Customs, Excise and Gold Tribunal - Delhi
Haldia Petrochemicals Ltd. vs Commissioner Of C. Ex. on 28 January, 2005
Equivalent citations: 2004(177)ELT708(TRI-DEL)
ORDER
Jyoti Balasundaram, Vice-President
1. This order disposes of two appeals filed by M/s. Haldia Petrochemicals Limited relating to the question of eligibility of Cenvat credit on inputs used for the generation of steam and electricity during the period November, 2000 to October, 2002. One appeal is against the order of the Commissioner (E/4001/04-A) and the other against the order of the Commissioner (Appeals) (E/4201/04-A).
2. The brief facts of the case are that M/s. Haldia Petrochemicals Limited (hereinafter referred to as the 'appellant') is a Public Limited Company promoted by the West Bengal Government through the West Bengal Industrial Development Corporation, which had set-up a petrochemical complex at Haldia, comprising (a) Naphtha Cracker Unit (NCU) and (b) Associated Downstream Units for producing HDPE, PP, LLDPE, etc., which consume the products manufactured by the NCU. The principal raw material for manufacture of petrochemical products is Naphtha which is procured from Indian Oil Corporation or other indigenous oil refineries or by direct imports from overseas, on payment of duty. A small portion of the Naphtha, either as such, or after being partially processed (internally known as CLS comprising NRS/Py Gas/C-6 Raffinate, etc.), is also sent to a power plant for generation of electricity or steam, which are in turn used for production of the final products within the appellant's factory.
3. Electricity is a vital input for the functioning of the plant in the petrochemical complex. Steam is also an essential input for the Naphtha Cracking Unit where Naphtha is fed along with the steam. It is, therefore, necessary for the appellant to maintain an uninterrupted supply of electricity and steam of an acceptable quality. For the purpose of meeting its requirement of electricity and steam, a combined cycle co-generation electricity plant (hereinafter referred to as 'power plant' 116 MW capacity) was setup by the appellant in a joint venture with M/s. Larsen and Toubro Limited. The Joint Venture Company, which owns the power plant, is known as HPL Co Generation Limited (HPLCL). A power agreement for a period of 20 years was signed between the appellant and HPLCL. In terms of this agreement, the appellant was required to supply Naphtha, as such, or partially processed Naphtha (CLP), and start up fuel free of cost to HPLCL, through pipeline for generation of electricity and steam, which would be returned back to the appellant for use in the manufacture of its final products. As per the power agreement, the appellant was required to pay conversion charges to HPLCL for carrying out the aforesaid operation. The land on which the power plant is situated has been assigned by the appellant to the joint venture (HPLCL) for a period of 20 years. Although the power plant is situated within the factory complex, the area of the power plant is separated from the main complex by a boundary wall.
4. The production in the petrochemical complex commenced sometime in the year 2000. Before the commencement of the operations of the petrochemical complex, the appellant wrote a letter dated 16-11-99 to the Commissioner of Central Excise and Customs, giving the background of the setting up of the petrochemical complex at Haldia and indicating the basic facts regarding its operations. Certain approvals were also requested for in this letter, such as (i) permission to warehouse Naphtha in a bonded warehouse without payment of duty, (ii) mixed bonding for both Central Excise and Customs, (iii) computation of assessable value for Excise/Customs duty in case of mixed bonding, (iv) storage of duty paid Naphtha. This letter also stated that the Naphtha, which had been procured in bulk, would be pumped from the appellant's storage tank either to its manufacturing unit or to the power plant; that the electricity generated by the power plant will be used within the appellant's factory; similarly, the steam generated will also be utilized within the appellant's factory, where it will be mixed with feedstock and Naphtha for cracking. The letter sought confirmation that the appellant will qualify for Modvat benefit both in respect of (a) Naphtha used as input for manufacture of the petrochemical products in its factory, and (b) Naphtha used as input for generation of electricity and steam in the power plant, which in turn would be used in the manufacture of petrochemical products by the appellant in its factory.
