Custom, Excise & Service Tax Tribunal
Hindustan Zinc Ltd vs Commissioner, Central Excise & ... on 8 February, 2024
CUSTOMS EXCISE & SERVICE TAX APPLELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH,COURT NO. 3
EXCISE APPEAL NO. 51598 OF 2022
[Arising out of Order-in-Original No. UDZ-EXCUS-000-COM-024-027-2021-22
dated 24/02/2022 passed by the Commissioner of Central Excise and Service
Tax Commissionerate, Udaipur (Rajasthan )]
M/s. HINDUSTAN ZINC LTD
Rajpura Dariba Mines APPELLANT
Distt. Rajsamand (Rajasthan)
Vs.
COMMISSIONER, CENTRAL GOODS AND
SERVICE TAX COMMISSIONERATE,
RESPONDENT
UDAIPUR, RAJASTHAN With EXCISE APPEAL NOs. 50838-50851/2020 EXCISE APPEAL NOs. 51599-51601/2022 EXCISE APPEAL NOs. 51638-51648/2022 EXCISE APPEAL NOs. 51663-51667/2022 EXCISE APPEAL NOs. 51671-51672/2022 EXCISE APPEAL NO. 52065/2022 Appearance:
Present for the Appellant : Ms Sukriti Das & Ms Mehak Mehra, Advocates Present for the Respondent: Shri Rakesh Aggarwal, Authorised Representative CORAM:
HON'BLE Ms.BINU TAMTA, MEMBER (JUDICIAL) HON'BLE Ms.HEMAMBIKA R. PRIYA, MEMBER(TECHNICAL) Date of Hearing : 10/11/2023 Date of Decision :08/02/ 2024 FINAL ORDER No. 50186-50222 /2024 PER HEMAMBIKA R PRIYA The present 37 appeals have been filed by M/s. Hindustan Zinc Ltd. (hereinafter referred to as the appellant) to assail the
2 E/51598/2022 impugned orders wherein the appellant was not allowed to avail Cenvat Credit as given in the summary hereinafter:
E/ 50838-51851/2020 These appeals have been filed by the appellant having their unit at Chanderia Lead Zinc Smelter Village Putholi District Chittorgarh (Rajasthan) to assail the Order in Appeal No. 164- CRM-CE-JDR-2020 Dated 18/03/2020 wherein Cenvat Credit was denied on components /spares/ accessories used in the manufacture of captive power plant.
Appeal Numbers Cenvat Credit Period involved Credit denied
involved (Rs.) on
E/50838/2020 29,45,241.00 October 2013 to Captive power
March 2014 plant
E/50839/2020 42,44,601.00 April, 2007 to Captive power
Sept, 2007 plant
E/50840/2020 38,17,824.00 April, 2013 to Captive power
Sept., 2013 plant
E/50841/2020 20,96,403.00 Oct. 2007. to Captive power
March, 2008 plant
E/50842/2020 35,86,060.00 Oct., 2012 to Captive power
March, 2013 plant
E/50843/2020 24,60,490.00 Oct., 2009 to Captive power
March, 2010 plant
E/50844/2020 48,39,822.00 Oct., 2015 to June, Captive power
2017 plant
E/50845/2020 9,68,778.00 Oct., 2014 to Captive power
March, 2015 plant
E/50846/2020 38,83,993.00 Oct., 2010 to Captive power
March, 2011 plant
E/50847/2020 43,37,935.00 April, 2012 to Captive power
Sept., 2012 plant
E/50848/2020 23,54,685.00 April, 2014 to Captive power
Sept., 2014 plant
E/50849/2020 27,07,104.00 April, 2011 to Captive power
Sept., 2011 plant
E/50850/2020 32,69,631.00 April, 2015 to Captive power
Sept., 2015 plant
E/50851/2020 12,82,976.00 Oct., 2006 to Captive power
March, 2007 plant
3 E/51598/2022
EXCISE APPEAL NOs. 51598-51601/2022
These appeals have been filed by the appellant having their unit at Rajpura Dariba Mines Distt. Rajsamand (Rajasthan) to assail the Order-in-Original No. UDZ-EXCUS-000- COM-024-027- 2021-22 Dated 24/02/2022 wherein Cenvat Credit was denied on components /spares/ accessories used in the manufacture of captive power plant.
