Custom, Excise & Service Tax Tribunal
Ghcl Limited vs Bhavnagar on 9 February, 2023
1|Page E/676- 678/2012-SM
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
REGIONAL BENCH- COURT NO. 3
Excise Appeal No. 676 of 2012
(Arising out of OIA-46-48/2012/BVR/COMMR-A-/RBT/RAJ dated- 18/05/2012 passed by
Commissioner of Central Excise-BHAVNAGAR)
Ghcl Limited ........Appellant
Sutrapada,
Nr. Veraval, Junagadh, Gujarat
VERSUS
C.C.E. & S.T.-Bhavnagar ......Respondent
Plot No.6776/B-1...Siddhi Sadan, Narayan Upadhyay Marg, Beside Gandhi Clinic, Near Parimial Chowk, Bhavnagar, Gujarat - 364001 WITH Excise Appeal No. 677 of 2012 (Arising out of OIA-46-48/2012/BVR/COMMR-A-/RBT/RAJ dated- 18/05/2012 passed by Commissioner of Central Excise-BHAVNAGAR) Ghcl Limited ........Appellant Sutrapada, Nr. Veraval, Junagadh, Gujarat VERSUS C.C.E. & S.T.-Bhavnagar ......Respondent Plot No.6776/B-1...Siddhi Sadan, Narayan Upadhyay Marg, Beside Gandhi Clinic, Near Parimial Chowk, Bhavnagar, Gujarat - 364001 AND Excise Appeal No. 678 of 2012 (Arising out of OIA-46-48/2012/BVR/COMMR-A-/RBT/RAJ dated- 18/05/2012 passed by Commissioner of Central Excise-BHAVNAGAR) Ghcl Limited ........Appellant Sutrapada, Nr. Veraval, Junagadh, Gujarat VERSUS C.C.E. & S.T.-Bhavnagar ......Respondent Plot No.6776/B-1...Siddhi Sadan, Narayan Upadhyay Marg, Beside Gandhi Clinic, Near Parimial Chowk, Bhavnagar, Gujarat - 364001 Appearance:
Shri Anand Nainawati & Shri Ishan Bhatt, Advocates appeared for the Applicant Shri Dinesh Prithiani, Assistant Commissioner (AR) for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR Final Order No. A/ 10272-10274 /2023 DATE OF HEARING: 10.10. 2022 DATE OF DECISION: 09.02.2023
2|Page E/676- 678/2012-SM RAMESH NAIR The brief facts of the case are that the appellant are engaged in manufacture of Soda Ash which is cleared on payment of duty. During the course of manufacture of soda ash the appellant manufactured intermediate goods i.e. coke briquettes from coke breeze. For manufacturing of Coke briquettes, the appellant has set up a plant for which certain plant and machinery were purchased. The appellant availed cenvat credit of excise duty paid on such plant and machinery by treating the same as capital goods. The show cause notices were issued to the appellant proposing to deny the cenvat credit availed on such plant and machinery used in the manufacture of coke briquettes on the following grounds:
a) The capital goods have been used in the manufacture of exempted goods i.e. briquette classified under Tariff Item 2701 20, which attracts NIL rate of duty. The same is not eligible under Rule 6 (4) of the Cenvat Credit Rules, 2004 (All 3 SCNs.)
b) That some of the itmes listed in Annexure- B to the SCN are not covered by the definition of capital goods under Rule 2
(a) of Cenvat Credit Rules, 2004 although credit has been availed on such items under Rule 2 (a) of the Cenvat Credit Rules,2004. [Only in SCN dated 30.12.2009 and 18.10.2010] 1.2 The 3 Show cause notices were adjudicated by the Learned Joint Commissioner of Central Excise, Bhavnagar by 3 separate Order in original, wherein demands of cenvat credit on capital goods were confirmed. Being aggrieved by the Orders in Original, the appellant filed the appeal before the Commissioner (Appeals) who has rejected the appeals and upheld the demand confirmed by the Learned Joint Commissioner. Both the lower authorities have denied the cenvat credit on capital goods on the ground that the capital goods is exclusively used in manufacture of briquettes which is exempted from central excise duty. Therefore, in terms of Rule 6 (4) of CCR, 2004 the appellant is not eligible for cenvat credit.
Being aggrieved by the Orders in Appeal, the appellant filed the present appeals.
