TaxTMI 
TaxTMI 
2025 (11) TMI 501
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....2015 - March 2016 2,87,72,086 Total 13,47,42,777 2.1 Respondents are engaged in the manufacture and sale of Aluminium and products thereof which are subject to excise duty. 2.2 The respondents have a power plant namely Renusagar Power Plant located at some distance (about 50 KMs.) from the main unit of the respondents and the entire power production from the said power plant is supplied to the respondent. 2.3 The respondents were taking cenvat credit of service tax on the premiums paid to insurance companies on various insurance policies such as, mega risk package policy and terrorism policy pertaining to the factory situated at Renukoot, Renusagar Power Plant and Mines, which were situated in different states and were providing Bauxite to the Respondent. The Respondent utilized the aforesaid credit for the payment of duty on clearance of final goods. 2.4 The said credit was not admissible to appellant for the reason that ⮚ Renusagar Power Plant as well as the Mines were located at different premises and are the independent entities and not captive plants or captive mines. ⮚ said plant and mines are involved in producti....
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....ty which in turn was used in the manufacture of final product in their factory at Renukoot and captive mines situated in the state of Jharkhand and Chattisgarh, 300 to 400 kms away from the factory situated at Remikoot. Further, as per allegation, Renusagar Power Plant is an independent and separate legal entity as any other unit of the company located throughout India and the party never intimated to the department that the Renusagar Power plant is an extension of their factory premises at Renukoot It has also been alleged in the show cause notice that Renusagar plant and captive mines are involved in the production of non excisable exempted product ie. electricity and bauxite, therefore no cenvat credit can be availed in terms of rule 6 of CCR.04. 6. On the other had the party contested the demand on the ground that the insurance services received in respect of Renusagar power plant wherein electricity is generated and in turn used in the manufacture of the final products, qualify as input service under the Cenvat Credit Rules, 2004. Further, the insurance service covering their mines and the Bauxite supplied by the mines and is also an eligible input since the Bauxite s....
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....he instant cases, I find that in all the show cause notices as mentioned in the column 2 and 3 of the Table-I above, the issue is related to demand & recovery of Cenvat credit taken of the service tax paid in respect of services which are related to the power plant and mines located in other states, under rule 14 of the Cenvat Credit Rules, 2004. First of all I will discuss the eligibility of insurance service for taking cenvat credit. In this regard the party submitted that that the insurance services received in respect of In Renusagar power plant wherein electricity is generated and in turn used in the manufacture of the final products, qualify as Input service under the Cenvat Credit Rules, 2004. Further, the insurance service covering their mines and the Bauxite supplied by the mines and is also an eligible input since the Bauxite supplied by mines is the basic raw material for manufacture of aluminium. In order to decide this issue the relevant statutory provisions are extracted as under: Rule 2(l) of the Cenvat Credit Rules, 2004 (hereinafter the Rules) defines "input service' as follows: "(l) "Input service' means any service ....
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.....) observed as under: 12. Manufacture thus involves series of processes. Process in manufacture or in relation to manufacture implies not only the production but the various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected to. manufactured product emerges Therefore, each step towards such production would he a process in relation to the manufacture. Where am particular process is so integrally connected with the ultimate protection of goods that but for that process manufacture or processing of goods would be impossible or commercially inexpedient, that process. is one in relation to the manufacture. 13. The natural meaning of the word 'process is a mode of treatment of certain materials in order to produce a good result, a species of activity performed on the subject-matter in order to transform or reduce it to a certain stage. According to Oxford Dictionary one of the meanings of the word process is "a continuous and regular action or succession of actions taking place or carried on in a definite manner and leading to the accomplis....