Appeal Numbers Cenvat Credit Period involved Credit denied
involved (Rs.) on
E/51598/2022 22,74,15,084.00 October,2008 to Captive
January, 2011 power plant
E/51599/2022 24,77,142.00 April, 2013 Captive
power plant
E/51600/2022 36,70,371.00 March, 2012 to Captive
July, 2012 power plant
E/51601/2022 2,12,74,683.00 February, 2011 to Captive
October, 2011 power plant
EXCISE APPEAL NOs. 51638-51648/2022
These appeals have been filed by the appellant having their unit at Chanderia Lead Zinc Smelter, Village Putholi District Chittorgarh (Rajasthan) to assail the Order-in-Original No. UDZ- EXCUS-000- COM-029-039-2021-22 dated 30/03/2022 wherein Cenvat Credit was denied on components /spares/ accessories used in the manufacture of captive power plant.
Appeal Numbers Cenvat Credit Period involved Credit denied
involved (Rs.) on
E/51638/2022 51,24,430.00 April 2008 to Captive
September 2008 power plant
E/51639/2022 82,80,657.00 October 2011 to Captive
March 2012 power plant
E/51640/2022 1,13,64,503.00 April 2009 to Captive
September 2009 power plant
E/51641/2022 19,02,04,450.00 September, 2004 Captive
to March, 2005 power plant
E/51642/2022 91,16,858.00 April 2010 to Captive
September 2010 power plant
E/51643/2022 75,28,742.00 October 2008 to Captive
March 2009 power plant
4 E/51598/2022
E/51644/2022 6,44,21,877.00 March 2004 to Captive
August 2004 power plant
E/51645/2022 80,30,260.00 January 2006 to Captive
September 2006 power plant
E/51646/2022 60,20,379.00 April 2005 to Captive
December 2005 power plant
E/51647/2022 2,58,48,240.00 December 2003 Captive
to February 2004 power plant
E/51648/2022 4,37,60,820.00 April 2004 Captive
power plant
EXCISE APPEAL NOs. 51663-51667 & 51671-51672/2022 These appeals have been filed by the appellant having their unit at Zawar Mines Distt. Udaipur (Rajasthan) to assail the Order-in-Original No. UDZ-EXCUS-000-COM-040-047-2021-22 dated 31/03/2022 wherein Cenvat Credit was denied on components /spares/ accessories used in the manufacture of captive power plant.
Appeal Numbers Cenvat Credit Period involved Credit denied
involved (Rs.) on
E/51663/2022 11,05,25,483.00 April, 2008 - Captive
December, 2008 power plant
E/51664/2022 13,093.00 October, 2009 - Captive
May, 2010 power plant
E/51665/2022 5,28,305.00 November, 2011 - Captive
July, 2012 power plant
E/51666/2022 7,31,62,081.00 September, 2007 - Captive
March, 2008 power plant
E/51667/2022 3,01,48,560.00 January,2009 - Captive
September, 2009 power plant
E/51671/2022 14,67,279.00 April, 2012 & Captive
August 2012 to power plant
March, 2013
E/51672/2022 1,87,41,388.00 April, 2007 - Captive
August, 2007 power plant
EXCISE APPEAL NO. 52065/2022
This appeal has been filed by the appellant having their
unit at Debari Distt. Udaipur (Rajasthan) to assail the Order-in- Original No. UDZ-EXCUS-000-COM-003-2022-23 dated 5 E/51598/2022 30/05/2022 wherein Cenvat Credit was denied on components /spares/ accessories used in the manufacture of KPTA plant.