2. Shri Anand Nainawati, Learned Counsel along with Shri Ishan Bhatt, Learned Advocate appearing on behalf of the appellant submits that even though the plant and machinery were used in manufacture of briquettes but briquettes are ultimately used for manufacturing of
3|Page E/676- 678/2012-SM soda ash which are cleared on payment of duty. The briquettes are the intermediate product and not cleared under exemption from the factory. Therefore it cannot be said that the plant and machinery were used in manufacture of exempted goods. He placed reliance on the following judgments :
Ispat Metallics Ltd vs. CCE Raigad- 2005 (191) ELT 1107 (Tri. Mum) Indira Sahakari Soot Girni Maryadit vs. CCE, Aurangabad- 2017 (2) TMI 667- CESTAT- Mumbai CCE vs. United Phosphorous Ltd -2015 (315) ELT 360 (Guj.) Union of India vs. HEG Ltd - 2012 (275) ELT 316 (Chattisgarh) Bharat Forge Ltd vs. CCE, Pune- III - 2004 (165) ELT 339 (Tri.- Mum) Rana Sugar Ltd vs. CCE, Ludhiana - 2012 (281) ELT 617 (Tri. Del) CCE vs. Sudarsanam Spinning Mills Ltd - 2012 (275) ELT 430 (Mad.)
3. Shri Dinesh Prithiani, Learned Assistant Commissioner (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order. He submits that the capital goods on which credit was availed were exclusively used for manufacture of exempted goods i.e. briquettes in terms of Rule 6 (4) of CCR, 2004. Therefore, the appellant is not eligible for the cenvat credit.
4. I have carefully considered the submission made by both sides and perused the records. I find that there is no dispute that even though plant and machinery on which credit was availed as capital goods though they were used in the manufacture of bricks which in turn used in the manufacture of final product i.e. soda ash and the same was cleared on payment of duty . In this fact, in my considered view it cannot be said that the capital goods were used exclusively for manufacture of exempted goods. This is for the reason the process of manufacture of soda ash is consist of various processes and the entire process is considered to be the process of manufacture of Soda ash which is indeed cleared on payment of duty. Therefore, the provision of Rule 6 (4) of CCR is not applicable in the present case. The said provision is applicable only when the final product in which the capital goods is used is exclusively, cleared under exemption. This issue has been considered in the various judgment cited by the appellant which are referred below:
Ispat Metallics Ltd vs. CCE Raigad- 2005 (191) ELT 1107 (Tri. Mum) "Heard both sides and considered the issue.
4|Page E/676- 678/2012-SM 1.2. issue is The case eligibility of Capital goods entitled and credit on "Coal Briquette Plant" where the appellants converted Iron Ore fines received on job work under Rule 4(5)(a) of CENVAT Rules from M/s.
Ispat Industries Ltd. and returned the Briquette, for further use there for manufacture of Iron & Steel Products.
1.3. being Credit is denied on the grounds :-
I have perused the case records and considered the arguments advanced in the appeal memorandum and reiterated at the time of personal hearing. The dispute lies in a narrow compass. The only point involved is whether the appellants were entitled to take capital goods credit on machine used for manufacture of non-dutiable goods. The appellants were using the said machine for making briquettes from fine ore which does not amount to manufacture. This aspect is not in dispute. The contention of the appellant is that there is no bar on such credit in terms of Rule 6(4) of Cenvat Credit Rules. The argument is fallacious. There is no absolute or unqualified right to credit. The right to take Cenvat Credit is itself a creature of the statute. Therefore the correct way to proceed will be to ascertain whether such a right is available under the law. The right to take the credit is granted vide sub-rule (1) of Rule 3 which states that :
"- A manufacturer of the final product shall be allowed to take the credit of the duty ....... paid on inputs or capital goods ....... received by the manufacture for use in, or in relation to the manufacture of final product......"
The term final product is defined under Rule 2(e) ibid. as follows :
"final products" means excisable goods manufactured or produced from inputs except matches.
The term excisable goods is defined in Section 2(d) of the Act as follows :
"excisable goods" means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act, 1985, (5 of 1986) as being subject to a duty of excise and includes salt.
A harmonious reading of the relevant provision given above makes it abundantly clear that there is no right to take credit, if the final products are not subject to a duty of excise. When the process of conversion of fine ores into briquettes does not amount to „manufacture‟ under the Central Excise Act, then nothing in the said Act or Rules made thereunder will apply to the said goods. The position is also clear from the CEGAT judgment in case of Gujarat State Fertilizer Co. Ltd. v. CCE - 1995 (80) E.L.T. 812 (Bom. CEGAT) in which the Hon‟ble Tribunal dismissed the appeal.
