Custom, Excise & Service Tax Tribunal
Cce, Raipur (C.G.) vs M/S. Jindal Steel & Power Ltd on 17 April, 2013
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH, NEW DELHI.
Date of hearing:17.04.2013
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982.
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Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
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Whether Their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
Central Excise Appeal No.E/2830 of 2002
(Arising out of Order-in-Original No.279-284/CH.72, 73, 74, 84 & 85/COMMR/2001 dated 29.08.2001 passed by the passed by the Commissioner of Central Excise, Raipur).
CCE, Raipur (C.G.) Appellants
Vs.
M/s. Jindal Steel & Power Ltd. Respondent
Appearance: Ms. Ranjana Jha, Joint CDR for the appellant.
Shri L.P. Asthana, Advocate for the respondent.
Coram : Honble Smt. Archana Wadhwa, Member (Judicial) Honble Shri Rakesh Kumar, Member (Technical) Final Order No.A/56512/2013 /Dated:17.04.2013 Per Rakesh Kumar:
The respondents are manufacturers of Sponge Iron and other Iron and Steel products chargeable to central excise duty. They had captive power plant. During the period of dispute i.e. during November 99 to August, 2000, they installed additional machinery for enhancing the power generation capacity and availed capital goods cenvat credit amounting to Rs.1,50,84,086/- in respect of the same. The department being of the view that since these capital goods have been used for generation of electricity which is non-excisable and since bulk of the electricity generated was being sold to the State Electricity Board as during the period of dispute, the power generated by the captive power plant was in excess of the respondents actual requirement issued a show cause notice for denying cenvat credit in respect of power generating machinery, its recovery along with interest and imposition of penalty. The show cause notice was adjudicated by the Commissioner vide order-in-original dated 29.8.2001 by which the proceedings against the respondent were dropped. However, this order of the Commissioner was reviewed by the Board under Section 35 E(1) of the Central Excise Act, 1944 and the Board by Review Order dated 27.08.2002 directed the Commissioner to file a review appeal for determination of the points as mentioned in the review order. Accordingly, the Commissioner filed a review appeal in terms of the provisions of Section 35 E (4) of the Central Excise Act, 1944.
1.1 This appeal was decided by the Tribunal vide Final Order No.A/452/2003 dated 5.9.2002 by which Revenues appeal was dismissed. The Tribunal while dismissing the appeal observed that modvat credit cannot be denied to the respondent as the power plant installed is part of their expansion plan to enhance the production capacity of sponge iron and steel and ferro alloys for which more power would be required by them.
1.2 Against this order of the Tribunal, the department filed appeal under Section 35G before the Chattisgarh High Court. In the appeal filed by the Revenue, the following questions of law were raised for decision of Honble High Court:-
(a) Whether the respondent can avail Modvat Credit facility with respect to the electricity produced in their captive power plant, when the electricity produced was at relevant time being sold to the MPEB as a final product itself and when the same is not excisable under the Act.
(b) Whether Modvat credit facility can be extended to the respondent, with respect to the electricity produced in their captive power plant, when the same was not being used for manufacturing/production of their excisable final product in the fact and circumstances of the case.
(c) Whether MODVAT credit facility could have been claimed by the respondent contingently on the electricity being produced by them on the ground that it will be used for the manufacturing /production at some future date after the expansion of their sponge iron unit.
1.3 The Honble Chattisgarh High Court decided the Departments appeal vide order dated 4.9.2012 setting aside the Tribunals order and remanding the matter afresh in the light of the Apex Courts decision in the cases of
(a) Commissioner of Central Excise, Chennai-I Vs. Chennai Petroleum Corporation Ltd. reported in 2007 (211) ELT 193 (SC),
(b) Maruti Suzuki Ltd. Vs. Commissioner of Central Excise, Delhi-III reported in 2009 (240) ELT 641 (SC).
