TaxTMI 
TaxTMI 
2025 (7) TMI 410
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....ed, and the penalties imposed by the order dated 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/5155....
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....entered into four separate agreements, all dated 14.8.2002, with the Contractor for procurement of imported/indigenous components, erection, commissioning, 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 us....
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.... these components, have manufactured the complete Power Plant (including manufacturing, erection, commissioning and installation etc.) and sold this completed Power Plant 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....
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....that they have purchased the said Power Plant from M/s. Wartsila who have manufactured the complete Power Plant at the site in their factory. He also stated that as per clause 1.5 of the "Agreement for sale of 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 pow....
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....considered as eligible capital goods for availing Cenvat credit. xxxxxxxxx As such the credit in respect of structural steel items used in manufacturing of building and support structure are not available to them. Otherwise also the 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 sai....
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....ose a penalty equal to 10% of the credit held disallowed as above in each case, under Rule 25 of the Central Excise Rules, 2002. (iv) The above order is passed in terms of provisions of Section 174 read with Section 142(8)(a) of the Central Service and Goods Act, 2017." (emphasis supplied) 12. The impugned order mainly 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 ....
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....New Delhi; (c) M/s. Vikram Pvt. Ltd. vs. C.C.E. & ST-BBSR-ll (Vice-Versa)- 2018 (11) TMI 727 - CESTAT Kolkata; (d) Singhal Enterprises Pvt. Ltd. vs. Commr. of Cus. & C. Ex., Raipur-2016 (341) E.L.T. 372 (Tri.- Del.); (e) M/s. India Cements Ltd. vs. The Custom, Excise and Service Tax & The Commissioner of Central Excise-2015 (321) E.L.T. 209 (Mad.); (iv) Maintenance of separate Books of Account for Captive Power Plant though located within the 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 de....
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....s. If goods are used in the process of manufacture, it will be capital goods. The parts/components were not part/component for the manufacture of Captive Power Plants, which is not the final product of the appellant; (vi) Having known that credit on inputs or input services, used in manufacture of immovable goods will not be available, the appellant has drawn a process in such way that they could avail CENVAT credit in the guise of capital goods, which were actually inputs; (vii) Since the parts and components were used in the manufacture of Captive Power Plant, credit 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 representat....
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....follows: "7. We have carefully considered the rival submissions. We see force in the plea regarding applicability of Rule 57-T (7) to the present case. This Rule states that 'the Assistant Commissioner may, on sufficient cause being shown to him, allow the manufacturer to take credit of the specified duties on capital goods paid by a contractor or job-worker who undertakes the job of initial setting up, renovation, modernisation or expansion of the plant on behalf of the manufacturer of final products, subject to such procedure and conditions as may be specified by the Commissioner or the Central Board of Excise 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....
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....e the main ground taken is that since the DGPP is not exigible to excise the question of giving Modvat credit for the same does not arise. It has also been urged that the DGPP is not used for the manufacture of the final product. 5. Both the arguments raised are without any merit. There can be no dispute that excise has been paid on some of the components of the DGPP. Since the DGPP is exempt from payment of excise no Modvat credit can be claimed by the manufacture of the DGPP, in the present case WDIL. However, there is no dispute that this DGPP is part and parcel of the factory of the respondent. It is definitely a capital good and therefore 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 ....
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....e as to whether they could claim modvat credit in respect of those components already stands covered in their facour by the decision of the Tribunal in the case of Gujarat Ambuja Cement vs. CCE reported in 2009(93) ECR-226. The facts of that case were identical to the present case. In that case also, purchase order for the D.G. Sets were placed by Gujarat Ambuja Cement company on M/s. Wartsil Diesel India Ltd. and the components were received by them through the invoices issued in their manes and they paid duty. The Tribunal in that case observed that M/s. Gujarat Ambuja Cement were entitled to claim the modvat credit of the duty paid on the components. That judgment was again followed 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 t....
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....either. In our view, when the learned Tribunal has followed the consistent practice, as laid down in the various judgments, and there is no contrary judgment, shown, it cannot be said that any substantial questions of law arise, as claimed." (emphasis supplied) 23. It was also contented by the appellant before the Commissioner in the present matter that the decision of the Tribunal in Aditya Cement should be followed since the appeal filed by the department before Rajasthan High Court to assail the decision of the Tribunal in Aditya Cement had been dismissed, but what prevailed upon the Commissioner not to follow the decision of the High Court or the Tribunal is the fact that the appeal filed by the department before 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 furth....
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....earing for the department that the aforesaid decisions of the Tribunal in Hindustan Zinc and Aditya Cement would not be applicable in the present case is not correct. It would also, therefore, not be possible to accept the contentions advanced by learned authorized representative appearing for the department on merits on this issue. 27. It, therefore, follows that the appellant was justified in availing credit of duties paid on parts, components used in the Captive Power Plant installed by the Contractor. 28. The ownership of goods is not relevant for deciding admissibility of CENVAT credit. The finding recorded by the Commissioner that at the time of receipt of 'capital goods' in the factory for use in installation of the Captive Power Plant, it is the Contractor 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, t....
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....ive Power Plant for generation of electricity which is ultimately used by the appellant in the production of excisable final goods. 33. It is not in dispute that the Captive Power Plant unit was installed in the factory premises of the appellant and all such inputs and capital goods were received within the premises registered in the name of appellant under duty paid excise invoices. Such goods were admittedly used in the fabrication of Power Plant for generation of electricity and its captive/exclusive use in the factory of appellant for manufacturing finished goods cleared on payment of excise duty. The inputs like Furnace Oil/LSHS and capital goods were not removed outside the factory premises of appellant. The appellant in order to meet its increased manufacturing requirement, 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 underta....