5. By letter dated 1-4-2000/28-4-2000, the Superintendent of Central Excise gave the approvals, as sought for, and confirmed that Cenvat credit on Naphtha used in or in relation to manufacture of final product, would be admissible subject to satisfaction of other terms and conditions. However, the letter stated that Cenvat credit on Naphtha used for generation of electricity and steam by the power plant would not be allowed. Against this letter, the appellant filed an appeal before the Commissioner of Central Excise (Appeals), Calcutta. The Commissioner of Central Excise (Appeals) passed Order-in-Appeal dated 27-2-2004 rejecting the appeal, rejecting the contention of the appellant that the power plant is situated within the premises of the registered factory of the appellant. He held that the power plant is under the ownership of a different company, HPLCL and the land on which the power plant is situated is assigned by the appellant to HPLCL by way of a deed of assignment and as such, it no more remains the part of the factory premises of the appellant. According to the Commissioner (Appeals), the factory of the appellant and the power plant of HPLCL are in two separate premises. On the basis of this finding, the Commissioner of Central Excise (Appeals) held that the Modvat credit was permissible only in respect of the duty paid on the inputs used for generation of electricity or steam used for manufacture of the final product or for any other purpose within the factory of production. In this case, according to him, the input was being used for generation of electricity or steam outside the factory of production, and as such the Modvat credit was not available. This order gives rise to Appeal No. E/4210/04-A.
6. In continuation of the letter dated 1-4-2000 received from the Superintendent, the appellant also wrote a letter on 25-5-2000 to the Commissioner of Central Excise and Customs. In this letter, the appellant again stressed that the generation of electricity and steam is an integral part of their manufacturing process, without which their petrochemical complex cannot function. In addition and without prejudice to the aforesaid submission, the appellant also submitted that Cenvat credit on Naphtha should not be denied to them in spite of the fact that they are getting electricity and steam generated by their conversion agent, i.e. HPLCL on their behalf, which in turn are brought to its factory unit for manufacture of final products within the stipulated period in terms of Rule 57AC (5)(a) of the New Cenvat Rules. This letter enclosed a detailed note giving the background of the case, extracts from the various Cenvat Rules, etc. This letter also relied upon the decision of the Hon'ble Supreme Court in the case of Collector of Central Excise v. Rajasthan State Chemicals Works, , the decision of the Tribunal in the case of Western India Plywood Ltd. v. CCE, , the Oriental Carbon and Chemicals Ltd. v. CCE, and Superintending Engineer, v. CCE, . The last decision was based on the definition of "premises including precincts" used in the context of the word 'factory'. This note also relied upon the decision of the Apex Court in the case of CST v. M.P. Electricity Board, to show that electricity if "goods".
7. On 8-6-2000, the appellant again wrote a letter to the Superintendent of Central Excise, giving a reference to the previous letters and finally referring to a meeting, which the representative of the appellant had with the Commissioner on 31-5-2000. The letter stated "after due deliberations, the learned CCE pointed out that since the power plant has been set up by a separate company, namely, HPLCL, and not us, it would not be possible to consider the power plant as our captive power plant. Accordingly, he conveyed reluctance to allow Cenvat credit on Naphtha used for power plant on that ground. Nevertheless, the Ld. CCE was pleased to convey that we are entitled to Modvat/Cenvat Credit in respect of the duty paid on Naphtha by sending Naphtha to HPLCL for further processing on job work basis". Finally, the appellant wrote that "In view of the aforesaid discussions, as has been very kindly confirmed by the Ld. CCE and your goodself, Cenvat Credit is admissible to us on Naphtha used for generation of electricity and steam by HPLCL on job work basis. Further, since we are a new assessee, we request your goodself to kindly let us the procedural aspects, if any, to be followed by us under the job work mode".
8. On 12-7-2000, the Superintendent of Central Excise clarified the procedural aspects by inviting attention of Rule 57AB(5)(a) of the Central Excise Rules, 1944 which provided that the inputs should be received from the job worker within 180 days, failing which duty would be required to be paid to the extent attributable to the inputs not received. As such, he asked the appellant to debit the Central Excise duty on the Naphtha supplied to HPLCL for generation of electricity and steam, not received back within a period of 180 days. In reply, the appellant wrote a letter dated 18-7-2000 pointing out that at any point of time, the time gap between supply of Naphtha to HPLCL and its return after conversion can never exceed 2-3 days. As such, the question of Cenvat reversal did not arise. The letter again mentioned the discussions with the Commissioner and assurance given by him regarding the availability of Cenvat credit on job work payment and stated that "In the meanwhile, unless we hear otherwise from you, we will take it that we are entitled to and have rightly claimed Cenvat credit subject to the submissions given by us herein-above. In the event if you need any further information and/or clarification from our side, please do not hesitate to let us know". Thereafter, the appellant started sending the Naphtha and partially processed Naphtha to the power plant on job work basis and taking the benefit of Cenvat credit on job work basis and also filed Returns under Rules 54 and 173G of the Central Excise Rules, 1944, and also filed RT-12 returns.