Appeal Numbers Cenvat Credit Period involved Credit denied involved (Rs.) on E/52065/2022 Rs.15,30,41,803/ February, 2007 to KPTA plant January 2009
2. Being aggrieved, the appellants have preferred the present Appeals before the Tribunal.
3. The learned counsel submitted that the issue of such capital goods to the contractors BHEL/L&T for making the captive power plant / KPTA plant within the factory does not and cannot affect the credit entitlement of the appellant on the capital goods received by it within its factory premises, under the cover of duty paying documents issued in favour of the appellant. It is on record that none of such capital goods were ever removed from the factory premises. He submitted that it is not relevant as to who made the captive power plant / KPTA plant and whether the captive power plant/ KPTA plant was an immovable property or not. The undisputed fact was that the capital goods on which credit was taken were received in the factory of the appellant, and the contractor use them within the factory premises for building the power plant which was used for generation of electricity used for the manufacture of the final product. The learned Counsel also stated that the credit of capital goods is not governed by the ownership of such goods. It is on record M/s BHEL/L&T never had any ownership of the plant at any point in time. The performance acceptance certificate, was issued only to certify 6 E/51598/2022 that the appellant had agreed to the workmanship of the contractor and the plant assembled by them satisfied the parameters set by them. The learned counsel further submitted that the credit is allowed on parts/components/accessories of capital goods which are attached to the earth. He submitted that as per the definition of capital goods, the same should be used in the factory of the manufacturer of the final products. There is no stipulation to the effect that the same should be used directly in the manufacture of final product as per the definition. In the light of the definition, the appellant satisfies the conditions of the Rule and is eligible for the credit. The learned counsel relied on the following decisions:
(i) Commissioner of Central Excise Vs Nava Bharat Ferro Alloys [2004 (166) ELT 72 (Tri-Bang)]
(ii) United Phosphorus Limited vs Commissioner of Central Excise [2002 (150) ELT 650 (Tri-Mumbai)]
(iii) Lloyds Metals & Engineers Ltd vs commissioner of Central Excise [2002 (150) ELT 638 (Tri-Mum)] The learned counsel contended that the extended period is not invokable as per the understanding of the appellant. CENVAT credit was eligible and no information regarding taking of such credit was required to be submitted by them in the prescribed returns. Further, there is no provision in the law for giving any intimation about availing such credit. The fact of taking such credit was clearly reflected in the documents and records maintained by the appellants. There is no positive corroborative evidence that the appellant has wilfully suppressed this from the
7 E/51598/2022 department. Consequently, once there is no mensrea, penalty equal to the demand cannot be imposed.
4. Learned Counsel for the appellant has submitted that the Show cause notices in the present matters were transferred to Call Book as in a similar matter in Aditya Cement Itd. v. CCE, Jaipur, the Revenue department had filed Reference Application No. 18/2003 before the Hon'ble Rajasthan High Court against the CESTAT's Final Order No. A/369/2002-NB dated 6.3.2002. The Hon'ble High Court vide Order dated 27.3.2008, rejected the department's appeal and upheld the CESTAT's Final Order dated 6.3.2002. Against the Hon'ble High Court's Order dated 27.3.2008, the department filed Special Leave Petition (Civil) No. 871 of 2009 before the Hon'ble Supreme Court which was converted to Civil Appeal No. 5256 of 2009. The Civil Appeal was dismissed by Hon'ble Supreme Court vide Order dated 6.2.2019 as not pressed by department due to low monetary limit in Commissioner Customs, Central Excise & S.T., Bilaspur v. Nalwa Steel and Power Ltd. upon dismissal of Department's Civil Appeal from the Hon'ble Supreme Court, the said Show Cause Notices were retrieved from the Call Book for adjudication purpose.
5. Accordingly, the decision of the Hon'ble Tribunal in Aditya Cement Ltd. case, Final Order No. A/369/2002-NB dated 6.3.2002 and upheld by Hon'ble Rajasthan High Court vide Order 8 E/51598/2022 dated 27.3.2008, is now final and binding upon the learned Adjudicating Authority.
6. The Learned Counsel further submitted that the issue regarding eligibility of CENVAT credit on the parts, components used in the plant installed by the contractor has been settled in the Appellant's own case, including others:
(1) Commissioner of Central Excise and CGST, Udaipur v. Hindustan Zinc Ltd., Final Order No. 50856/2023 dated 10.7.2023.