"..... in so far as the eligibility of Modvat credit in respect of duty paid on plain or coloured chips brought back and used in the process for obtaining plain or coloured chips holding that there is no manufacture involved and Modvat Scheme cannot apply in such contingency."
2.1. We find-
(a) On a reading of the definition of „Capital Goods‟ under Cenvat Credit Rules, 2002 it appears to prescribes :
"Capital Goods" means, -
(i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, Heading No. 68.02 and sub-heading No. 6801.10 of the First Schedule to the Tariff Act;
(ii pollution control equipment;
(iii) components, spares and accessories of the goods specified at (i) and (ii) above;
(iv) moulds and dies;
5|Page E/676- 678/2012-SM
(v) refractories and refractory materials;
(vi) tubes and pipes and fittings thereof; and
(vii) storage tank,
used in the factory of the manufacturer of the final products but does not include any equipment or appliance used in the office".
Thus "Coal Briquette Plant" could not be excluded from the definition.
(b) The term "used in the factory of the manufacture of the final products"..... could not mean an exclusive or only use, for the manufacture of final products of the availer of the credit. So long as the entity is required to be used in the factory of the final product manufacturer, the machinery/plant would be eligible. When read with Rule 6(4) of the Cenvat Rules, the credit could not be denied even if the use is for manufacture of non-excisable entity eg. Electricity generated in the Power House Plant in case of Power House Capital Goods. Therefore, even if the process of conversion of Iron ore „fines‟ to „Briquettes‟ does not amount to manufacture of excisable goods under the Central Excise law, the credit cannot be denied.
(c) After determining as above, we find the word „used‟ in the definition of Capital Goods will not and cannot be interpreted to mean that it should be actually in use. The potential use by the manufacturer, at a later date would also entitle the credit. The exclusive use as already held, is not contemplated. The plant in this case is capable for use for converting the Iron or fines to be used by the appellants at a future date. The word "used" can denote be intermittent and/or use sometime in future; we find that both sides agree that the appellants are a manufacturer of declared final products Iron and Steel and have the capacity or potential to use iron ore fines also. Therefore credit as over led cannot be denied.
(d) In this view of the findings, we find no reason and deny the credit on grounds of ineligibility as determined by the lower authority.
3. The appeal consequent to the findings is allowed after setting aside order."
Indira Sahakari Soot Girni Maryadit vs. CCE, Aurangabad- 2017 (2) TMI 667- CESTAT- Mumbai
6. In both the judgments viz., judgment of the Division Bench of the Delhi high Court Modi Carperts Limited vs. Union of India - 1997 (91) ELT 285 and the judgment of the learned Single Judge of the Bombay High Court - 1992 (61) ELT 566 ( Gokalchand Rattanchand Woollen Mills Pvt. Ltd v. UOI), we find a graphic description of the nature of Silver and we think it might be useful to extract this -
".........This sliver is very brittle in nature and is liable to fall apart by handling. It also got entangled if it is not handled gently, thus becoming unsuitable for spinning. If the Sliver falls apart or gets entangled, it becomes unfit for spinning and cannot be fed into ring frames for spinning. Moreover, it is important to maintain humidity condition in the spinning Section and the Sliver is not allowed to dry. If the moisture content is lost, Sliver dries and the fibre strands fall apart and collapse and become unfit for spinning. Sliver cannot be packed and
6|Page E/676- 678/2012-SM transported in view of its non-cohesive and brittle nature. Any form of packing entailing even the slightest pressure would entangle the fibre and render it unfit for spinning. Upon such entanglement, it would cease to be Sliver. Because of the very nature of the Sliver, it s non-cohesive and brittle property as described above, Sliver obtained in the Petitioner s factory as described above cannot be brought and sold in the market and is not a commodity which is known in the trade."
7. In view of the aforesaid reasons, the substantial question of law are answered against the revenue and the civil miscellaneous appeal is dismissed."
The similar issue was further considered by the this Tribunal in case of Commissioner of Vs. Narasus Spinning Mills[2005(128) ECR 187(Tri. Chennai)] and in case of Thuran Spining Mills Vs. Commissioner(2004(61) RLT 915(Cestat Che)] The Tribunal held that the Cenvat credit on capital goods used for producing silver cotton carded falling under chapter 52.02 is admissible under Rule 570. Both the above decisions of the Tribunal were upheld by the Hon'ble Madras High Court reported as [2016(334) ELT A163(Mad.)] and 2016(335) ELT A76(Mad)].
