENVAT credit availed on the cap....
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....erection of the CPP under the provisions of rule 3 of CENVAT Credit rules and they were also aware of the provisions of rule 6(4) of the said rules, which disallows such СENVAT Credit, if exclusively used in the manufacture of exempted goods. The product "Electricity" is exempted from Central Excise Duty and the same was sold to M/S MSEDCL for cash consideration, without being utilized in the manufacture of dutiable final product i.e. PVC resin/pipes and pipe fittings Thus the fact of availing of CENVAT Credit immediately on receipt of capital goods in the premises of the assessee since 2006-07 under the provisions of rule 3 of the CENVAT Rules shows the knowledge and awareness of the assessee about the provisions of the law in the matter. At the same time, non reporting of the fact to the department, of commissioning of the CPP in December 2009 and sale of total generated electricity for monetary consideration to M/s MSEDCL via M/s MSETCL, without utilizing a single unit of such captive generation, in the manufacture of their dutiable final product, also by not providing any electrical connection of whatsoever nature between the CPP and their final product plant of ....
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....ule 14 of CENVAT Credit Rules 2004 read with provisions of proviso to Section 11A (1) of the Central Excise Act. 1944 and provisions of Section 11AB of Central Excise Act, 1944. The Assessee, by their acts of omission and commission, narrated above have also rendered themselves liable for penalty under Rule 15 (2) of CENVAT Credit Rules 2004. Since, the assessee have knowingly availed inadmissible Cenvat credit on capital goods in contravention of Cenvat Credit Rules, 2004 in order to avail undue benefits, it appears that the said Capital goods are liable for confiscation under Rule 15 (1) of Cenvat Credit Rules, 2004." 2.3 On the basis of above respondents were called upon to show cause as to why : a. Capital Goods CENVAT Credit of Rs. 17,06,34,666/- (Rs. Seventeen Crore Six Lakh Thirty four thousand Six hundred sixty six only.) lying in balance as on December 2009 and subsequent credit wrongly availed till availed by them till December 2010 on capital goods for the CPP, which was exclusively utilized for manufacture of exempted/non excisable goods, should not be disallowed and recovered under the provisions of Rule 14 of CENVAT Credit Rules, 2004 read with proviso (1)....
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....xcess electricity outside the factory to the joint ventures, vendors, grid etc. would not be admissible for CENVAT credit as such wheeled out electricity, cleared for a price, would not fall within the definition of "input" in Rule 2(g) of the CENVAT Credit Rules, 2002" inter alia. • in the case of Ellora Times Ltd. [2009 (235) E.L.T. 661 (Tri.Ahmd.)] examining the issue of Maintenance and Repair Services received in Wind energy plant situated 200 KMs from factory and Wind energy plant uploading the power to the grid it was held that transaction of delivery of power to electricity board and sale of power by electricity board are two independent transactions. There is no direct nexus between service received in power plant and items manufactured in factory and hence the power plant cannot be treated as captive power plant. The ratio of the judgment is applicable in the instant case also. • The respondent uploaded electricity in the grid of MSETCL and subsequently obtained electricity separately for their consumption. As per the case of Ellora Tiles, it should be treated as two independent transactions. • Respondent had during the period Decembe....
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....ention to use the capital goods in manufacturing of dutiable product is based on 'subsequent development and is therefore against the decision of the Hon'ble Tribunal as cited above. • The judgments relied by the adjudicating authority are not applicable on facts in the instant case in as much as in the case of Arvind Mills Ltd. Vs. CCE, Ahmedabad - [2005 (182) ELT 362 (Tri. Mumbai)], the dispute pertained to old rules and not the present rules. Also the judgment on "relevant date" for availing credit of Capital Goods above are a later dated decision and concern the present Cenvat Credit Rules. Similarly in case of judgment of M/s Arisht Spinning Mills Vs. CCE - [2010 (261) E.L.T.417 (Tri. Delhi)), the relevant date for availing credit of capital goods was the issue, when the manufactured goods got exempted at a later date. In the circumstances above judgments were required to be distinguished by the adjudicating authority which has not been done. • Though not admitted, even if it is assumed that after the manufacturing process started the Capital Goods become eligible to credit, the noticee could not have taken/ availed the credit before the manuf....
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....Ltd. [2010 (261) ELT 807 (T)] • ST Cottex Exports (P) Ltd. [2018 (2) TMI 1313 (T)] As these decisions are in relation to textile industry where the capital goods have been used for manufacture of both dutiable and exempted goods whereas in the present cast, the goods have been used exclusively for manufacture of exempted electricity. • Their submission of suppression is misplaced as without proper investigation and enquiry, these facts could never have been brought forth to the knowledge of the department. • Their claim with regard to demand being time barred is not sustainable. 4.3 Arguing for the respondents, learned counsel submits that:- • Rule 6(4) is not applicable in their case as they have utilized the capital goods for production of dutiable goods in their factory. For this position, he would rely upon the following decisions:- • Arvind Mills [2005 (182) ELT 362 (T)] • Supreme Industries Ltd. [2002 (149) ELT 659 (T)] • S.T. Cottex Exports (P) Ltd. [2010 (261) ELT 807 (T)] • S.T. Cottex Exports Pvt. Ltd. [2018 (2) TMI 1313 (T)] • Lakshmi Balaji Bo....