(2) Commissioner of Central Excise and CGST, Udaipur v. Rajasthan Spinning & Weaving Mills (RSWM) Ltd.
Final Order No. 50491/2023 dated 11.4.2023 He further submitted that Cenvat credit has been availed on the goods which were mentioned in the invoices provided by the Contractor to the Appellant. The goods on which credit has been taken were either classifiable under Chapter 84, 85 or 90 of the First Schedule to the Central Excise Tariff Act, 1985; goods which were components, spares and/or accessories of goods of Chapter 84, 85 and 90; goods such as tubes, pipes and fittings thereof; and goods which fall under other sub-clauses of Clause A of the definition. Also, goods which are components, spares or accessories to the capital goods or pollution control equipment need not fall under Chapters 84, 85 or 90 of the First Schedule to the Central Excise Tariff Act, 1985. This is clear from the definition of capital goods under Rule 2(a)(A) of the Credit Rules which provides the specified goods to qualify as capital goods when "used in the factory of the manufacturer of final product".
9 E/51598/2022
7. The Learned Counsel also stated that Rule 3(1) of the Credit Rules, entitles a manufacturer of final product to take Cenvat credit of excise duty "paid on (i) any input or capital goods received in the factory of manufacture of final product". In the present case, there is no dispute that the components/parts of CPP were received at the factory premises, under duty paid invoices, issued in the name of appellants. Further, CPPs have admittedly been manufactured out of such parts/ spares/ components which further facilitated the production of electricity being used in the manufacture of dutiable final product i.e., of Zinc and lead. Therefore, the Cenvat credit cannot be denied to the Appellant.
8. While reiterating the findings of the Adjudicating Authority, the learned Authorised Representative emphasized the following:
i) The Cenvat credit had been availed on parts and components which were used in setting up the captive Power Plant (in short "CPP"), on turnkey basis, by an independent contractor, BHEL/ L&T, who were engaged by the appellant for procurement, design, manufacture, erection and commissioning of CPP, at the site of the appellant (HZL).
ii) A commercial contract was undertaken between the Contractor-BHEL and the appellant. The parts & components were received during the course of setting up the CPP, which were addressed to the factory 10 E/51598/2022 address, but consigned to the Project Manager-CPP for use in the work being done by the BHEL at the site of the factory. These parts and components were received at factory address of the appellant and were transferred to the contractor under Store Issue vouchers. The CPP, upon being commissioned was transferred by BHEL to the appellant on "as is where is basis", on the basis of 'Performance Acceptance Certificate' issued by HZL.
9. The learned Authorised Representative submitted that the one issue to be decided is whether or not, the parts and components were capital goods to the appellant for availing Cenvat credit as capital goods vide Rule 2 (a) (A) (iii) of the Cenvat Credit Rules 2004.
10. We have heard the arguments of the learned Counsel and the learned Authorised Representative in this regard.
11. We have heard the Authorised Representative and the learned Counsel for the appellant. At the outset we note that identical issue of the appellant has been decided by the Principal Bench of this Tribunal vide its Final Order no. 50856/2022 dated 10.07.2023, wherein the appeal filed by the Revenue was dismissed and the benefit of Cenvat credit on TGT plant was allowed to the assessee.