7. As per above consistent decisions on the very same issue, the appellant is entitle for the credit on the capital goods used for manufacture of intermediate goods i.e. silver, cotton carded which was further used in the manufacture of dutiable cotton yam. As per the above settled legal position, impugned order is set aside. Appeal is allowed."
CCE vs. United Phosphorous Ltd -2015 (315) ELT 360 (Guj.) "Draft amendment dated 24-11-2014 is allowed.
2. In the amended form, the question of law presented for our consideration by the Revenue in this appeal is as under :
"2(a) Whether in the facts and circumstances of the case, the Tribunal has committed substantial error of law in holding that Modvat Credit is available to the respondent on capital goods viz. Pipes, cables, valve, cooling tower, etc. used in the erection of power plant for generation of electricity by relying upon decision rendered by Chennai Bench of Tribunal in the case of Kothari Sugar & Chemicals Ltd. reported in 2006 (196) E.L.T. 35 (T) which has not attained finality and CMA No. 2671/2007 filed against the said decision is admitted and pending for final decision before the Hon‟ble High Court of Madras at Chennai?"
3. Having heard the learned counsel for the Revenue and having perused the impugned decision of the Customs, Excise & Service Tax Appellate Tribunal, it emerges that the sole issue involved in this Tax Appeal relates to the assessee‟s claim for Modvat Credit on the capital goods used in generation of electricity, which was captively consumed. According to the Revenue, the assessee would not qualify for such credit in view of Rule 57Q of the Central Excise Rules, 1944. The Tribunal, however, relied on the decision of Chennai Bench in case of Kothari Sugars & Chemicals Ltd. v. Commissioner of Central Excise, Trichy reported in 2006 (196) E.L.T. 35, held in favour of the assessee. In such decision, the Tribunal had come to the following conclusion :
7|Page E/676- 678/2012-SM "2. Yet another decision of the Tribunal (Division Bench) which is in favour of the assessee on similar set of facts is in the case of Commissioner of Central Excise, Raipur v. Jindal Steel and Power Ltd. [2003 (158) E.L.T. 178 (Tri.-Del.)], wherein capital goods credit was allowed in respect of capital goods used in power plant for manufacture of steel, to generate electricity, which was mainly used captively and partly sold out to MPEB. The submission of the assessee in that case that Rule 57R did not stand in the way of availment of such credit was not rejected by the Tribunal. Ld. Counsel has also cited two final orders of this Bench, one of which was passed in their own case. I am, however, unable to find support to the assessee‟s argument on the aforesaid issue from any of these orders which did not consider Rule 57R at all. Nevertheless, the Division Bench decision cited by ld. Counsel are squarely in their favour and consequently the impugned order gets set aside and this appeal is allowed."
4. The Tribunal in case of Kothari Sugars & Chemicals Ltd. (supra), had proceeded on the basis that the capital goods were used for generation of electricity which was mainly used captively. In the present case also the Tribunal has recorded that, "It is undisputed in the case in hand that appellants have been consuming the electricity mostly in their factory premises and little surplus electricity was sold and put into electricity board."
5. We have proceeded on the basis of such admitted facts. Quite apart from the decision of the Chennai Bench in case of Kothari Sugars & Chemicals Ltd. (supra), we are informed, is carried in appeal before the Madras High Court and is pending, we notice that the Supreme Court in case of Collector of Central Excise v. Solaris Chemtech Limited reported in 2007 (214) E.L.T. 481 (S.C.) has occasion to deal with a substantially similar issue. It was held that when inputs are used to generate electricity which are captively consumed for manufacture of final product, the assessee would be entitled to Modvat Credit in view of the expression "used in relation to the manufacture" used in the statute.
6. The situation might have been different had the Revenue succeeded in establishing that the electricity generated by the assessee was not used captively but sold outside.
7. In the result, tax appeal is dismissed."
4.1 In view of the above judgment as well as the judgment cited by the learned counsel an identical issue has been considered that only because the capital goods is used for exempted intermediate goods, the cenvat credit cannot be denied when the final product is cleared on payment of duty.
5. Considering the above judgments, I am of clear view that the appellant is entitled for cenvat credit on capital goods in the given facts of the present case. Accordingly, the impugned order is set aside. Appeals are allowed.
(Pronounced in the open court on 09.02.2023 ) RAMESH NAIR MEMBER (JUDICIAL) geeta