Custom, Excise & Service Tax Tribunal
M/S.Glaxo Smithkline Consumer Health ... vs Cce,Chandigarh-Ii on 9 August, 2016
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH-160017 COURT NO.1 Appeal No. E/56513 & E/56518/2013-(SM) [Arising out of the Order-in-Appeal No.576-577/CE/Appl/CHD-II/12 dt.21.12.12 passed by the CCE (Appeals), Chandigarh) Date of Hearing:26.07.2016 Date of Decision 09.08.2016 For Approval & signature: Honble Mr.Ashok Jindal, Member (Judicial) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3. Whether their Lordships wish to see the fair copy of the order? seen 4. Whether order is to be circulated to the Department Authorities? Yes M/s.Glaxo Smithkline Consumer Health Ltd. Appellant Vs. CCE,Chandigarh-II Respondent
Appearance Shri Krati Somani, Advocate for the appellant Shri Atul Handa, Ld. A.R for the respondent CORAM: HonbleMr.Ashok Jindal, Member (Judicial) FINAL ORDER NO. 61053-61054/2016 Per : Ashok Jindal The appellant is in appeal against the impugned order denying the credit on capital goods on the allegation that the capital goods installed in various villages around the factory.
2. The brief facts of the case are that the appellants are engaged in the manufacture of health products i.e. Horlicks, Boost, etc. The appellant is procuring the milk, a predominant raw material for manufacture of health products from the villages nearby its factory. In order to facilitate the purchase of milk, the appellant has taken the premises on lease in neighbouring villages for setting up milk collection Centers. The appellant has installed bulk milk coolers (BMC) and DG sets in the milk collection centers as it is essential to store the milk collected at a specific temperature. The appellant availed credit on these BMC and DG sets. The show cause notice was issued to the appellant to deny the credit on the said BMC and DG sets on the ground that the capital goods have not been used in the factory of the appellant. Both the authorities below denied the credit on capital goods confirming the demand alongwth interest and equivalent amount of penalties were also imposed. Aggrieved with the said order, the appellant is before me.
3. Learned Counsel for the appellant submits that the appellant is entitled to avail credit on BMC and DG sets installed milk collection centers. As per definition of Rule 2 (a) of Cenvat Credit Rules, 2004, the only issue is as the capital goods installed outside the factory premises in that case whether the appellant is entitled to avail to credit or not. It is her submission that the milk (which is a predominant raw material for the appellant) is required to store at specific temperature, the chilling of milk in BMCs at the milk collection center is an ancillary part of manufacturing process of the appellant. These milk collection centers are under the management of the appellant. After sale of the milk between the appellant and the local milk supplier, the ownership of the milk transferred to the appellant at milk collection centers itself. Milk collection centers form integral part of the unit, therefore, they entitled to avail credit in the light of the decision of Apex Court in the case of Vikram cements-2006 (197) ELT 145 (SC) and Hindalco Indalco Industries Ltd.-2014 (313) ELT (Tri.-Del.), Biral Corporation Ltd.-2005 (186) ELT 266 (SC) and this Tribunal in the case of JSW Steels Ltd.- 2014 (307) ELT 929 (Tri.-Chennai)and Kallam Spinnng Mills Ltd.-2007- TIOL-523-CESTAT-Bang. She also relied on the decision of the Tribunal in the case of Steel Authority of India-2007 (219) ELT 960 (Tri.-Del.). She further submits that the interest is not payable by the appellant in view of the decision of Bill Forge Pvt.Ltd.-2012 (26) STR 204 (Kar.), the credit was not utilized. Therefore, she pray that the penalty is not imposable on the appellant.
5. On the other hand, learned AR opposed the contention of the learned Counsel and submits that the BMC installed at the milk collection centers in various villages around the factory. Some of these milk collection centers are as far as 30 kilometer from the factory. To avail the credit two conditions are required to be satisfied:
(a) the goods must fall within the definition of capital goods and
(b) the capital goods must be used in the factory to manufacture final products but the definition include any equipment or appliance used in office. He submits that section 2(e) defines what is the factory. As per the definition of the premises including the precincts wherein or any part of which manufacturing process connected with the production of these goods is carried out. The word precinct means and this definition of factory explained the same limit. To support this contention, he relied on the decision in the case of South Eastern Coalfileds-2006 (260) ELT 357 (SC). He submits that reliance made by the learned Counsel in the cases of South Eastern Coalfields ,Vikram Cement and JSW are not relevant. Further he relied on the decision Bharat Oman Refineries-2014 (309) ELT 549 (Tri.-Del.) and also in the case of Southern Iron & Steel Co.-2000 (121) 164 (Tri.), Vikash Industrial Gases-2000 (118) ELT 257. Therefore, he submits that the credit is not available to the appellant.
6. Heard both sides and considered the submissions.
7. On careful consideration of the submissions made by both sides, I find that the issues emerge in this case is whether the appellant is entitled to avail credit on bulk milk cooler installed at milk collection center and DG sets away from the factory or not.