12. We further note that the appellant had availed credit on goods mentioned in the invoices provided by the contractor to the 11 E/51598/2022 appellant. The goods on which such credit was taken are components, spares and/or accessories of goods classifiable under chapter 84, 85 or 90 of the First Schedule to the Central Excise Tariff Act, 1985. It is not disputed that the component/parts of captive power plant (hereinafter referred to as CPP/KPTA plant) were received in the factory premises of the appellant under duty paid invoices which was in the name of the appellant. Admittedly, the CPP/KPTA plant was manufactured out of such parts/spares/components and such plant was used in the manufacture of the dutiable final product. There is no dispute that machineries/components received at the factory of the appellant on which the credit has been availed are indeed capital goods in terms of Rule 2(a) of the CENVAT Credit Rules, 2004 as is evident from the fact that the credit arrangement has been restricted in the impugned show cause notice to 50% in each year. We note that the Tribunal in several earlier decisions has held that the prerequisite for availment of CENVAT credit in respect of capital goods in the factory of manufacturer is its receipt in the factory and use in the manufacture of dutiable final product. The Tribunal in a similar factual matrix in the case of Gujarat Ambuja Cements Vs. Commissioner of Central Excise [2001(130)ELT 129(Tri Del)], held as follows:-
"7. We see force in the plea have carefully considered the rival submissions. 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
12 E/51598/2022 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 Rules 57- D(2) and 57-R(2) will clarify the above position. Rule 57-D(2) states that credit of specified duty shall be denied in case inputs are used in the manufacture of capital goods which are not chargeable to excise duty; however, there is no such stipulation in Rule 57-R(2). There was also no need for such stipulation since Sl. No. 5 of the Table appended to Rule 57-Q(1) covers components, parts and accessories themselves as capital goods. The Commissioner's finding in para 23 of the impugned order that it is only complete DG sets which are capital goods within the meaning of Rule 57-T(7) is not correct since credit of duty, if paid on DG sets, would have been availed of by the appellants herein under the provisions of Rule 57-Q itself, as DG sets were undoubtedly used in the factory of the appellants who are the manufacturers of final products - the place where the DG sets were assembled is the factory premises of the appellants cannot be treated as the factory of WDIL - and resort to the provisions of Rule 57-T(7) need not be made by the appellants for availing credit on complete DG sets. In the above view of the matter, we hold that the finding of the Commissioner in para 23 of the impugned order that the benefit of Modvat credit under Rule 57-T(7) is not admissible, is not correct.
8. In view of the fact that we are accepting the alternative submission of the assessees that they are eligible to the benefit of Modvat credit on parts, components and accessories of DG sets in terms of the provisions of Rule 57-T(7) of the Central Excise Rules, we do not deem it necessary to pronounce upon the other submissions of the appellants.
9. In the result, we set aside the impugned order and allow the appeal"
13 E/51598/2022 This decision of the Tribunal was upheld by the Himachal Pradesh High Court [2010(256)ELT 356(HP)]. It would be pertinent to reproduce the relevant para:
"5. Both the arguments raised are without any merit. There can be no dispute that Excise has been paid on some of the company of the DGPP. Since the DGPP is exempt from payment of Excise duty but credit can be claimed by the manufacturer of the DGPP, in the present case WDIL. However, there is no dispute this this DGPP is part and parcel of the factory of the appellant. 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 serial No. five with table of the said rule, a manufacturer is entitled to claim what but credit on account of the Excise duty paid on the components, spares and accessories of the goods exempt. If duty is paid on the components used in its one fracture, we see no reason why the manufacturer cannot claim what but credit for such duty."
13. In a similar decision in the case of Commissioner of Central Excise, Mumbai-III vs NRC Ltd.,[2001(135)ELT 1012(Tri-Mum)] the Tribunal held as follows:
"4. The grounds in the appeal run as follows. The assembly of the diesel generating sets from its components amounts to manufacture. The generating set so manufactured is exempted from duty. Therefore, by application of Rule 57R(1), credit cannot be taken of the duty paid on capital goods used exclusively in the manufacture of an exempted final product. The provisions of Rule 57T(7) (which the Tribunal in Gujarat Ambuja Cement Ltd. v. CCE relied upon) will not apply because the fabricator of the generating set had not undertaken any initial setting up or modification, renovation or expansion of the plant.
