Custom, Excise & Service Tax Tribunal
C.C.E., Raipur vs Bhilai Steel Plant on 20 December, 2016
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R.K.Puram, New Delhi COURT-I Date of hearing: 6.12.2016 Date of pronouncement : 20.12.2016 Central Excise Appeal No.2421 of 2007 Arising out of the Order-in-Original No.Commissioner/RPR/30/2007 dated 24.5.2007 passed by the Commissioner, Central Excise, Raipur. C.C.E., Raipur .. Appellant Vs. Bhilai Steel Plant Respondent
Appearance:
Present Shri Amresh Jain, A.R. for the Appellant-Revenue Present Shri Amit Jain with Shri Vipul Agarwal, Advocates Coram: Honble Mr. Justice (Dr.) Satish Chandra, President Honble Mr. V. Padmanabhan, Technical Member Final Order No. 55927/2016 Per V. Padmanabhan:
The present appeal filed by Revenue is against the order dated 24.5.2007 in which the Commissioner dropped the demand of central excise duty of about Rs.1.7 crores.
2. The respondent is engaged in the manufacture , inter alia, of goods falling under Chapter 72, 73, 84 and 86 of the First Schedule to the Central Excise Tariff Act, 1985. Respondent had a captive power plant, installed in the year 1982-83, which was being used for generation of steam and electricity required for manufacture of steel. Respondent had availed credit of capital goods installed in the captive power plant after 1.3.1994, when the Modvat Scheme was introduced.
3. Under a comprehensive business restructuring plan, to focus on areas of core competence and to reorganize its activities and with a view to streamline the production/power generation related activities, the Respondent transferred the ownership of their captive power plant, installed within their factory to M/s Bhilai Electric Supply Company Ltd. (BESCL), on the terms and conditions specified in the agreement dated 19.3.2002.
4. In terms of the agreement dated 19.3.2002, respondent delivered all movable and immovable articles including building, works, plants and machinery to M/s BESCL. A dead of lease was also executed to effect the transfer of the leasehold interest in the lands/immovable property used by the said captive power plant. Various other agreements relating to sharing of facilities and services were entered into. They also entered into a power and steam purchase agreement whereby M/s BESCL was to supply the electricity generated to SAIL.
5. Department took the view that since the respondent and M/s BESCL are separate legal entities, the inputs and capital goods which were transferred by the respondent to M/s BESCL stood removed and that the respondent was required to pay an amount equal to the duty of excise which is leviable on such inputs and capital goods installed in the captive power plant on which cenvat /movat was taken, in terms of Rule 3(4) of the Cenvat Credit Rules, 2002.Department relied on registration of M/s BESCL as a separate factory with the Chief Inspector of Factories, Chhaittisgarh and took the credit that the transfer is liable to be termed as removal.
6. Show cause notice dated 27.7.2006 was issued to the respondent demanding an amount equal to the duty of excise leviable on the capital goods and inputs which, according to the Department, stood removed from the factory of the respondent. The amount payable was calculated on the basis of the value realized by the respondent from M/s BESCL. Also, suppression was alleged on the part of the respondent as it had failed to inform the sale of the captive power plant to the Department as also details of capital goods and inputs removed to M/s BESCL.
7. Respondent filed a detailed reply to the show cause notice dated 27.7.2006 stating that there was no removal of the capital goods in the captive power plant from the physical location, but there was mere change in ownership by transfer to M/s BESCL.There was no dismantling or physical shifting to any other location involved. Further, computation of demand as well as invocation of extended period of limitation was also challenged by the respondent.
8. Ld. Commissioner vide impugned order-in-original dated 24.5.2007 dropped the proceedings, relying upon the fact that neither the inuts/capital goods used in captive power plant nor the captive power plant itself was removed from its location. It was held that mere change in ownership on transfer of goods will not amount to removal of goods, in the absence of any physical shifting. Ld. Commissioner also relied upon the fact that the respondent did not submit any revised ground plan of the factory even after leasing out the captive power plant and the goods continued to remain within the approved factory premises of the respondent. Having decided the issue in favour of the respondent, on merits, ld. Commissioner did not decide the issue of limitation.
9. Against the above order passed by the ld. Commissioner, the present appeal has been filed by the Department, on the following grounds:
(i) Respondent and M/s BESCL are two separate legal entities and the land leased out by the respondent to M/s BESCL ceases to fall within the factory premises of the respondent.Therefore, on transfer of captive power plant, the inputs and capital goods stand removed in favour of M/s BESCL, and physical removal of the goods is not the necessary condition.
(ii) In terms of the provisions of Rule 3(4) of Cenvat Credit Rules, 2002 amount equivalent to credit availed is payable, as done in respect of stores and spares transferred along with captive power plant.
9. With this background, we have heard Shri Amresh Jain, ld.A.R. for Revenue and Shri Amit Jain, ld. Advocate for the respondent.