9. The Commissioner of Central Excise, Haldia issued a show cause notice dated 26-5-2003 raising duty demand for the period 1-11-2000 to 31-10-2002. The show cause notice laid particular emphasis on the point that the final product electricity, is non-excisable goods and as such the conditions of Notification No. 214/86 were not fulfilled. Further it was alleged that, the appellant has suppressed material facts relating to job work. On 7-11-2004, the appellant filed a detailed reply to the show cause notice. In this reply, apart from making submissions on the merits regarding allegations in the show case notice, the appellant pointed out that Notification No. 214/96 was not at all relevant for availment of credit and further that electricity and steam were intermediate products and not final products as alleged. The appellant also submitted that there was no justification for invoking the extended period of limitation. It also denied any liability for interest or penalty. As regards the point whether or not the power plant is located within the factory premises of the appellant, the Commissioner of Central Excise, Haldia, agreed with the finding of the Commissioner (Appeals) that the power plant is located outside the factory premises of the appellant. As for the question whether the appellant is eligible for the benefit of Cenvat credit under Rule 4(5)(a) of Cenvat Credit Rules, the Commissioner has held that this Rule is not applicable because what is returned back from the premises of HPLCL is electricity and not any excisable goods. According to the Commissioner, the appellant sent partially processed Naphtha, i.e. CLS to the power plant belonging to a different company, namely, HPLCL for generation of electricity and steam and in that process, the character of the inputs gets totally converted from raw material to energy. Rule 4(5)(a) emphasises return of the inputs or partially processed inputs from the job worker's premises after further processing such as testing, repair, re-conditioning or any other purposes and not for complete conversion of input or partially processed input into a different entity altogether. He has further held that the relationship of HPL and HPLCL cannot be said to be one of principal manufacturer and its job worker. It is a case of two independent manufacturers belong to two separate and independent companies. The Commissioner also sustained the charge of suppression. He disallowed the credit and confirmed demand of duty of Rs. 29,18,30,118/- with interest under Section 11AB and also imposed a penalty of equal amount under Section 11AC of the Central Excise Act by his final order dated 2-5-2004. This gives rise to Appeal No. E/4001/04-A.
10. We have heard both sides.
11. Two issues arise for consideration in these appeals. (1) Whether the power plant is located within the factory premises of the appellant and consequently whether Cenvat credit is admissible. (2) Whether the appellant is entitled to Cenvat credit on the basis that the inputs are being supplied to a job worker, namely the power plant, for generation of steam and electricity which are returned back to the appellant's factory for production of the final products.
12. On the first issue, the Counsel for the appellant has submitted that power plant is situated within the factory of production of final products and is shown in the ground plan as approved by the Central Excise. According to him, the question of ownership of the power plant is not relevant. He emphasized that power and steam generation process of the power plant is completely integrated with HPL complex and particularly with the Naphtha Cracking Unit Steam generation system. Very high degree of integration is incorporated between HPL and the power plant with respect to steam and power generation and utilization configuration to improve overall process efficiency of both the appellant and the power plant. The petrochemical complex of the appellant and the power plant steam systems are synchronised. The entire feed stock for generation of electricity and steam is provided by the appellant to the power plant. The power plant is completely dedicated to the main factory of the appellant. The facilities are totally interconnected. The power plant does not sell the steam and electricity to any outside user nor does the appellant charge the power plant anything for all the raw materials supplied. The power plant only recovers facilitation charges from the appellant.
13. As regards the second issue, the Counsel for the appellant has submitted that the appellant is entitled to the benefit of the Cenvat credit under the job work procedure. He has urged that merely because the character of the inputs is changed, when they are received back, it is not relevant. Electricity is an intermediate product used in the manufacture of the final product and the change of the identity of the input does not bar the admissibility of Cenvat credit under the job work procedure. In this connection, he relied upon a number of judgments the Supreme Court, High Courts and the Tribunal. He further submitted that the Commissioner himself had agreed in the discussions with him (referred to above) that the appellant could take Cenvat credit by following the job work procedure. He also submitted that the expressions "further processing" and "any other purposes" used in the rule must be given wide amplitude and would even cover complete manufacture as seen from the provisions of Rule 4(6). In this connection, he also relied upon the Board's Circular dated 4-5-94. The Ld. Counsel also specifically relied upon the decision of the Tribunal in the case of Essar Steel Limited v. Commissioner of Central Excise, Surat which according to him directly applies to the present case. He also relied upon the decision of the Supreme Court in the case of Escorts Limited v. Commissioner of Central Excise, Delhi reported in 2004 (64) RLT 227 (SC) wherein the Supreme Court has held that so long the duty is paid on the final product, mere fact that duty was not paid on the intermediate product would not disentitle the manufacturer from the benefit of Cenvat credit.
