Custom, Excise & Service Tax Tribunal
Commr. Of Central Excise, Kolkata vs M/S Mcc Pta India Corporation Pvt. Ltd on 10 August, 2009
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, EAST REGIONAL BENCH : KOLKATA
Ex. Appeal No.295/09
& CO-52/09
Arising out of Order-in-Appeal No.24/Hal/09 dated 6.5.2009 passed by Commr. of Central Excise (Appeal I), Kolkata.
SHRI S. S. KANG, HON'BLE VICE PRESIDENT
1. Whether Press Reporters may be allowed to see
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982? :
2. Whether it should be released under Rule 27 of the
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not? :
3. Whether His Lordship wishes to see the fair copy
of the Order? :
4. Whether Order is to be circulated to the Departmental
Authorities? :
Commr. of Central Excise, Kolkata
...APPELLANT(S)
VERSUS
M/s MCC PTA India Corporation Pvt. Ltd.
RESPONDENT (S)
APPEARANCE Shri J. A. Khan, SDR for the Appellant Revenue Shri S. N. Sinha Mahapatra, Advocate for the Respondent (s) CORAM:
SHRI S. S. KANG, HON'BLE VICE PRESIDENT Date of hearing & decision : 10.08.2009 ORDER NO.........................................................................................
Per Shri S. S. Kang :
Heard both sides. The Revenue filed this appeal against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals) whereby the credit in respect of inputs used as fuel for generation of electricity which is further used in the canteen and office building is allowed.
2. The contention of the Revenue is that as per the definition of input provided under Rule 2 (k)(i) of the Cenvat Credit Rules, 2004, the credit is admissible in respect of the input, such as, fuel or other goods used for generation of electricity or steam used in or in relation to manufacture of final product or for any other purpose, within the factory of production. The contention is that as per the definition of "factory" as provided under Rule 2 (e) of the Central Excise Act, 1944, the factory means that any premises wherein in any part of which excisable goods manufactured or any part of which any manufacturing process connected with production of these goods is being carried on or is ordinarily carried on. In view of the definition of factory, the goods which are used as input for generation of electricity or steam used in or in relation to manufacture of final product or for any other purpose, within the factory of production, does not include the use of electricity which was in the canteen and office building. The Revenue relied upon the decision of the Hon'ble Bombay High Court in the case of Indo Rama Synthetics (India) Ltd. Vs. Commissioner of Central Excise, Nagpur - 2007 (219) ELT 122 (Bom.) and the appeal filed by Indo Rama Synthetics (India) Ltd. was dismissed by the Hon'ble Supreme Court reported in 2008 (226) ELT A181 (S.C.). The Hon'ble Bombay High Court while interpreting Rule 57B (iv) of the Central Excise Rules, 1944, held that the credit of duty is available to input used for generation of electricity provided, the electricity is used for manufacture of final products or for any other purpose connected with or related to the manufacture of the final products. The contention is that hence, the respondents are not entitled for the credit.
3. The contention of the respondents is that the canteen and office building is a part of the factory and under the Factory Act, it is essential to provide the canteen facility to the workmen. Therefore, as the same is a part of the factory and the electricity is used within the factory. Hence, the credit cannot be denied. It is also submitted that for the earlier period, there were four show-cause notices issued for denying credit on the similar ground and the adjudicating authority dropped the proceeding. Therefore, the Revenue now cannot reopen the issue which is already settled. The respondents relied upon the Tribunal's decision in the case of Lampack Paper Products Vs. Commissioner of Central Excise, Visakhapatnam I Commissionerate vide Final Order No.1816/2006 dated 31.10.2006 whereby the Tribunal after relying upon the various decisions of the Hon'ble Supreme Court, held that the Revenue is not given a liberty to review the order on the issue which is already settled in favour of the manufacturer. The ld. Counsel for the respondents also submitted that the Hon'ble Bombay High Court in the case of Indo Rama Synthetics (India) Ltd., allowed the credit in respect of the inputs used for the generation of electricity which is further used in the manufacture of the workshop in the factory and treated the same as used in the factory.
4. In reply, the ld. SDR for the Revenue submitted that the Hon'ble Supreme Court in the case of C. K. Gangadharan Vs. Commissioner of Income Tax, Cochin reported in 2008 (228) ELT 497 (SC) held that non-filing of appeals in similar cases does not bar filing of appeal in other cases. The Revenue also relied upon the another decision of the Hon'ble Supreme Court in the case of Swaraj Mazda Ltd. Vs. Collector of Central Excise, Chandigarh reported in 1995 (77) ELT 505 (SC).
5. In this case, the issue is that whether the credit in respect of duty paid on the inputs used as fuel for generation of electricity which is further used in the canteen and office building is available to the manufacturer or not.
6. During the relevant period, the definition of inputs as provided under Rule 2 (k)(i) of the Cenvat Credit Rules, 2004 is as under :
"all goods, except light diesel oil, 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 oil, 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 in or in relation to manufacture of final products or for any other purposes, within the factory of production."