10. Ld. A.R. submits that in terms of Rule 3(4) of the Cenvat Credit Rules, the payment of an amount equivalent to the credit availed on capital goods is required to be made inasmuch as the power plant stands sold to M/s BESCL even though there is no physical removal of goods even after sale. He argued that the transaction was nothing short of physical removal of the capital goods. He relied upon the decision of the Honble Karnataka High Court in the case of Commissioner of Central Excise, Belgaum vs. Associated Cement Co. Ltd. 2009 (236) ELT 240 (Kar.). He emphasized that the decision of the Honble High Court was in similar facts.
11. Ld. Counsel for the respondent argued against the said proposal. His contention was that Rule 3(4) of the Cenvat Credit Rules requires payment of an amount equal to the excise duty leviable on such goods which re removed as such from the factory. His submission is that in the present case since there is no physical removal of capital goods, the aforesaid Rule is not attracted as there is no deeming fiction under Central Excise law with respect of removal goods. He relied upon the following case laws:
* Steel Authority India Ltd. vs C.C.E., Raipur 2016 (332) ELT 825 (Tri0 Delhi);
* Steel Authority of India Ltd. vs. C.C.E.,Bhubawa 2007 (219) ELT 96 (Tri-90);
* L G Balakrishnan and Bros vs. C.C.E., Trichy 2016 TIOL 2356 CESTAT MAD.
* J.K. Spinning & Weaving Mills Ltd. and Another vs. UOI and others 1987 (32) ELT 234 (SC).
12. It is an admitted fact that of the case that there was no physical removal of the capital goods from the factory of the respondent. The central point for consideration is whether the amount is required to be paid under Rule 3(4) of the Cenvat Credit Rules is to be paid by taking such capital goods as removed from the factory. Revenue relied upon the decision of the Honble Karnataka High Court in which a view was taken, in the light of the erstwhile Rule 57Q of the Central Excise Rules, that such an amount would be payable even in the absence of any physical removal of capital goods. The Honble High Court held that the transaction of sale of the entire power plant to different entity is nothing short of physical removal.
However, the respondent has relied upon several case laws in which contra view has been taken. Ld. Counsel has relied on the decision of the Honble Supreme Court in J.K. Cotton Spinning and Weaving Mills Ltd. vs. UOI 1987 (32) ELT 234 (SC) wherein the meaning of the word removal has been examined. The Apex Court held as follows: There can be no doubt that the word removal contemplates shifting of a thing from one place to another. In other words, it contemplates physical movement of goods from one place to another. In the Tribunal decision in the case of L.G. Balakrishnan and Bros. Ltd. (supra), the Tribunal has examined a similar question as is before us and considered the meaning of the word removal as explained by the Honble Supreme Court and held as under:
10. In view of the above settled decision, we find that the provisions of Rule 3 (5) are not attracted in the present case. The original authoritys attempt to distinguish the above findings is not appropriate. He found that these decisions are regarding change of ownership of whole factory whereas here only a part of the factory is transferred. We find such finding as untenable. Further, regarding question of issue of invoice by the appellant for sale and transfer of capital goods and inputs to the new legal entity, we find on perusal of sample invoice that these are not invoices in terms of Rule 11 of Central Excise Rules, 2002. The appellant contended that the goods were identified with value for the purpose of business transaction and not for sale transaction in terms of Sales Tax or Central Excise provision. We note that the invoices issued did not contain the details of any removal, mode of transport, rate of duty, duty payable thereon etc., as per the requirement of Rule 11 (2) of Central Excise Rules, 2002. We also note that based on these invoices no credit can be availed by any buyer as these are not in terms of Rule 9 of Cenvat Credit Rules, 2004. In view of settled legal position regarding need for physical removal of capital goods or inputs, in order to attract the provisions of Rule 3 (5) of Cenvat Credit Rules, 2004, we find that there is no justification to invoke such provision to demand and recover any amount from the appellant in this case. As such, we find no justification for the confirmation of demand towards capital goods. The same reasoning is applicable to the recovery of amount for the inputs amounting to Rs.91,76,449/-. The demand towards such recovery is also not sustainable. There is no allegation or finding regarding any irregular credit availed on inputs or capital goods or usage of these goods for other than approved purposes.
13. We also note that the Tribunal has taken similar view in all the cases cited by the respondent.The Tribunal decision cited in the case of Steel Authority of India Ltd. 2007 (219) ELT 960 (Tri-Del.) has dealt with identical facts pertaining to another unit of respondent at Rourkela. We also note that the respondent has cited similar decision from the Honble Allahabad High Court as well as Madras High Court.
14. After considering various case laws cited by both the sides we find that the Honble Supreme Court has clearly held that removal contemplates physical removal of goods from one place to another . Such a view has also been taken by the majority of the High Court as well as in several Tribunal decisions including in respect of another unit of respondent. Under the circumstances, we find no infirmity in the order passed by the ld. Commissioner who has held that no amount is required to be paid under Rule (4) on capital goods as there has been no removal and dropped the demand of central excise duty.
15. In view of above, the impugned order is upheld and the appeal filed by Revenue is dismissed.
(Pronounced in open Court on 20.12.2016).
(V. Padmanabhan) (Justice Dr. Satish Chandra)
Technical Member President
scd/
Appeal No.E/2421/2007
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