14. The Ld. Counsel also submitted that Notification No. 214/86 has no relevance to the facts of the present case. He also submitted that the extended period of limitation cannot be invoked in view of the fact that everything was known to the Central Excise authorities and RT-12 returns were also regularly submitted for each month. The demand of duty for a substantial period was, therefore, time barred. Finally, he submitted that in the facts of the case involving interpretation of an important question of law, no penalty is warranted.
15. On the other hand, the Ld. Senior Departmental Representative, with regard to the first issue, stressed that there is a boundary wall between the appellant's factory and the power plant and it cannot be overlooked that the power plant is owned by a different legal entity, namely, a joint venture company. Therefore, it cannot be said that the power plant is located within the factory premises of the appellant. As regards the second issue, the Ld. Senior Departmental Representative reiterated the findings of the Commissioner. He emphasised that electricity is not excisable goods and, therefore, the job work procedure would not apply. He also submitted that since Notification 214/86 has no application to the facts of the case, the benefit of Cenvat credit cannot be taken by following job work procedure. He also stressed the point regarding change of identity of the input. He further submitted that the processes done by the power plant amounted to manufacture and cannot be regarded as mere processing.
16. We have considered the rival contentions and we find it is not necessary to give any findings on the first issue, in view of our findings on the second issue. During the relevant period (i.e. November 2000 to October 2002), the relevant provisions of law read as under :
From November 2000 to 30th June 2001 "input" means all goods, except high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not, and includes accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used for manufacture of final products or for any other purpose, within the factory of production, and also includes lubricating oils, greases, cutting oils and coolants.
Explanation 1. - The high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.
Explanation 2. - Inputs include goods used in the manufacture of capital goods which are further used in the factory of the manufacture.
Rule 57AB. Cenvat credit. - [(1) A manufacturer or producer of final products shall be allowed to take credit (hereinafter referred to as the Cenvat credit) of, -
(i) the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 (hereinafter referred to as said First Schedule), leviable under the Act;
(ii) the duty of excise specified in the Second Schedule to the Central Excise Tariff Act, 1985, leviable under the Act,
(iii) the additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978;
(iv) the additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957;
(v) the National Calamity Contingent duty leviable under Clause 129 of the Finance Bill, 2001, which clause has, by virtue of the declaration made in the said Finance Bill under the Provisional Collection of Taxes Act, 1931, the force of law, and
(vi) the additional duty leviable under Section 3 of the Customs Tariff Act, 1975, equivalent to the duty of excise specified under Clauses (i), (ii), (iii), (iv) and (v) above, paid on any inputs or capital goods received in the factory on or after the first day of...including, the said duties paid on any inputs or capital goods used in the manufacture of intermediate products, by a job worker availing the benefit of exemption specified in the Notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 214/86-Central Excise, dated 25th March 1986 published in the Gazette of India vide number GSR 547(E), dated the 25th March 1986, and received by the manufacturer for use in or in relation to the manufacture of final products, on or after the first day of....
Rule 57AC. Conditions for allowing Cenvat credit.- (1) The Cenvat credit in respect of the inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer....
5(a) The CENVAT credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re-conditioning or any other purpose, and it is established from the records, challans or memos or any other document produced by the assessee availing the CENVAT credit that the goods are received back in the factory within 180 days of their being sent to a job worker. If the inputs or the capital goods are not received back within 180 days, the manufacturer shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise. However, the manufacturer can take the CENVAT credit again when the inputs or capital goods are received back in his factory....
From 1st July 2001 to October 2002 Input" means all goods, except high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not, and includes lubricating oils, greases, cutting oils and coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used for manufacture of final products or for any other purpose, within the factory of product.
Explanation 1. - The high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever.
Explanation 2. - Inputs include goods used in the manufacture of capital goods which are further used in the factory of the manufacture.