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....espect of the power plant will fall under the purview of the phrase "in or in relation to the manufacture of the final products. I therefore find that the services availed in respect of power plant are covered by the definition of input service as such services are used in or in relation to the manufacture of the final products. Similarly, the service used in respect of mines and Bauxite supplied by the mines is also covered under the definition of the input service as the bauxite is being used for manufacture of final product, hence the service is also being used in or in relation to the manufacture of final product. I further observe that in order to fall under the definition of input service it is not required that such service should be received in the factory of the manufacture of the final products as provisions of the Rules, as regards input service are qua the manufacturer and not qua the factory. Hence, in my opinion the insurance services received in respect of the power plant will quality as input service. Here it is not out of place to mention that that as per the provisions of rule 4(1) of the Rules, Cenvat credit can be availed when the inputs are received in....
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....rvice tax paid on the services received in any office of the manufacturer can be distributed to the factories discharging the burden of Central Excise duty. Hence, it is not essential that input service has to be received only in the factory of the manufacturer. Rule 2(m) of the Rules, which defines "input service distributor" reads as follows. "input service distributor" means an office of the manufacturer or producer of final products or provider of output service, which receives invoices issued under rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider, as the case may be:" Thus, any office of a manufacturer or producer of final products or provider of output service, which receives invoices confirming to the requirements as laid down in rule 4A of the Service Tax Rules, 1994 can distribute the service tax paid as indicated on such invoices. Rule 7 of the Rules deals with the manner of distribution of credit by Input Service Distributor. In view o....
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.... power plant and the Bauxite supplied by the mines is sent to the factory situated in Renukoot and is used in the manufacture of the final products. Thereafter, such final products are cleared on payment of excise duty. It is thus clear that electricity generated in the captive power plant and the Bauxite supplied by the mines is used by the party in the manufacture of dutiable final products. Thus, the insurance services received in respect of the power plant, which generates electricity and the Bauxite supplied by the mines, are in fact indirectly used in relation to the manufacture of the final products. Even a part of the electricity generated in the captive power plant is used in the residential complexes of the employees of Hindalco Industries Limited, however, in my opinion it does not affect the eligibility toward the Cenvat credit of the input services used in respect of captive power plant. Hence, the insurance services received by the party in respect of its power plant situated in Renusagar, will qualify as an "input service' as defined in rule 2(1) of the Rules even though it is not received in the factory of Hindaloo Industries Limited. In other words, even though....
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.... the Income Tax Act, 1961. In this regard, reliance is placed on the following judgments: i) CIT vs. Malayalam Planations Ltd. 53 ITR 140 (SC) ii) CIT vs. Mysore Iron 115 ITR 219 iii) CII vs. Nanital Bank 62 ITR 638 (SC) It is therefore evident that any service received and which is commercially required for the benefit or for carrying on of the business of the manufacturer, is covered by the expression activities relating to business'. In the present case, insurance of the power plant is required for effective functioning of the factory situated in Renukoot as power is a major input for manufacturing the final products which is being generated in the power plant situated in Renusagar. Almost the entire electricity generated in the captive power plant is sent to the factory situated in Renukoot and is used in the manufacture of the final products. Even a very small part of electricity so generated is used in the residential colonies, such consumption is also in relation to the business of Hindalco Industries Limited. Hence, the entire electricity generated in the power plant is used for the business of Hindalco Industries Limited. Similarly, ....
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....ulatory Commission who are sanctioning authority for setting up of a power plant has granted permission for setting up of Renusagar Power Plant on the condition that electricity generated will be used at the manufacturing plant at Renukoot and will not be sold to any third party. Thus total generation of electricity is confined to Renukoot plant and is a captive plant. In this regard I place reliance on the judgment of Hon'ble Supreme Court, who has elaborately discussed this fact elaborately in the judgment of Supreme Court of India in the case of State of UP V. Renusagar Power Company 1998 4 SCC. The relevant text of the order is reproduced below: Renusagar Power Co. (respondent 1) was brought into existence by Hindalco (respondent 2) in order to fulfill the condition of industrial license of Hindalco through production of aluminium. The model of setting up of power station through the agency of Renusagar was adopted by Hindalco to avoid complications in cases of take-over of the power station by the State or the Electricity Board. As all the steps for establishing and expanding the power station were taken by Hindalco, Renusagar can be said to be wholly own....
