TaxTMI 
TaxTMI 
2005 (1) TMI 306
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.... a petrochemical complex at Haldia, comprising (a) Naphtha Cracker Unit (NCU) and (b) Associated Downstream Units for producing HDPE, PP, LLDPE, etc., which consume the products manufactured by the NCU. The principal raw material for manufacture of petrochemical products is Naphtha which is procured from Indian Oil Corporation or other indigenous oil refineries or by direct imports from overseas, on payment of duty. A small portion of the Naphtha, either as such, or after being partially processed (internally known as CLS comprising NRS/Py Gas/C-6 Raffinate, etc.), is also sent to a power plant for generation of electricity or steam, which are in turn used for production of the final products within the appellant's factory. 3. Electricity is a vital input for the functioning of the plant in the petrochemical complex. Steam is also an essential input for the Naphtha Cracking Unit where Naphtha is fed along with the steam. It is, therefore, necessary for the appellant to maintain an uninterrupted supply of electricity and steam of an acceptable quality. For the purpose of meeting its requirement of electricity and steam, a combined cycle co-generation electricity plant (herein....
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....actory, and (b) Naphtha used as input for generation of electricity and steam in the power plant, which in turn would be used in the manufacture of petrochemical products by the appellant in its factory. 5. By letter dated 1-4-2000/28-4-2000, the Superintendent of Central Excise gave the approvals, as sought for, and confirmed that Cenvat credit on Naphtha used in or in relation to manufacture of final product, would be admissible subject to satisfaction of other terms and conditions. However, the letter stated that Cenvat credit on Naphtha used for generation of electricity and steam by the power plant would not be allowed. Against this letter, the appellant filed an appeal before the Commissioner of Central Excise (Appeals), Calcutta. The Commissioner of Central Excise (Appeals) passed Order-in-Appeal dated 27-2-2004 rejecting the appeal, rejecting the contention of the appellant that the power plant is situated within the premises of the registered factory of the appellant. He held that the power plant is under the ownership of a different company, HPLCL and the land on which the power plant is situated is assigned by the appellant to HPLCL by way of a deed of assignment and ....
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....reported in AIR 1970 (SC) 732, 736 to show that electricity if "goods". 7. On 8-6-2000, the appellant again wrote a letter to the Superintendent of Central Excise, giving a reference to the previous letters and finally referring to a meeting, which the representative of the appellant had with the Commissioner on 31-5-2000. The letter stated "after due deliberations, the learned CCE pointed out that since the power plant has been set up by a separate company, namely, HPLCL, and not us, it would not be possible to consider the power plant as our captive power plant. Accordingly, he conveyed reluctance to allow Cenvat credit on Naphtha used for power plant on that ground. Nevertheless, the Ld. CCE was pleased to convey that we are entitled to Modvat/Cenvat Credit in respect of the duty paid on Naphtha by sending Naphtha to HPLCL for further processing on job work basis". Finally, the appellant wrote that "In view of the aforesaid discussions, as has been very kindly confirmed by the Ld. CCE and your goodself, Cenvat Credit is admissible to us on Naphtha used for generation of electricity and steam by HPLCL on job work basis. Further, since we are a new assessee, we request your goo....
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....it and further that electricity and steam were intermediate products and not final products as alleged. The appellant also submitted that there was no justification for invoking the extended period of limitation. It also denied any liability for interest or penalty. As regards the point whether or not the power plant is located within the factory premises of the appellant, the Commissioner of Central Excise, Haldia, agreed with the finding of the Commissioner (Appeals) that the power plant is located outside the factory premises of the appellant. As for the question whether the appellant is eligible for the benefit of Cenvat credit under Rule 4(5)(a) of Cenvat Credit Rules, the Commissioner has held that this Rule is not applicable because what is returned back from the premises of HPLCL is electricity and not any excisable goods. According to the Commissioner, the appellant sent partially processed Naphtha, i.e. CLS to the power plant belonging to a different company, namely, HPLCL for generation of electricity and steam and in that process, the character of the inputs gets totally converted from raw material to energy. Rule 4(5)(a) emphasises return of the inputs or partially pro....