Rule 3. CENVAT credit. - (1) A manufacturer or producer of final products shall be allowed to take credit (hereinafter referred to as the CENVAT credit) of-
(i) the duty of excise specified in the First Schedule to the Tariff Act, leviable under the Act;
(ii) the duty of excise specified in the Second Schedule to the Tariff Act, leviable under the Act;
(iii) the additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978 (40 of 1978);
(iv) the additional duty of excise leviable under Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957);
(v) the National Calamity Contingent duty leviable under Clause 136 of the Finance Act, 2001 (14 of 2001); and
(vi) the additional duty leviable under Section 3 of the Customs Tariff Act, equivalent to the duty of excise specified under Clauses (i), (ii), (iii), (iv) and (v) above, paid on any inputs or capital goods received in the factory on or after the first day of...including, the said duties paid on any inputs or capital goods used in the manufacture of intermediate products, by a job worker availing the benefit of exemption specified in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 214/86-Central Excise, dated 25th March 1986 published vide number GSR 547(E), dated the 25th March 1986, and received by the manufacturer for use in or in relation to the manufacture of final products, on or after the first day of....
Rule 4. Conditions for allowing Cenvat credit....
5(a) The CENVA T credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re-conditioning or any other purpose, and it is established from the records, challans or memos or any other document produced by the assessee taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred eighty days, the manufacturer shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise, but the manufacturer can take the CENVAT credit again when the inputs or capital goods are received back in his factory.
(b) The CENVAT credit shall also be allowed in respect of jigs, fixtures, moulds and dies sent by a manufacturer of the final products to a job worker for the production of goods on his behalf and according to his specifications.
(c) The Commissioner of Central Excise having jurisdiction over the factory of the manufacturer of the final products who has sent the inputs or partially processed inputs outside his factory to a job worker may, by an order, which shall be valid for a financial year, in respect of removal of such inputs or partially processed inputs, and subject to such conditions as he may impose in the interest of revenue including the manner in which duty, if leviable, to be paid, allow final products to be cleared from the premises of the job worker.
17. The aforesaid legal provisions clearly show that the definition of "input" covers goods used as fuel or for generation of electricity or steam used for manufacture of final products or for other purpose within the factory of production. As such, the intention seems to be clear that the definition of "inputs" covers specifically inputs used for generation of electricity or steam which is used for manufacture of final products.
18. The Rules specifically provide that Cenvat credit is admissible inputs, as such, or after being partially processed, are sent to a 'job worker' for further processing, testing, repair, re-conditioning or any other purpose provided the goods are received back in the factory of production within 180 days of their being sent to a job worker. It is accepted in the order that the steam and electricity were being received back in the petrochemical complex within a period of 2-3 days only. The power plant is indeed a job worker because all the raw materials are supplied by the appellants to the power plant; free of charge for doing certain operations and (intermediate) products so produced are returned to the petrochemical complex of the appellant. The appellant does not pay anything to the power plant for electricity or steam. The power plant is completely dedicated to the petrochemical complex and was in fact set up for generation of electricity and steam for the exclusive use by the petrochemical complex of the appellant. Only conversion charges are paid by the appellant to the power plant for the said operations. In our opinion, the expressions "further processing" and "any other purpose" mentioned in Rule 4(5)(a) are fairly wide and would take their colour from the processes mentioned in the definition of 'input'. As such the generation of electricity or steam as intermediate products would fall within the scope of these expressions, and would amount to job work.
19. The Commissioner has denied the benefit of Rule 4(5)(a) of the Cenvat Credit Rules on the ground that "the said rule emphasises return of the inputs or partially processed inputs from the job worker premises after further processing such as testing, repairing, re-conditioning or any other purposes and not for complete conversion of input or partially processed input into a different entity altogether. When partially processed inputs get converted into an energy in the form of electricity, the original character of the goods known as CLS consisting of different constituents such as NRS/Py, Gas, C/4 Raffinate, C/6 Raffinate etc., are totally lost and the provisions of Rule 4(5)(a) of Cenvat Credit Rules is not applicable in such cases". This finding is not borne out from the rules.