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....is also manifest from the facts that the model of the setting up of power station through the agency of Renusagar was adopted by Hindalco to avoid complications in case of takeover of the power station by the State or the Electricity Board. As the facts make it abundantly clear that all the steps for establishing and expanding the power station were taken by Hindalco, Renusagar is whollyowned subsidiary of Hindalco and is completely controlled by Hindalco. Even the day-to-day affairs of Renusagar are controlled by Hindalco, Renusagar has at no point of time indicated any independent volition. Whenever felt necessary, the State or the Board have themselves lifted the corporate veil and have treated Renusagar and Hindalco as one concern and the generation in Renusagar as the own source of generation of Hindalco. In the impugned order of the profits of Renusagar have been treated as the profits of Hindalco. 67. In the aforesaid view of the matter we are of the opinion that the corporate veil should be lifted and Hindalco and Renusagar be treated as one concern and Renusagar's power plant must be treated as the own source of generation of Hindalco and should be liable to d....
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....he mining lease executed for these mines between the Noticees company and the State Government, hence, these mines are the captive mines of the Noticees' company. Further, on perusal of the Copies of CST Registration & ISD Registration of Loharuaga I observe that in the CST registration certificate noticee's factory at Renukoot has been declared as additional place of business. Further, on perusal of the Annual Return (Form H-3) filed with the Regional Controller of Mines, Indian Bureau of Mines, Nagpur Region I find that these mines are captive mines. Further, in the own case of the party wherein it was alleged that the appellant had availed CENVAT credit on inputs and capital goods which were received and used in Lohardaga and Samri Mines located in different States from where the appellant were receiving bauxite ore for the purpose of manufacture of Aluminium and products thereof. The demand was confirmed by the Adjudicating authority confirming therein the demand and recovery of credit along with interest. Feeling aggrieved the party filed appeal before the Commissioner Appeal. The Commissioner (Appeal) vide OIA No. 50/CE/ALLD/2017 dt. 28.08.2017 passed by the ....
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....udgment, the Hon'ble Supreme Court, while following its earlier order reported in 2006 (194) ELT 3 (SC) held that the inputs (explosives, lubricating oils, etc) used in the mines will be eligible for credit. Therefore, even considering the decision of the Hon'ble Supreme Court on this issue it is not imperative that the mines which have received the inputs/ input services should be the Captive mines of the assessee, in order to make the assessee eligible to avail Cenvat Credit of the inputs/ input services used in the mines. This distinction can be noted from the fact that while deciding the admissibility of credit on the capital goods used in the mines, the Hon'ble Supreme Court held that the credit on the capital goods would be admissible if the mines are captive mines so that they constitute one integrated unit. However, while deciding the eligibility for availing credit on inputs used in the mines, the Hon'ble Supreme Court has not laid stress on the factum that the mines have to be Captive mines. Therefore, for determining the eligibility of the Noticees to avail credit of input services, used in mines. I, therefore, find, that as the present dispute s....
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....nd by the Hon'ble Supreme Court in the Assessee's own case. It is seen that the Tribunal in the Assessee's own case has dealt with the said issue of the Renusagar Power Division being a part of the Assessee or not and originally there was difference of opinion between two Members, which was resolved by third Member. As per the majority decision, the duty paid on input and input service utilized at their power plant was held to be cenvatable by considering the Renusagar Power Plant as captive power plant. Further, the Hon'ble Supreme Court in Assessee's own case reported as 1988 (4) SCC 59 observed that it has to be held that M/s Hindalco Industries and Renusagar power plant should be treated as one concern and if that is taken, the consumption of energy is from its own source of generation. The said order of the Hon'ble Supreme Court was also followed by the Hon'ble Delhi High Court vide their order dated 09 July, 1993 held in favour of the Assessee. 4. Revenue in their memo of appeal is not disputing the fact that all the decisions relied upon and referred to by the Adjudicating Authority have dealt with the issue in the assessee's own case. However, their only reason is ....