TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 410
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....ated 31.01.2022 are as follows: Appeal Nos. Date of Show Cause Notice Period Cenvat Credit disallowed in Rs. Penalties imposed in Rs. E/51490/2022 18.05.2007 01.05.2006 - 31.01.2007 4,74,10,186 47,41,019 E/51491/2022 04.01.2006 01.02.2004 - 30.11.2004 7,10,21,959 71,02,196 E/51494/2022 23.07.2004 16.07.2003 - 31.01.2004 4,33,49,691 43,34,969 E/51495/2022 14.09.2011 01.12.2010 - 30.06.2011 2,68,532 26,853 E/51497/2022 05.06.2012 01.07.2011 - 31.03.2012 3,576 358 E/51501/2022 21.09.2006 01.09.2005 - 30.04.2006 3,15,65,215 31,56,521 E/51502/2022 21.01.2009 01.12.2007 - 30.09.2008 3,78,48,616 37,84,862 E/51503/2022 05.12.2003 01.11.2002 - 15.07.2003 4,23,00,687 4,23,00,687 E/51504/2022 20.02.2008 01.02.2007 - 30.11.2007 7,55,07,425 75,50,743 E/51505/2022 18.01.2011 01.01.2010 - 31.11.2010 3,61,730 36,173 E/51506/2022 23.09.2009 01.10.2008 - 30.06.2009 5,09,14,680 50,91,468 E/51507/2022 05.04.2010 01.07.2009 - 31.12.2009 1,21,15,099 12,11,510 E/51554/2022 04.10.2006 01.12.2004 - 31.08.2005 6,63,94,181 66,39,418 41,10,94,874 ....
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....ing, manufacturing, and regular operation/maintenance of the said plant. According to the appellant, the complete functional Captive Power Plant was handed over to the appellant on 25.3.2003. However, the appellant availed CENVAT credit of duties paid on the components/equipments used in the manufacture of the power plant as and when they arrived in the factory from November 2002 onwards. 7. During the scrutiny of records, it was observed by the department that the appellant had incorrectly availed CENVAT credit of duties paid on parts/components of the Captive Power Plant used by the Contractor for installation and commissioning of the said Captive Power Plant. It was believed that it was the Contractor who would be eligible to take credit as the real manufacturer and not the appellant in terms of rule 3 (1) of the Credit Rules. It was also believed that appellant had availed CENVAT credit of duties paid on steel items namely, angles, frames, floor plate and hardware falling under Chapter 73 of the Tariff Act, which items were used as supporting structure of Chimney and would not fall in the specified category of capital goods under rule 2(a)(A) of the Credit Rules. It was also b....
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....lant to the assessee on 25.03.2003. The documents in respect of components supplied by the supplier were so prepared so as to enable the assessee to avail Cenvat credit on the same i.e. M/s. Wartsila were shown as 'buyers' and the assessee as 'consignee' as required under Cenvat Credit Rules. But it is on record that, the components in question were purchased by the supplier and used by the supplier for manufacturing of complete power plant. 34.3 Further it is also on record and not denied by the assessee, that the assessee had availed Cenvat credit on some "Structural items of Iron and Steel" namely columns, platforms, hardware, angles, frames, beam etc. by treating them as Capital Goods while these goods were classifiable under Chapter Heading Nos. 7308.90 and 7326.90 of the Central Excise Tariff Act, 1985 and had, been used for construction of building and civil structure for supporting the 'Chimney'. However credit taken on these items has been included in the amount of credit taken on the components as detailed above. 34.4 It is further observed that, they have created the Power Plant as a separate "business entity" in the name of "Hindustan Zinc Lt....
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....f plant and equipment" dated 14.08.2002, the supplier had to design, engineer, manufacture and supply the DG sets. As per "Agreement for sale of indigenous plant and equipment" dated 14.08.2002, the supplier had to design, engineer, manufacture, supply, inspect, test and transport to the site in their factory, the accessories and auxiliaries of the DG Sets. As per Agreement the supplier was also responsible for "erection and commissioning of power plant. He further stated that M/s. Wartsila have supplied the imported components, indigenous components of the Power Plant, transported the same to their site and have manufactured and supplied the Power Plant on 25.03.2003. 36.2 From the above facts, it is clear that the supplier was the actual manufacturer of the power plant, who purchases the components etc., brought them to the site, and manufactured the power plant and then hand over to the assessee on 25.03.2003. As such the assessee was not the manufacturer of the power plant in the case. xxxxxxxxxxxxx 36.3 The agreements were entered between the assessee and the supplier was for the supply of complete and operational Power Plant and not parts / components thereof. As per re....