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....d electricity to any outside user nor does the appellant charge the power plant anything for all the raw materials supplied. The power plant only recovers facilitation charges from the appellant. 13. As regards the second issue, the Counsel for the appellant has submitted that the appellant is entitled to the benefit of the Cenvat credit under the job work procedure. He has urged that merely because the character of the inputs is changed, when they are received back, it is not relevant. Electricity is an intermediate product used in the manufacture of the final product and the change of the identity of the input does not bar the admissibility of Cenvat credit under the job work procedure. In this connection, he relied upon a number of judgments the Supreme Court, High Courts and the Tribunal. He further submitted that the Commissioner himself had agreed in the discussions with him (referred to above) that the appellant could take Cenvat credit by following the job work procedure. He also submitted that the expressions "further processing" and "any other purposes" used in the rule must be given wide amplitude and would even cover complete manufacture as seen from the provisions o....
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....ary to give any findings on the first issue, in view of our findings on the second issue. During the relevant period (i.e. November 2000 to October 2002), the relevant provisions of law read as under : From November 2000 to 30th June 2001 "input" means all goods, except 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 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 for manufacture of final products or for any other purpose, within the factory of production, and also includes lubricating oils, greases, cutting oils and coolants. Explanation 1. — The high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2. — Inputs include goods used in the manufacture of capital goods which are further used in the factory of the manufacture. Rule 57AB. Cenvat credit. — [(1....
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....eceived back in the factory within 180 days of their being sent to a job worker. If the inputs or the capital goods are not received back within 180 days, the manufacturer shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise. However, the manufacturer can take the CENVAT credit again when the inputs or capital goods are received back in his factory........ From 1st July 2001 to October 2002 "Input" means all goods, except 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 and 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 for manufacture of final products or for any other purpose, within the factory of product. Explanation 1. - The high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input ....
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.... back within one hundred eighty days, the manufacturer shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise, but the manufacturer can take the CENVAT credit again when the inputs or capital goods are received back in his factory. (b) The CENVAT credit shall also be allowed in respect of jigs,(b) fixtures, moulds and dies sent by a manufacturer of the final products to a job worker for the production of goods on his behalf and according to his specifications. (c) The Commissioner of Central Excise having jurisdiction over(c) the factory of the manufacturer of the final products who has sent the inputs or partially processed inputs outside his factory to a job worker may, by an order, which shall be valid for a financial year, in respect of removal of such inputs or partially processed inputs, and subject to such conditions as he may impose in the interest of revenue including the manner in which duty, if leviable, to be paid, allow final products to be cleared from the premises of the job worker. 17. The aforesaid legal provisions clearly show that the definition of "input" cov....
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....own as CLS consisting of different constituents such as NRS/Py, Gas, C/4 Raffinate, C/6 Raffinate etc., are totally lost and the provisions of Rule 4(5)(a) of Cenvat Credit Rules is not applicable in such cases". This finding is not borne out from the rules. 20. In the case of Prestige Engineering (India) Limited v. Collector of Central Excise, Meerut, reported in 1994 (73) E.L.T. 497 (S.C.), while dealing with the question as to what processes can be undertaking on job work in terms of Notification 119/75-C.E., the Supreme Court has observed that "insisting upon the same articles being returned to the customer after undergoing the manufacturing process at the hands of job worker may rob the Notification of any substance whatsoever". This observation was reiterated by the Hon'ble Supreme Court in the case of Wadpack (P) Ltd. reported in 1997 (89) E.L.T. 24 (S.C.) and in the case of Hindustan Mudran reported in 1997 (94) E.L.T. 474 (S.C.). In the case of Wyeth Laboratories Limited reported in 2000 (120) E.L.T. 218 (T-LB), Larger Bench of the Tribunal held that reading of these Rules 57D, 57F(2), 57F(4) in the light of the common understanding of the words, would indicate, tha....
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....ing of the Commissioner in this respect is, therefore, not sustainable. 23. It has been argued on behalf of Revenue that under Rule 3 of the Cenvat Credit Rules, the credit is available only when the job worker avails the benefit of Notification No. 214/86. We do not read Rule 3 in this manner. The Cenvat credit is admissible when the inputs are received in the factory and used in or in relation to the manufacture of final products. The inclusion clause in the Rule does not restrict or reduce the scope of the main clauses in the Rule. Moreover, the expression "availing the benefit of exemption specified in the Notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 214/86-C.E., dated 25th March 1986" is only an enabling provision which permits credit on inputs to the principal manufacturer, even in cases where the input is not received by it, but is received directly by the job worker and provides for taking Cenvat credit of the duty paid on the inputs used in the manufacture of intermediate products even when no duty is required to be paid on the intermediated products.., Rule 57AC of the 2000 Rules and Rule 4(5)(a) of July 2001 Rules pro....