Custom, Excise & Service Tax Tribunal
M/S. The India Cements Limited vs The Commissioner Of Central Excise, ... on 22 October, 2010
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH AT BANGALORE Central Excise Appeal Nos:E/881/2007 (Arising out of Order-in-Appeal No:43/2007(H-III) CE dated 13.11.2007 passed by the Commissioner of Customs, Central Excise & Service Tax (Appeals-III),Hyderabad) 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. The India Cements Limited Appellants Vs. The Commissioner of Central Excise, Appeals-III Hyderabad Respondents
Appearance Shri S. Muthu Venkatraman, Advocate, for the appellant Shri D.P. Nagendra Kumar, JCDR, for the Respondent CORAM HONBLE SHRI JUSTICE R.M.S. KHANDEPARKAR, PRESIDENT HONBLE SHRI. P. KARTHIKEYAN, MEMBER(TECHNICAL) Date of Hearing:22.10.2010 Date of decision:22.10.2010 FINAL ORDER Nos._______________________2010 Per Shri Justice R.M.S. Khandeparkar (Oral) Heard the learned Advocate for the appellant and the learned Joint CDR for the respondent.
2. This appeal arises from Order dated 13th November, 2007 passed by the Commissioner (Appeals), Hyderabad.
2. By the impugned order, the appeal filed by the appellant against the order of the adjudicating authority has been dismissed.
3. The appellant is essentially challenging the decision of the Excise Officers rejecting the claim of the appellant in relation to the CENVAT Credit on the capital goods used in the fly ash extraction.
4. The appellant is the manufacturer of Cement classifiable under Chapter 25 of the Central Excise Tariff Act, 1985. The appellant sought permission to avail CENVAT credit of duty paid on the capital goods used in the erection of fly ash extraction plant at Vijayawada Thermal Power Station at Vijayawada. The said claim was rejected by the lower authorities on the ground that the activity was not essentially carried out within the captive mines and fly ash extracted is not being utilized exclusively in the appellant's factory. In that regard, reliance was placed in the decision in the case of Ahmedabad Electricity Co. Ltd. Vs. Union of India [2003 (158) ELT 3(SC)] wherein it was held that the fly ash is not an excisable goods and, therefore, does not come within the purview of the said Act. Reliance was also placed in the decision in the matter Vikram Cements Ltd. Vs. CCE, Indore [ 2006 (197) ELT 145(SC)].
5. Referring to the impugned order passed by the Commissioner (Appeals), the learned Advocate for the appellant, while placing reliance in the decision of the Apex Court in the matter of Birla Corporation Ltd. Vs. CCE reported in 2005 (186) ELT 266(SC), submitted that the authority below are wrong in assuming that since the unit of fly ash extraction is situated away from the cement factory that, therefore, the appellant would not be entitled to avail the credit. According to the learned Advocate, the credit has been denied essentially on the said ground. The Supreme Court in that regard having held that mere distance between such unit and the factory of the assessee could not be a deciding factor to deny the CENVAT credit benefit, the authority below, according to the advocate for the appellant, erred in denying the CENVAT credit benefit.
6. The Joint CDR, on the other hand, submitted that considering the law laid down by the Apex Court in Vikram Cement(supra) as well as in Ahmedabad Electricity Co. Ltd. case (supra), no fault can be found in the impugned order.
7. The Commissioner (Appeals), while confirming the denial of Modvat/Cenvat credit to the capital goods claimed by the appellant, has observed thus:
"8. In the case on hand, the Appellants have entered into MOU with VTPS for extraction of fly ash for the contracted period of 10 years and during the said period, they are to maintain the fly ash extraction system and also get fly ash. Out of the two fly ash silos at VTPS, one is meant for their exclusive use and the other is to be shared by them with M/s. Vishnu Cements and Andhra Cements. The Appellants have taken a stand that the fly ash extraction system is their capital asset and used in or in relation to the manufacture of cement and hence they would be eligible for the CENVAT credit of duty paid on the items which have gone into the making of the said fly ash extraction system classifiable under Ch 84312090 of CETA, 1985. The Appellants have also relied on clause No. 22 and 23 of Memorandum of Understanding (MOU) to drive home their contention that though the extraction of fly ash is not in their captive plant, yet the fly ash generated is totally used in their factory captively for the manufacture of cement. On a careful perusal of the MOU, the following facts emerge:
The existing fly ash extraction plant at M/s. VTPS was offered to the Appellants for upgradation at their cost.
The rights on all the equipment installed in the premises of M/s. VTPS shall rest with M/s. VTPS only.
The personnel deployed for operation and maintenance of the system shall work as per the guidelines of M/s. VTPS.
In the event of the Appellants not able to lift the available dry fly ash, the same shall become surplus and such surplus quantity shall rest with M/s. VTPS, which can be issued to other parties.
M/s. VTPS reserves the right to utilize fly ash required for its own projects from any of the units.
9. In the case of M/s.Vikram Cements Ltd. Vs. CCE, Indore [2006 (197) ELT 145 (SC)], it was held that "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 assesses, Modvat/Cenvat credit on capital goods used in such mines will not be available to the concerned assesses under the appropriate Modvat/Cenvat Rules". In the instant case, the Appellants have only undertaken the activity of upgrading the existing fly ash extractor in the premises of M/s. VTPL at Vijayawada. The drawing of analogy between the "captive mines", as discussed in the cited case law and "the fly ash extractor system" operated by the Appellants at M/s. VTPL is farfetched. The MOU entered by them clearly states that the rights on all the equipment installed in the premises of M/s. VTPS shall rest with M/s. VTPS only and in case the Appellants are not able to lift the available dry fly ash, the same shall become surplus and such surplus quantity shall rest with M/s. VTPS, which can be issued to other parties. More importantly, M/s. VTPS has the right to utilize fly ash required for its own projects from any of the units. The above facts make it abundantly clear that neither the extraction of fly ash takes place in their captive plant nor the fly ash generated is totally used in their factory captively. Further, the fly ash extraction system operating at M/s. VTPS and owned by them can by no stretch of imagination be construed to constitute one integrated unit together with the concerned cement factory. From the foregoing, it is clear that the facts of this case are distinguishable from the one on which the Appellants have so heavily banked upon."
8. The Apex Court, in Vikram Cement case in Appeal No. 1197/2005 delivered on 16th February 2006, had held thus:-
"As regards the Modvt/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."
9. The detailed analysis of the materials on record by the Commissioner (Appeals) and the findings arrived at on the basis of such analysis clearly disclose that in the case in hand, it is abundantly clear that neither the extraction of fly ash takes place in the captive plant nor the fly ash generated is exclusively used in the factory of the appellant. This itself is sufficient to reject the claim of the appellant.
10. As rightly pointed out by the learned Joint CDR, the decision of the Apex Court in Ahmedabad Electricity Co. Ltd. case (supra) also lend support to the view taken by the Commissioner (Appeals).
11. The decision of the Apex Court in Birla Corporation Ltd. case (supra) was in relation to a question as to whether the duty paid on the spares of the ropeway used for the purpose of transporting crushed limestone from mines located at 4.2 kms. away from the factory could have been availed as Modvat credit. The said matter did not involve any other issue regarding the captive use and necessity of subsidiary plant being a captive plant. Being so, the decision is of no help in the matter in hand.
12. For the reasons stated above, therefore, we do not find any case for interference in the impugned order and hence the appeal is dismissed.
(R.M.S. KHANDEPARKAR) President (P. KARTHIKEYAN) Member (T) /pr/