20. In the case of Prestige Engineering (India) Limited v. Collector of Central Excise, Meerut, , while dealing with the question as to what processes can be undertaking on job work in terms of Notification 119/75-C.E., the Supreme Court has observed that "insisting upon the same articles being returned to the customer after undergoing the manufacturing process at the hands of job worker may rob the Notification of any substance whatsoever". This observation was reiterated by the Hon'ble Supreme Court in the case of Wadpack (P) Ltd. reported in 1997 (89) E.L.T. 24 (S.C.) and in the case of Hindustan Mudran . In the case of Wyeth Laboratories Limited , Larger Bench of the Tribunal held that reading of these Rules 57D, 57F(2), 57F(4) in the light of the common understanding of the words, would indicate, that inputs in their course of conversion of when used in or in relation to the manufacture of the final products, may require re-processing, re-conditioning or any other processing and due to such partial and final processing can undergo and result in any stage of intermediate goods, by-products, refuse or/and waste. The Larger Bench further observed commercial prudence and technological feasibility would induce manufacturer to re-convert, re-process, re-condition and otherwise deal with intermediate goods, by-products, scrap, refuse, waste etc., to obtain maximum target available in his premises or by sending them out on job work to other places. In the case of EMCEE Crown Corks (P) Ltd. reported in 2002 (149) E.L.T. 639 (T), the Tribunal held that the goods after "job work" may be exigible or non exigible intermediate goods which are then to be used in the appellant's premises. The Tribunal further held that the finding of the Commissioner that the inputs have lost identity would not debar availment of credit which is available on the date when the goods were sent to the job worker, in the context of Notification No.ll9/75-C.E., the Rajasthan High Court in the case of Hindustan Development Corporation Ltd. v. Union of India reported in 2002 (150) E.L.T. 1425 (Raj.) had also taken a similar view.
21. In the case of Bhilwara Melba De Witte Ltd. , the Tribunal has taken the view that substantive benefit of the Cenvat credit cannot be denied as the goods at intermediate stage are otherwise exempted from payment of whole of the duty leviable thereon. Inputs used for generation of electricity were held admissible to Modvat credit in Ballarpur Industries Ltd. . The Board's Circular No. 33/33/94-CX., dated 4-5-1994 also clarifies that input credit is admissible whether such input is physically present in the finished excisable goods or not, so long such inputs are used in or in relation to the manufacture of finished excisable goods.
22. In view of the foregoing decisions and also having regard to the fact that inputs for generation for electricity or steam are specifically mentioned in the definition of "input", we are of the view that the Cenvat credit is available even if the identity of the input is lost when the job worker returns the goods after further processing. The finding of the Commissioner in this respect is, therefore, not sustainable.
23. It has been argued on behalf of Revenue that under Rule 3 of the Cenvat Credit Rules, the credit is available only when the job worker avails the benefit of Notification No. 214/86. We do not read Rule 3 in this manner. The Cenvat credit is admissible when the inputs are received in the factory and used in or in relation to the manufacture of final products. The inclusion clause in the Rule does not restrict or reduce the scope of the main clauses in the Rule. Moreover, the expression "availing the benefit of exemption specified in the Notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 214/86-CE., dated 25th March 1986" is only an enabling provision which permits credit on inputs to the principal manufacturer, even in cases where the input is not received by it, but is received directly by the job worker and provides for taking Cenvat credit of the duty paid on the inputs used in the manufacture of intermediate products even when no duty is required to be paid on the intermediated products.... Rule 57AC of the 2000 Rules and Rule 4(5)(a) of July 2001 Rules provide an additional facility, and do not lay down any requirement that the following of Notification 214/86-C.E. is precondition for availment of Cenvat credit, in any case, where the intermediate product is not excisable or otherwise exempted from payment of duty, the question of availing the benefit of Notification No. 214/86 does not arise. We, therefore, do not see any force in the contention of the Revenue.
24. We, therefore, hold that the appellant was entitled to take Cenvat credit on the duty paid on Naphtha, sent as such, or after being partially processed (CLS) to the power plant for generation of steam or electricity, which was sent to the petrochemical complex of the appellant for use or in relation to the manufacture of final products under Rule 57AC or Rule 4(5)(a) of the Central Excise Rules or Cenvat Credit Rules. We are also of the view that no relevant facts were suppressed by the appellant as is evident from various letters and discussions with the Departmental Officers, and, therefore, the extended period of limitation cannot be invoked under the proviso to Section 11A(1) of the Central Excise Act, 1944. There is also no case for imposition of penalty, firstly for the reason that the demand of duty is unsustainable and secondly for the reason that the case involves a question of interpretation of law.
25. We, therefore, set aside the order passed by the Commissioner of Central Excise and allow Appeal No. E/4001/04-A and grant consequential relief, if any. In view of the decision that we have taken in Appeal No. E/4001/04 A, it is not necessary to decide the issues involved in Appeal No. E/4210/04-A and accordingly this appeal is dismissed as infructuous.
Order Pronounced in open Court.