7. The contention of the respondents is that the electricity is used within the factory premises therefore, the credit is available as per the definition of inputs which covers the goods as fuel for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production. The emphasis of the respondent is that the electricity so generated is used for purpose other than manufacture or in relation to manufacture, hence, the credit is available. It is also submitted that as per the definition of factory as provided by the Factory Act, the canteen is essential and integral part of the factory. Hence, the credit cannot be denied. The factory under Section 2 (e) of the Central Excise Act, 1944, defines as under :
"2 (e) 'factory' means any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process connected with the production of these goods is being carried on or is ordinarily carried on."
8. I find that in view of the Hon'ble Bombay High Court in the case of Indo Rama Synthetics (India) Ltd. (supra) interpreted Rule 57B (iv) of Central Excise Rules, which provides that the credit in respect of inputs used for generation of electricity or steam used in the manufacture of final product or for any other purpose within the factory premises is available. The Hon'ble High Court interpreted the words for "any other purpose" within the factory of production and held as under :
"18. We have carefully considered the rival submissions. The basic dispute in the present case revolves on the meaning of the word "any other purpose" contained in Rule 57B(iv) of the Central Excise Rules, 1944 as well as similar Rule contained in the Cenvat Credit Rules, 2001 and Cenvat Credit Rules, 2002. During the period from 1997 to 2002 the electricity generated has been utilized by the assessee within the licensed premises for manufacture of final product and at the residential complexes. The question is, whether the assessee is entitled to the credit of duty paid on furnace oil used in the generation of electricity for supply to residential complexes situated within the licensed premises?
19. According to the assessee, the words "any other purpose" in Rule 57B (iv) is wide enough to cover supply of electricity to the residential complexes. In other words, the submission is that once it is established that the electricity manufactured from the duty paid furnace oil is used within the factory premises for any purpose whatsoever, the credit of duty paid on furnace oil would be available.
20. We find it difficult to accept the submissions of the assessee. In our opinion, credit of duty under Rule 57B(iv) would be available to inputs used for generation of electricity provided, the electricity is used for manufacture of final products or for any other purpose connected with or related to the manufacture of the final products. In other words, the use of electricity must have nexus with the goods manufactured in the factory. For example, where the electricity is used in the production of an intermediate product within the licensed premises for use in the final product or use of electricity in the godown or workshop established by the assessee within the licensed premises to facilitate storage/repair of the machinery used in the production of the final products, it would be covered within the meaning of the word "any other purpose" in Rule 57B(iv) of the Central Excise Rules, 1944.
21. The fact that the residential complexes are situated within the licensed premises would be entitle the assessee to avail credit of duty paid on furnace oil used in the manufacture of electricity supplied to the residential complexes. It is necessary to establish that the electricity is used for any purpose connected with or related to the production of final products. In our opinion, supply of electricity to the residential complexes situated within the factory premises are neither connected with or related to the production of the final products. In this view of the matter, we hold that the finding recorded by the Tribunal that the assessee is not entitled to the credit of duty paid on the furnace oil used in the generation of electricity supplied to the residential complexes cannot be faulted."
9. The appeal filed by Indo Rama Synthetics (India) Ltd., was dismissed by the Hon'ble Supreme Court as reported in 2008 (226) ELT A181 (S.C.).
10. Another argument advanced by the respondents is that earlier four show-cause notices were decided in the same issue and the proceedings were dropped and the respondent is debarred for agitating the same issue and relied upon the Tribunal's decision in the case of M/s Lampack Paper Products (cited supra). I find that the Hon'ble Supreme Court in the cases of Swaraj Mazda Ltd. (cited supra) and M/s C. K. Gangadharan (cited supra) held that merely because in some cases, the Revenue has not preferred appeal and does not operate as a bar for the Revenue to prefer an appeal in another case. In view of the above decisions of the Hon'ble Supreme Court, I find no merit in the contention of the respondents and there is a bar on the Revenue for agitating the issue which is already settled by the adjudicating authority.
11. As the meaning of the word "any other purpose" contained in Rule 57B (iv) of the Central Excise Rules, 1944 as well as similar Rule contained in the Cenvat Credit Rules, 2001 and Cenvat Credit Rules, 2002, is interpreted by the Hon'ble Bombay High Court in the case of Indo Rama Synthetics (India) Ltd. (supra) and held that the credit of duty paid on the goods or fuel used in the generation of electricity is available provided the electricity is used for manufacture of final product or for any purpose connected with or related to the manufacture of final product. The use of electricity must have nexus with the goods manufactured in the factory. The appeal filed by Indo Rama Synthetics (India) Ltd. (supra) against the decision of the Bombay High Court is dismissed by the Hon'ble Supreme Court as noticed above. Hence, the ratio of the above decision is fully applicable on the facts of the present case and the credit in respect of duty paid on the goods or fuel used for generation of electricity which is further used in canteen or office building is not available to the respondent. The impugned order in this regard is set aside.
12. However, taking into account the overall facts and circumstances of the case, as earlier the four show-cause notices were decided on the same issue and the proceedings were dropped by the adjudicating authority and there is no malafide intention on the part of the respondents to evade duty, it is not a fit case for imposition of penalty.
13. The appeal is allowed as indicated above. Cross objection filed by the respondents also gets disposed off.
(Dictated and pronounced in the open Court) Sd/ (S. S. KANG) VICE PRESIDENT mm 9 Ex.Appeal No.295/09