2023 (9) TMI 179

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....phtha as such or after partial processing (internally known as "CLS") to the power plant for conversion into steam and electricity which were returned to the Appellant. A small quantity of such electricity was used by the power plant for its administrative operations as also for its production operations. Prior to becoming owner of the power plant with effect from April 1, 2008, the Appellant paid a conversion charge to HPLCL for such job work. 3. The Appellant took credit of the duty paid on naphtha which was sent to the power plant for production of electricity and steam. The Appellant reversed proportionate credit in respect of naphtha to the extent - (i) electricity was used in the power plant for its administrative operations, (ii) electricity was supplied to a company called Praxair India Ltd. which used it to manufacture and supply liquid nitrogen to the appellant, and (iii) Electricity was sent to the housing colony of its employees owned by a 100% subsidiary named Haldia Riverside Estates Ltd. 4. The Appellant used to submit details and working in respect of such reversal regularly to their jurisdictional authorities. The details and workin....

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....rmediate goods which may be not excisable or otherwise exempt. Cenvat credit was available even if the identity of the input was lost when the job worker returned the goods after further processing. (iv) Credit was admissible whether inputs were physically present in the finished excisable goods or not so long such inputs were used in or in relation to the manufacture of finished excisable goods. 7. The Tribunal, thus held that the Appellant was entitled to take cenvat credit of the duty paid on naphtha sent as such or after being partially processed to the power plant for generation of steam or electricity which was sent to the petrochemical complex of the Appellant for use in or in relation to the manufacture of final products under rule 57AC and rule 4(5)(a). It was also held that no facts were suppressed and the extended period of limitation cannot be invoked. It was further held that since the demand for duty was unsustainable, no penalty can be imposed and that even otherwise, the case involved a question of interpretation of law. 7. The dispute involved herein for the period April 2006 to January 2011 is as regards the Appellant's eligibility to proportionate ....

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....f the Cenvat Credit Rules, 2004 ("the 2004 Rules") were in force. "Input" was defined in rule 2(k) of the 2004 Rules as follows:- '(k) "input" means- (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 electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production; (ii) all goods, except light diesel oil, high speed diesel oil, motor spirit, commonly known as petrol and motor vehicles, used for providing any output service. Explanation 1.-The light diesel oil, high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2.-Input include goods used in the manufacture of capital goods which ....

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.... and the use test" fails. In such a case, the nexus between the process and the use gets disconnected. In such a case, it cannot be said that electricity generated is "used in or in relation to the manufacture of final product, within the factory". Therefore, to the extent of the clearance of excess 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. This view is also expressed in para 9 of the judgment of this Court in the case of Collector of Central Excise v. Solaris Chemtech Limited - 2007 (214) E.L.T. 481 (S.C.). Further, our view is supported by the observations of this Court in the case of Vikram Cement v. Commnr. of Central Excise, Indore - 2006 (194) E.L.T. 3 (S.C.) which is quoted below :- "It appears to us on a plain reading of the clause that the phrase "within the factory of production" means only such generation of electricity or steam which is used within the factory would qualify as an immediate product. The utilization of inputs in the generation ....

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....on of the Larger Bench in Ballarpur Industries Ltd. v Collector, 2000 (116) ELT 312 (Tribunal). The said Larger Bench decision was upheld by the Hon'ble Supreme Court in Collector v. Solaris Chemtech Limited, 2007 (214) ELT 481 (SC). (b) Hindustan Petroleum Corporation Ltd. v Commissioner, 2000 (124) ELT 323 (Tribunal). In the said case, the Tribunal held that naphtha used for the production of electricity and steam which were used for refining of petroleum crude was used in the manufacture of the final products. 15. In view of the above discussion and the decisions of the Hon'ble Supreme Court and the decision in Appellant's own case for the past period, they contended that the electricity used to run the power plant itself was an 'input' and the findings of the Commissioner in the impugned order is not sustainable. Accordingly, they prayed for setting aside the impugned order. 16. The Ld. A.R. reiterated the findings in the impugned order. 17. Heard both sides and perused the Appeal records. 18. We observe that there are two periods involved in the present appeal. we will discuss the issue for each of the period separately. PERIOD ....

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....ove provision permitted inputs to be sent to the job worker as such or after being partially processed, for further processing or for the manufacture of intermediate goods necessary for the manufacture of the final products or any other purpose. We observe that the reported decision in the Appellant's case was rendered with respect to the provisions of Rule 4(5)(a) of the Cenvat Credit Rules, 2002. The Tribunal in the Appellant's own case has held that it was permissible to send naphtha to HPLCL for manufacture of intermediate products, namely, electricity and steam which were used by the Appellant for the manufacture of their final products. The reported decision in the Appellant's case was rendered on January 28, 2005. The provisions of Rule 4(5)(a) of the Cenvat Credit Rules, 2004 were amended by Notification No. 27/2005-CE (NT) dated May 16, 2005 to specifically cover the sending of inputs to a job worker for the manufacture of intermediate goods necessary for the manufacture of final products. 22. In view of the above cited decisions, we observe that the legal position of the issue is very clear . However, the impugned order has held that Cenvat credit was not admissible in....