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.... same is found not eligible as discussed above. xxxxxxxx. 36.5 As such I find that, the demand was rightly issued for recovery of credit of Rs. 82,20,337/- (in/r/o SCN dated 05.12.2003) taken on the parts/components of power plant as capital goods, since the aforesaid parts/components were not received by the assessee for further use in assembly/erection of final product by them and they were not found to be the manufacturer of power plant. Further, as no duty was paid on power plant by the supplier, no credit was available to the assessee. Therefore, the assessee appeared to have wrongly availed credit directly on parts/ Components of power plant for which they were not entitled at all. The said components were also particular and specified components of power plant supplied by M/s. Wartsila and not purchased by the assessee from the market on their own choice." (emphasis supplied) 11. The operative part of the said order dated 31.01.2022 adjudicating the show cause notice dated 05.12.2003 and the remaining twelve show cause notices is as follows: "(a) In respect of show cause notice dated 05.12.2003 mentioned at Sr. No. 1 of the table given in Para 1 above: (i) I disallo....
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....ly holds: A. Period involved from 01.11.2002 to 15.07.2003 (i) The appellant is not the 'manufacturer of final goods' under rule 3(1) of the Credit Rules. It is the manufacturer who alone is entitled to take credit of specified duties of excise paid on any inputs or capital goods in terms of rule 2(g) and 2(b) of the Credit Rules. Thus, the Contractor, as the real manufacturer of the Captive Power Plant, was entitled to take credit. (ii) The appellant is not entitled to take credit on steels items, namely columns, platforms, hardware, angles and floor plate used as supporting structures of 'Chimney' as they do not fall within the specified category of capital goods under rule 2(a)(A) of the Credit Rules. B. Common allegation for the relevant period i.e., from 01.11.2002 to 31.3.2012 (i) The appellant is liable to reverse CENVAT credit of duties paid on capital goods and inputs transferred to the Captive Power Plant created as a separate Unit as separate Books of Account have been maintained vis-a-vis profits earned on account of generation of electricity in statutory compliance to section 80IA of Income Tax Act. Such transfer of inputs/capital goods would amount to remova....
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.... factory premises of the appellant is for statutory compliance of the provisions of section 80IA of the Income Tax Act for claiming exemption/deduction in respect of profits from generation of electricity. It cannot be treated as two different business entities/units. Both the appellant and the Captive Power Plant together constitute as one factory, in view of exclusive use of electricity by the appellant. Hence, the appellant is entitled to avail credit on capital goods as well as inputs used in the Captive Power Plant generation of electricity, which is ultimately used by the appellant in production of excisable final goods. In support of this contention learned counsel placed reliance upon the following decisions: (a) Dhampur Sugar Mills Ltd. vs. Commissioner of C. Ex., Meerut -2001 (129) E.L.T. 73 (Tri.- Del.); (b) Century Denim vs. Commissioner of Central Excise, Indore-2014 (301) E.L.T. 358 (Tri.- Del.); (c) Reliance Industries Ltd. vs. Commissioner of C. Ex., Raigad-2007 (215) E.L.T. 413 (Tri.- Mumbai); (d) Sangam Spinners vs. Commissioner of C. Ex., Jaipur-2007 (208) E.L.T. 386 (Tri.- Del.) (v) Order-in-Original No. 08-09/2023-CGST-B(Dem.-CE) passed by the Commiss....
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....edit cannot be allowed even if parts and components are considered as capital goods; and (viii) The contractor was under an obligation to supply/hand over the complete power plant. After taking over the power plant, risk of loss or damage to the Unit has passed on to the assessee and the assessee has taken over the care, custody and control of the power plant form the contractor. As such the contractor was a separate entity, it cannot be considered as working on behalf of the assessee. 15. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered. 16. The issue as to whether the appellant could avail credit of duties paid on parts, components used in the Captive Power Plant has been settled in the own case of the appellant in Hindustan Zinc in the decision rendered on 08.02.2024 in Excise Appeal No. 51598 of 2022. The relevant portion of the order of the Division Bench is reproduced below: "11. We have heard the Authorised Representative and the learned Counsel for the appellant. At the outset we note that identical issue of the appellant has been decided by the Principal Bench....
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....ise and Customs'. The DG sets in question are power plants. WDIL was engaged for initial setting up of this captive power plant in the factory of GACL. Parts, components and accessories of DG sets are capital goods in terms of the definition given in Rule 57-Q (covered by Sl. No. 5 of the Table to the Rule). Even if the DG sets which have been manufactured out of these parts and components and accessories, have not discharged duty liability, there is no bar to availment of Modvat credit duty paid on such parts, components, accessories. A comparison of the provisions of Rules 57-D(2) and 57-R(2) will clarify the above position. Rule 57-D(2) states that credit of specified duty shall be denied in case inputs are used in the manufacture of capital goods which are not chargeable to excise duty; however, there is no such stipulation in Rule 57-R(2). There was also no need for such stipulation since Sl. No. 5 of the Table appended to Rule 57-Q(1) covers components, parts and accessories themselves as capital goods. The Commissioner's finding in para 23 of the impugned order that it is only complete DG sets which are capital goods within the meaning of Rule 57-T(7) is not correct since cr....
