TaxTMI 
TaxTMI 
2026 (9) TMI 653
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....under Chapter 25 of the Central Excise Tariff Act, 1985, avails CENVAT credit under the CENVAT Credit Rules, 2004. The present dispute concerns CENVAT credit availed on the Countervailing Duty (CVD) paid on capital goods imported during 2004, 2005 and 2012 for setting up a captive power plant at Valantharavai Village, Ramanathapuram District. The imports were made by M/s Coromandel Electric Company Ltd. (CECL), a separately incorporated Special Purpose Vehicle established for generation of electricity for captive use by the appellant, in which the appellant initially held 25% shareholding, later increased beyond 51%. The appellant availed credit of the CVD paid by CECL on the ground that the electricity generated was exclusively used in manufacture of its dutiable final products. The Department, however, took the view that since CECL was an independent legal entity distinct from the appellant, credit of duty paid on goods imported by CECL could not be availed by the appellant and accordingly issued Show Cause Notice Nos.14/2013 dated 04.11.2013 and 11/2014 dated 05.05.2014 proposing recovery of Rs.8,13,91,044/- together with interest and penalty, which came to be confirmed by the C....
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....n functional nexus of capital goods with manufacture but concerns a far more fundamental legal issue, namely whether one company can legally avail CENVAT credit of duty paid on capital goods imported by another independent company. It was argued that CECL and the appellant are separate juristic entities under company law and cannot be treated as one and the same merely because of shareholding patterns or commercial arrangements. Revenue submitted that the Bills of Entry clearly stood in the name of CECL and customs duty including CVD had been discharged by CECL as importer on record. Under the statutory scheme of the CENVAT Credit Rules, 2004, credit can be availed only by the manufacturer or eligible person satisfying the prescribed statutory conditions and not by another legally distinct entity. 4.2 The Ld. Authorized Representative further submitted that the appellant seeks to selectively disregard the separate corporate existence of CECL solely for availing tax benefits while otherwise treating CECL as an independent company for all legal and commercial purposes. Revenue pointed out that earlier customs proceedings concerning exemption claimed by CECL under Notification No. ....
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....en argued that since the electricity generated by CECL was exclusively used in manufacture of dutiable final products, denial of CENVAT credit defeats the object of the credit scheme intended to avoid cascading of taxes. Learned Counsel has also emphasized revenue neutrality and argued that earlier customs proceedings concerning imports made by CECL demonstrate that Revenue itself had treated both entities as economically integrated and therefore cannot now adopt a contradictory position. 10. In support of the above submissions, reliance has been placed upon the ratio of decisions rendered in Vikram Cement v Commissioner of Central Excise reported in 2006 (197) E.L.T. 145 (S.C.), Birla Corporation Ltd. v Commissioner of Central Excise reported in 2005 (186) E.L.T. 266 (S.C.), Bigen Industries Ltd. v Commissioner of Central Excise reported in 2006 (197) E.L.T. 305 (S.C.), Novapan Industries Ltd. v Commissioner of Central Excise reported in 2007 (209) E.L.T. 161 (S.C.), Boving Fouress Ltd. v Commissioner of Central Excise reported in 2006 (202) E.L.T. 389 (S.C.) and other decisions in support of the proposition that credit provisions should receive liberal interpretation where goo....
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.... scheme therefore clearly recognizes only specific legally sanctioned modes by which credit entitlement may arise. In the present case, admittedly the appellant neither imported the goods directly nor acquired the goods under any arrangement contemplated under Rule 4(3). The statutory conditions therefore remain unfulfilled. 16. The appellant has strongly relied upon the judgment of the Hon'ble Supreme Court in Vikram Cement v Commissioner of Central Excise reported in 2006 (197) E.L.T. 145 (S.C.). In that case, the Hon'ble Supreme Court held that MODVAT/CENVAT credit could not be denied on capital goods used in captive limestone mines supplying raw material to the cement manufacturing unit since the mines were integrally connected with manufacture of final products. However, the ratio laid down therein arose in an entirely different factual context. The dispute in Vikram Cement concerned with a single assessee claiming credit in respect of goods used within its own integrated manufacturing operations. The Court was not dealing with a situation where one incorporated entity paid duty and another distinct corporate entity sought to avail the credit. The principle laid down in Vik....
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.... denied the benefit of concessional customs duty on that basis. According to the appellant, Revenue having earlier treated CECL and the appellant as economically integrated entities cannot now adopt a contrary stand by treating them as distinct legal entities for denying CENVAT credit. We are unable to accept this submission. The earlier proceedings arose in an entirely different statutory context concerning eligibility to concessional customs duty under a customs notification and the Project Import Regulations, whereas the present dispute concerns with statutory entitlement to avail CENVAT credit under the CENVAT Credit Rules, 2004. The issues involved, the statutory provisions applicable and the nature of the benefit claimed are entirely different. Therefore, the factual position adopted by the Department while examining eligibility to a customs exemption cannot estop it from applying the independent statutory conditions governing availment of CENVAT credit. The said decision, therefore, does not advance the appellant's case. 20. Further, thus the above decision in the case of Coromandel Electric Company Ltd. [2010 (255) E.L.T. 406 (Tri.-Chennai)] arose in an entirely diff....
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....le emerging from this judgment directly supports Revenue's contention that the right to avail credit cannot be claimed merely on grounds of equity, economic integration or business convenience where the statutory conditions themselves do not recognize such entitlement. 23. In the final analysis, the appellant's entire case proceeds on the assumption that economic integration and functional nexus are sufficient to create statutory entitlement. In our considered opinion, this assumption is fundamentally erroneous. The CENVAT Credit Rules do not recognize any principle by which credit legally accruing to one incorporated entity may automatically stand transferred to another merely because both entities are commercially interconnected. The imported goods were neither imported by the appellant nor duty paid by the appellant. Consequently, the statutory entitlement to avail credit never legally accrued to the appellant. 24. We therefore hold that M/s. India Cements Ltd. is not legally entitled to avail CENVAT credit of Countervailing Duty paid on capital goods imported by M/s Coromandel Electric Company Ltd. (CECL), notwithstanding the captive power arrangement, economic integratio....