Custom, Excise & Service Tax Tribunal
M/S. Opg Metals Pvt. Ltd vs Commissioner Of Central Excise, Trichy on 6 June, 2016
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
E/00114/2009
[Arising out of Order-in-Original No.22/2008, dated 26.11.2008 passed by the Commissioner of Central Excise & Service Tax]
M/s. OPG METALS PVT. LTD.
APPELLANT
Versus
COMMISSIONER OF CENTRAL EXCISE, TRICHY
RESPONDENT
Appearance:
For the Appellant Shri S. Venkatachalam, Adv.
For the Respondent Shri K. Veerabhadra Reddy JC (AR) CORAM:
Honbe Shri D.N. Panda, Judicial Member Honble Shri B. Ravichandran, Technical Member Heard on 06-06-2016 Pronounced on 06-06-2016 FINAL ORDER NO. 40892/2016 Per B. Ravichandran:
The appeal is against order dated 26.11.2008 of Commissioner of Central Excise, Trichy. The brief facts of the case are that the appellants are engaged in the manufacture of iron & steel billets, waste and scrap liable to Central Excise duty. They have another sister Unit (M/s. OPG Energy Pvt. Ltd.) situated in the adjacent premises having common entrance. The power produced by the sister Unit is mostly consumed by the appellants. The present dispute is relating to eligibility of Cenvat credit on capital goods (steam boilers and other equipments) for the appellants. The appellant procured these capital equipments on payment and these were installed for the purpose of generation of electricity by heat energy recovery which is exhausted by the three natural gas fired generator sets already working.
2. The case of the Revenue is that these capital goods are becoming part of the existing generator sets which belong to another legal entity (M/s. OPG Energy Pvt. Ltd.) and hence credit on such capital goods is not available to the appellant. Proceedings were initiated against the appellant for payment and recovery of the credit taken on these goods amounting to Rs.1,13,28,850/- and Rs.2,01,668/- towards capital goods and services respectively. The original authority vide the impugned order confirmed the demand by denying the credits. He also imposed penalty of equivalent amount on the appellant.
3. The learned counsel for the appellant submitted that the only ground on which the denial of credits were ordered is that the capital goods were not installed in the premises of the appellant thereby violating provisions of Rule 2(a) of Cenvat Credit Rules, 2004. He submitted that it is well settled position of law, after various decisions of the Honble Supreme Court and the Tribunal that the usage of inputs or capital goods in or in relation to manufacture of final products cannot be restricted only on the ground of the location of usage. He relied on various decided cases in this regard.
4. The learned Authorised Representative opposes the contentions of the appellant. He submitted that the capital goods on which credits were availed were actually installed as ancillary parts of already existing generator sets of M/s. OPG Energy Pvt. Ltd. The appellant being a separate legal entity cannot claim credit on the capital goods used by another person in the generation of electricity. He submitted that the usage of capital goods in the factory premises of the appellant is a requirement in terms of the above mentioned rule.
5. We have heard both sides and examined the appeal records.
6 The short question for decision is whether or not the appellants are eligible for Cenvat credit on capital goods in respect of boilers and others procured by the appellant and used for generation of electricity using the waste heat recovery process of already existing generator sets in the premises of the sister Unit. The admitted facts of the case are that the capital goods have been procured on payment of duty by the appellants. They have been put into use for generation of electricity in Waste Heat Recovery System. The electricity so generated is indisputably used by the appellant in their manufacturing process. These being admitted facts, Revenues case that the capital goods are installed in the adjacent premises of sister concern who are engaged in power generation, cannot be valid reason for denial of such credit. It is seen that the capital goods now in dispute are for generation of electricity out of Waste Heat Energy System which arise out of three generator sets using natural gas as fuel. The exhaust heat given out during the course of production of electricity in these generators is being used by the Waste Heat Recovery Power Plant. It necessarily follows that such Waste Heat Recovery Power Plant is to be integrated to the original power generation process, so that waste energy by way of exhaust can be put into beneficial use of further power generation. Keeping these factual details in mind, we find no justification to deny the credit on these capital goods only on the ground that these are installed in the premises of sister Unit.
7. Honble Supreme Court in the case of Vikram Cement Vs Commissioner of Central Excise, Indore reported in 2006 (194) E.L.T. (S.C.) examined the terms within the factory of production, though in connection with entitlement of credit for inputs. The Honble Supreme Court held that the term means only such generation of electricity or steam which is used within the factory would qualify as an intermediate product. In Steel Authority of India Ltd. Vs Commissioner of Central Excise, Bhubaneswar reported in 2007 (219) E.L.T. 960 (Tri.-Del.), the Tribunal held that mere location of capital goods outside the factory premises is no ground for denying the credit. In Commissioner of Central Excise, Nagpur Vs Indorama Textiles Ltd., reported in 2010 (260) E.L.T. 382 (Bom.), the Honble Bombay High Court held that when the electricity is used as intermediate goods in the manufacture of final product such electricity can be obtained from outside source also.
8. We note that the department has not disputed the duty-paid nature of the capital goods, discharge of duty by the appellant, usage of capital goods for generation of electricity and consumption of such electricity by the appellant in the manufacture of dutiable final products. In these factual matrix, we find no justification to deny the credit on the capital goods availed by the appellant. Accordingly, the impugned order is set aside, the appeal is allowed.
(Pronounced in the open court on 06-06-2016)
(B. RAVICHANDRAN) (D.N. PANDA)
TECHNICAL MEMBER JUDICIAL MEMBER
ksr
06-06-2016
DRAFT
Remarks
I
II
III
Date of dictation
06.06.2016
Draft Order - Date of typing
06.06.2016
Fair Order Typing
06.06.2016
Date of number and date of dispatch
06.06.2016
6
E/1143/2004