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....efore Rule 57Q is applicable. Rule 57Q enables a party to claim credit of duty paid on capital goods by the manufacturer of specified goods. Under Sr. No. 5 to the table of the said Rule, a manufacture is entitled to claim Modvat Credit on account of the excise paid on the components, spares and accessories of the goods exempt. A DGPP is a capital good. If duty is paid on the components used in its manufacture, we see no reason why the manufacturer cannot claim Modvat credit for such duty. 6. It would also be pertinent to mention that on the basis of the order passed by the CEGAT in the present case, manufacturers in other parts of the Country claim Modvat credit of the excise paid on the components of the DGPP. These matters were decided by different Bench of the CEGAT in favour of the manufacturers following the decision rendered by the CEGAT in the present case. The Revenue filed a reference petition against one such order in the High Court of Rajasthan in Jodhpur being other Tax Reference Civil Appeal No. 18 of 2003 (Union of India v. Aditya Cement and another) which reference was rejected by a Division Bench of said High Court on 27-3-2008. Another case was decided by anothe....
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....ollowed by the Tribunal in NRC Ltd. and Century Rayon - 2001 (46) E.L.T. 609. The learned SUR has not been able to cite any contrary judgment of the Tribunal, or of any other High Court. 6. Therefore, keeping in view the ratio of law, laid down in the above referred cases, the impugned order of the Commissioner denying the modvat credit is the appellants cannot be sustained and is set aside. The appeal of the appellant accordingly stands allowed with consequential relief, if any, permissible under the law." (emphasis supplied) 22. The Rajasthan High Court, in the appeal filed by the department to assail the decision of the Tribunal in Aditya Cement, observed as follows: "The Revenue submits the question of law being, as to whether Tribunal is correct in allowing modvat credit on parts/components of D.G. Set to assessee, who is not a manufacturer of the D.G. Set as it was commissioned/ erected by another person, who in fact received and used the parts/components of D.G. Set. The other question being, whether the assessee are entitled for credit on parts/components of D.G. Set when they have received a complete D.G. Set from supplier on which on excise duty was discharged by t....
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....re the Supreme Court to assail the decision of the High Court was withdrawn by the department because of monetary limits and would, therefore, have no precedent value. The said portion of the order of the Commissioner is reproduced below: "37.1 Further the assessee has relied the decision of Hon'ble CESTAT in the case of M/s. Aditya Cement Ltd. Appeal filed against the same was rejected by the Hon'ble High Court of Rajasthan and further department preferred appeal against the same before the Hon'ble Supreme Court. But later on in compliance to department's litigation policy, the same was withdrawn due to low monetary value. As such it does not have any precedence value. As per Instruction F. No. 390/Misc./163/2010-JC, dated 12-12-2013 issued by CBEC (now (CBIC), Ministry of Finance, GOI it has been clarified that: "Sub-Section (3) of Section 35R and Section 131BA provides that if an 2. appeal has not been filed by the Department following Instructions issued for not filing appeal below the monetary limit, no person, being a party in appeal, shall contend that the Department has acquiesced in the decision on the disputed issue by not filing appeal. In effect, the....
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....ontractor who is the real manufacturer of the said plant and would eligible to take credit and not the appellant is, therefore, not correct. 29. The next issue that requires determination is whether iron and steel used in fabrication/structural support for installation and operation of chimney would fall within the ambit 'capital goods' and, therefore, be eligible for credit. During the period from April 2002-April 2003, the appellant had availed CENVAT credit amounting to Rs. 11,26,005/- on duties paid on iron and steel items as capital goods for use as parts/components/accessories of Chimney, specified capital goods falling under Chapters 82, 84 and 85 of First Schedule to Tariff Act, inasmuch as without the fabrication or providing the requisite supporting structure, operation of the Chimney of the Captive Power Plant would not be possible. According to the appellant these technological structures qualify to be considered as parts/components/accessories of capital goods under rule 2(a)(A) of Credit Rules. 30. The said technological structures of iron and steel such as columns, plates, platforms and angles, provide necessary support to the chimney for its proper and smooth....
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....ement, enhanced the capacity of power generation by installing a power plant within the factory premises for captive and exclusive use in the manufacture of its finished goods. 34. The Commissioner has denied credit on inputs/fuels and capital goods on the ground that the appellant had claimed the benefit of section 80IA of the Income Tax Act, by treating the captive power plant as a new industrial undertaking and, therefore, the same cannot be held to be a part of the factory of the appellant for the purpose of excise duty and CENVAT credit availed on inputs/capital goods which were transferred to Captive Power Plant would, therefore, have to be reversed in terms of rule 3(4) rule 3(5) of the Credit Rules. 35. The appellant had created a separate unit namely, Captive Power Plant in the books of accounts as per the requirement of section 80IA of the Income Tax Act wherein entries were made for purchase and receipt of inputs as well as capital goods and power was debited to Capital Power Plant Debari at normal electricity rate and accordingly, profit was calculated separately for this Captive Power Plant unit in statutory compliance of Income Tax Act. The undisputed fact is that t....