2. Heard both the sides.
3. Ms. Ranjana Jha, ld. Joint CDR, assailing the impugned order of the Commissioner and reiterating the points raised in the Revenues appeal against the Commissioners order, pleaded that during the period of dispute, the power generation by captive power plant already installed in the respondents factory was more than the actual power consumption and, therefore, the new power generation machinery was used for generation of power which was sold outside, that the respondent for this purpose had entered into an agreement with the State Electricity Board for the sale of power, that since the electricity is not excisable product, the capital goods installed in the factory for generation of additional electricity, which was being sold outside the factory, would not be eligible for cenvat credit and that in this regard, she relies upon the Apex Courts judgement in the case of Maruti Suzuki Ltd. Vs. Commissioner of Central Excise, Delhi-III reported in 2009 (240) ELT 641 (S.C.). She, therefore, pleaded that the impugned order permitting the cenvat credit in respect of the power plant machinery is not correct.
4. Shri L.P. Asthana, ld. Counsel for the respondent, pleaded that during the period of dispute the respondent were in the process of expanding their capacity for manufacture of sponge iron and other steel products, that for this purpose only, they had augmented their power generation capacity as more power was going to be required for increasing their steel production, that just because during certain period, the power being generated by them was in excess of actual power requirement and excess power was sold to the State Electricity Board, the modvat credit cannot be denied, that in this regard, he relies upon the judgement of Honble Chattisgarh HighCourt in the case of CCE, Raipur Vs. HEG Ltd., wherein it was held that cenvat credit would be admissible on the capital goods installed in the factory for captive power generation, even if, substantial portion of the electricity generated was being wheeled out to sister concern and was not being used in the factory and in this regard, the Apex Courts judgement in the case of Maruti Suzuki Ltd. reported in 2009 (240) ELT 641 (SC) would not be applicable, that the facts of the present case are identical to the facts of the case of HEG Ltd. (supra) decided by the Honble Chattishgarh High Court, that the judgement of the Apex Court in the case of CCE Vs. Chennai Petroleum Corpn. Ltd. (supra), mentioned in the remand order dated 4.9.2012 of Chattisgarh High Court has absolutely no relevance to the issue involved in this case and that it is the judgement of the same High Court in the case of HEG Ltd. (supra) which is applicable to the facts of this case. He, therefore, pleaded that there is no merit in the Revenues appeal.
7. The dispute in this case is about the machinery installed for augmenting the power generation in the captive power plant. There is no dispute that the machinery required for captive power plant is eligible for capital goods cenvat credit. However, the departments objection is that bulk electricity was being sold to the State Electricity Board and hence the cenvat credit would not be admissible as the machinery has been used for generation of electricity, and that electricity had not been used in the factory. We do not agree with this objection of the department, as it is not disputed that the respondent was in the process of enhancing their capacity for production of sponge iron and other iron and steel products for which they required more electricity and for this purpose only, their power generation electricity had been enhanced. Therefore, just because during the intervening period between installation of power generation machinery for generating additional power and installation of machinery for manufacture of sponge iron and other iron and steel products, the excess power being generated was being sold outside, the capital goods cenvat credit in respect of power generation machinery cannot be denied. We find that identical point of dispute was involved in the case of HEG Ltd. wherein Honble Chattishgarh High Court vide judgement dated 30.09.2010 observing that the Apex Courts judgement in the case of Maruti Suzuki Ltd. is not applicable, has held that cenvat credit in respect of the machinery for captive power plant would be admissible even if the bulk of the electricity generated was being wheeled out to the sister concern. We have also find that the issue involved in the Apex Courts judgement in the case of Chennai Petroleum Corpn. Ltd. (supra) is totally different whether Residual Fuel Oil (RFO) obtained as residue after distillation of crude oil for manufacture of petroleum products would be liable to excise duty, if such RFO was used as fuel for generating electricity and the electricity instead of being used in the refinery was sold to Tamil Nadu Electricity Board. The Apex Court held that to the extent electricity was sold out, RFO used in generation of such electricity would be liable to duty. The issue involved in this case is totally different whether the power generation machinery can be said to have been exclusively used for manufacture of exempted excisable goods when a part of electricity was being sold out. Therefore, the Apex Courts judgement in case of Chennai Petroleum Corporation Ltd. (supra) is not applicable to the facts of this case.
8. In view of the above discussion, we hold that there is no merit in the Revenues appeal. The same is dismissed.
( Archana Wadhwa ) Member (Judicial) ( Rakesh Kumar ) Member (Technical) Ckp.
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