Custom, Excise & Service Tax Tribunal
M/S. Lakshmi Gayatri Iron & Steel (P) Ltd vs Cce, Hyderabad-Iii on 10 June, 2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL REGIONAL BENCH AT HYDERABAD Bench SMB Court I Appeal No.E/2483/2011 (Arising out of Order-in-Appeal No.8/2011(H-III)(D)(CE) dt. 31/03/2011 passed by CC,CE&ST(Appeals-III), Hyderabad) For approval and signature: Honble Ms. Sulekha Beevi, C.S., Member(Judicial) 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 their Lordship wish to see the fair copy of the Order? 4. Whether Order is to be circulated to the Departmental authorities? M/s. Lakshmi Gayatri Iron & Steel (P) Ltd. ..Appellant(s) Vs. CCE, Hyderabad-III ..Respondent(s)
Appearance Shri B.V. Kumar, Advocate for the appellant.
Shri Vikram Kaushik, Asst. Commissioner(AR) for the respondent.
Coram:
Honble Ms. Sulekha Beevi, C.S., Member(Judicial) Date of Hearing:10/06/2016 Date of decision:10/06/2016 FINAL ORDER No._______________________ [Order per: Sulekha Beevi, C.S.] The appellant, M/s. Lakshmi Gayatri Iron & Steel (P) Ltd., is engaged in manufacture of sponge iron and are availing facility of CENVAT credit on inputs and capital goods. They had taken credit on capital goods viz. boilers and Water Treatment Plant (WTP).
2. A show-cause notice dt. 05/05/2008 was issued to appellant for irregular availment of CENVAT credit of Rs.29,69,276/- taken on boilers, WTP and proposed recovery of the said amount along with interest and penalty under Rule 15(2) of CENVAT Credit Rules, 2004 (CCR, 2004) read with Section 11AC of Central Excise Act, 1944 (CEA, 1944). The original authority vide Order-in-Original No.16/2009/JC/Hyd.-III. Adjn dt. 31/03/2009 dropped the demands for CENVAT credit and interest but imposed a penalty of Rs.30,000/- under Rule 15 of CCR, 2004. Aggrieved by the Order-in-Original dt. 31/03/2009, the department filed an appeal before the Commissioner(Appeals) on the grounds that the said WTP was not installed in appellants premises. The Commissioner(Appeals), while set aside the Order-in-Original relating to dropping the demand and remanded the case for denovo adjudication by the original authority. In the de novo proceedings vide order dt. 16/08/2010, credit of Rs.3,38,749/- taken by appellant on WTP installed in the premises of M/s. Gayatri Agro Industrial Power Ltd. (GAIPL) was allowed. Being aggrieved the Department filed appeal raising the ground that credit is not admissible as the WTP is not installed within the factory premises of appellant but in the neighbouring unit i.e. GAIPL. That when the machinery/plant is not installed in the factory of the manufacturer, it does not fall within the definition of capital goods and that it is not eligible for credit. The Commissioner(Appeals) allowed the appeal filed by Department. Hence the assessee is now before the Tribunal.
3. The learned counsel Shri B.V. Kumar appearing for the appellant submitted that GAIPL is a power generation unit of the appellant, thus a sister concern. During the initial years of functioning, the gases, fumes and dust generated in the course of production of sponge iron was let out in open air through high chimney. The villagers in the surrounding complained. As suggested by experts, appellant purchased additional equipments to solve the issue of pollution. The Waste Heat Recovery Boiler (WHRB) was purchased and installed in the appellants premises. The WTP was purchased by appellant from M/s. Doshion Ltd. on 22/05/2007 and due to shortage of space, it was installed in the premises of GAIPL. The appellant then entered into lease agreement dt. 01/02/2008 with GAIPL under which monthly rent is paid to GAIPL for leasing the space/premises where WTP is installed. The counsel explained through a rough lay out plan that the WTP installed in GAIPL and the WHRB installed within the appellants factory are connected with pipes. Water is required to cool waste gases which are put into WHRBs. This water is fed into WHRB from the WTP. If hard water is fed without treatment, then scales of salts of Magnesium and Calcium would be formed and WHRB will get corroded. The hard water is first treated in WTP before being fed into WHRB through pipelines. In the WHRB, while waste hot gases are cooled, steam is generated. Such steam from the boilers is sent through a pipeline connecting the appellants unit with GAIPL. The steam received in GAIPL turns the turbines installed in the power station of GAIPL, which in turn generates electricity/power. That though WTP is installed in the premises of GAIL, it is connected with pipes to the equipment/machinery in the premises of appellants factory. That appellant is therefore eligible for credit on WTP as capital goods.