5. It is no doubt true that the immediate result of assembly or putting together of the alternator and the diesel engine resulted in the emergence of a diesel generating set. To that extent, it would be correct to say that these two components were used in the manufacture of a diesel generating set, which was exempted from duty. It is necessary at this point to take note of the significant difference in phraseology between Rule 57A, relating to Modvat credit, of the duty paid on inputs
14 E/51598/2022 (other than capital goods) used in or in relation to the manufacture of the final products, and Rule 57Q relating to credit to be taken of duty paid on capital goods. Rule 57A, specifically provides that the inputs must be used in or in relation to the manufacture of the finished product. There is no such requirement in Rule 57Q. All that it requires is that the capital goods must be used in the manufacture of the specified final products. The requirement that the capital goods must be used in or in relation to the manufacture of the final product is absent. That this difference in wordings is deliberate is clear from the circular of the Board explaining the changes made in the budget of 1994 part of which relates to credit on capital goods incorporated in the Central Excise Rules. Paragraph 71.5 of this circular emphasises that "There is no reference to the expression "used in or in relation to the manufacture of final products". It goes on to say that "capital goods acquired by a manufacturer for use in his factory are eligible to Modvat credit."
6. The manufacturer, in each case, acquired the components of the generating set, not for use in the manufacture of the generating set as a final product, but to generate electricity required for the manufacture of tyre cord and other such goods, which are their final product. It would therefore not be correct to say that the components were used exclusively in the manufacture of the generating set. It would be more appropriate to say that these components were put together into a generating set for the manufacture of tyre cord and other final product. The explanation that the departmental representative tendered, if accepted, would in effect result in denying Modvat credit contrary to the provisions of law, in a very large number of cases. The definition of capital goods in the Table to Rule 57Q, includes components, spares and accessories of various machines, machinery, apparatus, appliances etc. specified therein. Every time any manufacture brings in a component to replace a damaged or worn out component in any of the machinery in its factory, it could be argued that the component it is not directly used in the manufacture of the final product. The component can also be said to be used to manufacture a machine in which it will be fitted as a replacement, that machine already exists even in the absence of the component. Therefore, none of the components would ever be continued to be used in the manufacture of any commodity and therefore could not be capital goods. The absurdity of this conclusion destroys the merits in the submission.
7. The second ground is also equally without merit. No doubt, the manufacturer of the generating set was M/s. Wartsila NDS (India) Ltd.
15 E/51598/2022 or M/s. Modi Mirrless Blackstone Ltd. However, the credit that is sought to be taken is not the credit of the duty payable, if any, on the generating set. The credit is sought to be taken on the components of the generating set. Here again, the manufacturer is someone other than the person who has taken the credit. Now if the condition is that it is only the person who paid should take the credit, it will mean that credit will only be available on capital goods, if they are solely utilised in the factory of their production. The credit in no case will be available where the capital goods are taken out for fitment or installation in any other factory. Apart from the fact that there is no such requirement in the rules, such an interpretation will totally frustrate the object of the scheme to provide Modvat credit on capital goods and therefore cannot be accepted.
8. The Appeals are accordingly dismissed."
14. This judgment was upheld by the Bombay High Court, relying on the Supreme Court's judgment in Escorts Ltd., vs Commissioner of Central Excise, Delhi [2004 (171) ELT145(SC)]. The two judgments mentioned supra were affirmed by the Supreme Court in the Commissioner of Central Excise, Chandigarh vs Ambuja Cements Ltd.,[2022(65)GSTL3(SC)] wherein the court held as follows:
"3. The short question which is posed for consideration of this court is whether, the facts and circumstances of the case, the High Court/Tribunal were justified in allowing what might credit on parts, components and accessories of diesel generating power plant sets to assessee?
4. On appreciation of evidence and considering the material on record, the High Court has specifically observed and found that GBP sets on which format credit is allowed is part of the factory of the appellant which is ultimately used in the manufacture of endproduct - cement. Therefore, serial No. five of the table appended to rule 57Q shall be attracted and therefore the SSE shall be entitled to Modvat credit such DGPP sets being part/components of the cement plant/final manufacture product"
16 E/51598/2022
15. Thus, we find that this issue has attained finality in other judgments of the Tribunal, which has been upheld by the Supreme Court, as indicated supra. Consequently, the 37 appeals are allowed and the respective impugned orders are set aside.
(Pronounced in the open court on 08/02/ 2024) (BINU TAMTA) MEMBER (JUDICIAL) (HEMAMBIKA R. PRIYA) MEMBER(TECHNICAL) ss