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....l period of limitation. • Accordingly he submits that the appeals be dismissed. 5.1 We have considered the impugned orders along with the submissions made by both sides during the course of argument. 5.2 Undisputed facts are that the respondents have set up the captive power plant and on receipt of capital goods for captive power plant, they had availed the cenvat credit during the period 2006-07 to 2010-11 (upto December 2010). Electricity and exempted non-excisable goods were generated within the CPP and were sold during the period December 2009 to 02.05.2011 to MSEDCL on pure commercial considerations and not utilized the same in manufacture of dutiable finished products PVC resin as there was no electricity line connecting captive power plant to the PVC plant. 5.3 Revenue contended that the fact of commissioning of CPP and sale of total electricity generated in the CPP to MSEDCL started with effect from December 2009, was never brought to the notice of the department, suppressing the material fact of utilization of the said capital goods for manufacture of exempted electricity. Therefore the respondents have suppressed vital information and in respect of a....
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....een utilized in the manufacture of good at PVC plant. I am of the opinion that the electricity generated by utilizing the capital good in CPP plants is utilized for manufacture of dutiable excisable goods in PVC plant." 5.4 Even if there was no direct connection between the captive power plant and PVC plant, the Commissioner has concluded that it was through a banking arrangement that entire electricity uploaded from captive power plant was supplied to the PVC plant. 5.5 The Commissioner has not disputed that during the period December 2009 to February 2011 electricity was supplied to MSEDCL and was not utilized by the respondent in their PVC plant. After that, the Commissioner has recorded the reason for considering the credit admissible. In case of capital goods, it is now settled that capital goods should have been used for manufacture of the products cleared on payment of duty. The credit could not have been denied in respect of such capital goods which have been so used, even if for some time, the same were used otherwise. The intention of the respondents for setting up the captive power plant was to ensure uninterrupted power supply to their manufacturing unit. There ca....
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....tricity board or the joint ventures. Electricity being the excisable commodity subject to nil rate of duty, Supreme Court held that the credit on the inputs used in that part of the electricity that is wheeled out and not used captively credit will not be admissible. However Supreme Court has no occasion to consider the case of Capital Goods credit in this case. The ratio of the decision of the Hon'ble Apex Court is exactly what Rule 6 of CENVAT Credit Rules, 2004 provided for. Since Supreme Court has not even considered the case in respect of Capital Goods, for which no provision like Rule 6, ibid, is available, we do not find any applicability of the said decision in the present case. 5.7 The decision of the Ellora Tiles relied upon by the revenue has been overruled by the Hon'ble Madras High Court in the case of Ashok Leyland [2019 (369) E.L.T. 162 (Mad.)] stating as follows: "12. The argument of the Learned Counsel is that the windmill is situated far away from the manufacturing plant, there is no nexus and the type of transaction between the assessee and the TNEB is a barter system and it is, in effect, a sale of electricity at one point and purchase of....
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....at Barielly at the fruit juice Maaza plant and the Filler VP-L-PET is designed to handle carbonated/aerated soft drinks. This is achieved by software changes and minor adjustments. Krones has supplied several similar equipment and fillers which are operating at various sites across the world." The manufacture had certified that machine is designed to handle carbonated/aerated soft drinks by software changes and minor adjustments. The certificate never said that the object can be achieved only after modification. The certificate did not use the word 'modification' which has crept in the order of the Tribunal. More so, before us now the appellant has filed certificate dated 25-9-2009 which indicates that no modification in the machine can be done in India since it is manufactured at Germany and imported in India." 5.9 In the remand proceedings, tribunal have vide order reported at [2014 (310) ELT 398 (T)] decided the matter stating as follows: "6. The undisputed facts are that the capital goods, in question, had been received by the appellant in their Bareilly unit during September 2004 to August 2005 period. There is also no dispute about the fact that during th....
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....would be admissible when the capital goods are used either only for dutiable final product or for dutiable as well as exempted final product. The capital goods Cenvat credit is also admissible when a manufacturer is availing full duty exemption based on the value or quantity of the goods cleared in a financial year, in which case, while initially the manufacturer will be availing full duty exemption (for some months or for several financial years at a stretch) but subsequently at some point of time when he crosses the threshold limit for exemption, his final product becomes dutiable and in such a case, even during the period of full exemption, the manufacture can take capital goods Cenvat credit which he can utilize when this final product becomes dutiable. A question arises as to when capital goods are used for manufacture of dutiable as well as exempted final product, whether for availing capital goods credit, the dutiable as well as exempted final product have to be manufactured simultaneously. In our view this is not necessary, and Cenvat credit would be admissible even if the capital goods are used for manufacture of dutiable goods and exempted goods at different points of tim....
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....s reason only, they had availed capital goods Cenvat credit, while initially using the machinery only for manufacture for the exempted final product. This aspect has to be verified on the basis of records. If the appellant at the time of receipt of the capital goods during September 2004 to August 2005 period, had filed any declaration to the Department or had sent some letter to the Department intimating that they would be using this machinery for manufacture of dutiable final product (aerated waters) as well as exempted final product (the fruit pulp based soft drinks), or there is any other evidence indicating that at the time of receipt, the appellant had plans to use the machinery, in question, for manufacture of dutiable as well as exempted final products [like the machinery, without any modification, being capable of manufacture of both the dutiable final products (aerated/ carbonated waters) as well as exempted final products (MAAZ) along with declaration/intimation of dual use], they would be eligible for Cenvat credit. In this regard, as per the directions of Hon'ble Allahabad High Court in its order dated 24- 2-2014, the manufacturer's certificates certifying that the mac....