8. Learned AR has relied on the decision of Bharat Oman refineries to interpret the words premises and precincts. He further relied on the South Eastern Coalfileds and Vikash Industrial Gases (supra), I have seen that South Eastern Coalfields and Vikash Industrial Gases (prior) are prior to the decision of the Apex court in the case of Virkram Cement. In the case of Bharat Oman refinery, this Tribunal has not considered the decision of Vikram Cement and South Eastern Coalfields further JSW (supra). I have seen in the case of Vikram Cement, the Apex Court observed as under:
5.As regards the? Modvat/Cenvat credit on capital goods, if the mines are captive mines so that they constitute one integrated unit together with the concerned cement factory, Modvat/Cenvat credit on capital goods will be available to the assessee. On the other hand, if the mines are not captive mines but they supply to various other cement companies of different assessees, Modvat/Cenvat credit on capital goods used in such mines will not be available to the concerned assessee under the appropriate Modvat/Cenvat Rules. The matters are remanded to the respective original authorities for decision only on the above issue.
9. Further I find that in the case of Hindalco Industries Ltd. (supra), this is after considering Vikaram Cements and Vikash Industrial Gases has observed as under:
6.3?We are of the view that the ratio of the above-mentioned judgments of the Apex Court is squarely applicable to the facts of this case, as the Renusagar Power Plant, which is a captive power plant of the appellant company, together with the cement factory of the appellant company constitute one integrated unit and it is not disputed that except of small quantity of electricity generated being used in the Renusagar township, the remaining quantity is used in the appellants factory for production of aluminium. Therefore, the Cenvat credit in respect of capital goods and inputs used in the captive power plant located at Renusagar cannot be denied just because the power plant is located at some distance from the factory.
6.4?We also find that the Apex Court in the case of State of U.P. v. Renusagar Power Company reported in 1988 (4) SCC 59 has held that Renusagar Power Plant had no separate and independent existence apart from and independent of Hindalco (the appellant) and therefore the Renusagar Power Plant has to be treated as captive power plant of Hindalco.
7.?However, since, admittedly, some quantity of electricity generated is used in the township and is not used in the factory of the appellant company for manufacture of excisable goods, to that extent, the input duty credit would not be admissible in view of judgment of the Apex Court in the case of CCE v. Solaris Chemtech Ltd. [2007 (214) E.L.T. 481 (S.C.)]. However, for determining the quantum of input duty credit, which would be inadmissible on this ground, the matter would have to be remanded to the original Adjudicating Authority.
10. Further in the case of Birla Corporation Ltd. (supra), wherein the facts of the case are :
2.The Customs, Excise? & Gold (Control) Appellate Tribunal, New Delhi (for short CEGAT) by its impugned order of 25th March, 2003 disallowed the Modvat credit on the ground that the ropeway transports raw material from the mines to the factory premises and is not a material handling equipment within the factory premises. It is not disputed before us that the crushed lime stone is brought from the mines to the factory premises where it is deposited utilising the ropeway as a means of transportation Wherein the Apex Court has observed as under:
5.In the instant case the same? question arises for consideration and the facts are almost identical. We cannot permit the Revenue to take a different stand in this case. The earlier appeal involving identical issue was not pressed and was therefore, dismissed. The respondent having taken a conscious decision to accept the principles laid down in Pepsico India Holdings Ltd. (supra) cannot be permitted to take the opposite stand in this case. If we were to permit them to do so, the law will be in a state of confusion and will place the authorities as well as the assessees in a quandary.
6.We, therefore, allow this appeal? and hold that Modvat credit is available to the appellant in the facts and circumstances of the case. This appeal is accordingly allowed. The order of the CEGAT is set aside.
12. This issue also came up before this Tribunal in the case of JSW Steel Ltd. (supra) wherein it has been observed as under:
30.In this case, the other relevant facts are that for? generation of electricity, both the water and steam turbines which are used to produce power, were to be supplied by M/s. SISCOL though the boilers, which are also installed in the premises of M/s. SISCOL. Therefore, by no stretch of imagination it can be said that CPP for generation of electricity is an independent entity from where the appellants M/s. SISCOL had purchased electricity. In fact, it is only an arrangement for restructuring of their funds and lease was executed only for raising the funds by M/s. JSWPL for installation of CPP.
13. I find that in this case bulk milk coolers and DG sets have been installed by the appellant in the premises which has been leased out to the appellant and which is ultimately used by the appellant for manufacturing their final product which has been cleared on payment of duty. Therefore, relying on the case law cited by the appellant which are squarely applicable to the facts of this case, I hold that the appellant has correctly availed the credit on capital goods i.e. bulk milk coolers and DG sets and consequently the impugned order is set aside and the appeals are allowed with consequential relief, if any.
(Pronounced in the open court on _________________________) (Ashok Jindal) Member (Judicial) mk 1