4. The learned counsel adverted to the definition of factory in the Central Excise Act, 1944 which is as under:-
Section 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.
The counsel for appellant urged that the definition means any premises and includes the precincts thereof wherein any part of any manufacturing process connected with production of excisable goods, is carried on.
5. Countering these contentions, the learned AR Shri Vikram Kaushik submitted that the factory premises means the registered factory premises. The WTP is installed in the premises of GAIPL and not in the registered premises of appellant. As the WTP is not functioning in the premises of appellant, but in the premises of GAIPL, the Commissioner(Appeals) has rightly disallowed the credit on WTP.
6. The learned counsel for appellant stressed on the word precincts used in the definition of factory. He drew support from the judgment laid in South Eastern Coal Fields Ltd. Vs. CC&CE, MP [2006(200) ELT 357 (SC)] where it is observed as under:-
24. In other words, we have to interpret the word precinct in the exemption notification to mean the surrounding region or area, as defined in Collins English Dictionary or the surroundings or environs of a place as defined in the New Shorter Oxford English Dictionary. This is because the purpose of the exemption notification is to grant exemption from excise duty to goods produced in a mine so as to encourage the mining industry. A workshop which is in an area in the environs of a mine and is existing solely for the purpose connected with the mine and under the same management, is obviously directly serving the mining operations. Hence, we have to interpret the notification so as to include such a workshop within the definition of a mine for the purpose of grant of exemption, as that would encourage the mining industry.
I do not find myself in agreement with the reliance placed by the learned counsel on the said judgment. The Honble Apex Court in the said case was interpreting Section 2(j) of the Mines Act, 1952. Being the word (precincts) used in the definition of another enactment, I do not think that the same can be referred or applied herein.
7. Another judgment placed by Shri B.V. Kumar is Konark Met Coke Ltd. Vs. CCE, Bhubaneshwar [2007(207) ELT 470 (Tri. Kol.)]. In the said judgment, it is held as under:-
10.?After hearing both sides and considering the material on record, it is found and held that on consideration of the definition of factory under Section 2(e) of the Act, and the guidelines of CBEC issued in this connection, the fact of Coke Oven Plant and Power Plant of KMCL located at different cites i.e. not inside the premises of Coke Woven Plant cannot be denied especially when land has subsequently been transferred to KMCL. The Commissioner did not disentitle the capital goods credit on the duty paid on capital goods brought to set up the Power Plant. So long as the Power Plant is used, to generate electricity, to manufacture the goods in the appellants Coke Woven Plant, which is not disputed. Capital Goods credit would be eligible. We find therefore no reasons to uphold the order of the Commissioner to deny the capital goods credit.
11.?That the power generated, in the power plant of KMCL, is meant for use by NINL, would not disentitle the credit, since power cannot be stored. It has to be rolled out and gainfully utilized. Rolling out of power is a technological necessity.
The said decision clarifies and covers the issue at hand. Undeniably the WTP is an essential part of the manufacturing process undertaken by appellants. Further the definition of factory as contained in Section 2(e) of CEA, 1944 does not anywhere use the word registered premises. Registration of the premises is only a procedure for application of the Act in practice. The WTP in the GAIPL premises is transferred to the appellant by lease agreement and appellant is paying rent. Non-registration of the premises, in which the WTP is situated in the appellants name or adding it to the appellants factory premises at the most can only be a procedural lapse, which can be cured. In view thereof, I hold that credit on WTP is admissible. However, I direct the appellants to cure the procedural lapse and take steps to get the premises registered as part of appellants manufacturing factory within a period of two months from the date of receipt of copy of this order.
8. In the result, the impugned order is set aside and the appeal is allowed with consequential reliefs, if any.
(Operative part of this order was pronounced in court on conclusion of the hearing) SULEKHA BEEVI C.S. MEMBER(JUDICIAL) Raja.
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