Custom, Excise & Service Tax Tribunal
M/S. Reliance Industries Ltd vs Cce And Service Tax (Ltu) Mumbai on 19 January, 2012
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI
COURT NO. I
APPLICATION NO. E/S/759 and 760/11
IN APPEAL NOs. E/712 and 713/11 Mum
Arising out of Order-in-Original Nos. 15/COMMR (KAP)/LTU-M/2010 dated 24th January, 2011 and 16/COMMR (KAP)/LTU-M/2010 dated 31st January, 2011 passed by the Commissioner of Central Excise, Mumbai.
For approval and signature:
Honble Shri S.S. Kang, Vice President
Honble Shri Sahab Singh, Member (Technical)
1. Whether Press Reporters may be allowed to see : No
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 Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
M/s. Reliance Industries Ltd.
:
Appellant
Versus
CCE and Service Tax (LTU) Mumbai
Respondent
Appearance Shri J.C. Patel, Advocate for appellant Ms. D.M. Durando, Dy. Commissioner (A.R.) For Respondent CORAM:
Shri S.S. Kang, Vice President Shri Sahab Singh, Member (Technical) Date of Hearing : 19.01.2012 Date Pronounced : 19.01.2012 ORDER NO.
Per : S.S. Kang Heard both sides.
2. Common issue is involved in both these applications; therefore they are being taken up together.
3. The applicant filed these applications for waiver of total demand of duty, interest and penalties.
4. The demand is confirmed after denying credit on the ground that the appellant was availing benefit of exemption on inputs used in the production of LPG which also goes into the manufacture of Nitrogen and some parts of Nitrogen is used for degassing of wagons. The case of the Revenue is that as the appellant availed credit of duty paid on common inputs, therefore the appellant is liable to pay 10% of the price of the Nitrogen which goes into the process of degassing of wagons. Part of the demand is confirmed on the ground that the power generated in the captive power plant is used outside the factory of production i.e. in residential colony and the appellant is liable to pay 10% of the price of the electricity which is going outside the factory. The demand is also confirmed in respect of the electricity which is used for peripheral activities within the factory on the ground that the same is not used in or in relation to the manufacture of final product.
5. The contention of the appellant is that as the common inputs are used in the manufacture of LPG which cleared nil rate of duty and the Nitrogen which was captively consumed within the factory in relation to the manufacture of LPG which is exempt from duty, therefore the demand in respect of Nitrogen which is used for degassing of wagons is not sustainable. The appellant relied upon the earlier decision in the appellants own case in Service Tax Appeal No. 131 of 2007 dated 28.08.2008 reported as 2009(16) STJ 99 (CESTAT-Ahmedabad) whereby the Tribunal has held that as the appellants are clearing the final exempted product as per provision of Rule 6(3)(a) of CENVAT Credit Rules, question of reversal of credit of duty paid on the inputs used in the manufacture of fuel does not arise, therefore input service credit availed in respect of Nitrogen which is also input for the manufacture of LPG which is used for degassing of wagons, is not sustainable.
5.1 In respect of electricity which is manufactured and used in the peripheral area and used outside the factory, the contention of the applicant is that since the electricity is not an exempted final product, therefore the demand of 10% on the value of electricity going outside the factory is not sustainable. In respect of inputs used in the generation of electricity which is going outside the factory, the appellant relied upon the decision of the Honble Supreme Court in the case of Collector of Central Excise vs. Solaris Chemtech Ltd. 2007 (214) ELT 481 (S.C.) and in the case of Maruti Suzuki Ltd. 2009 (240) ELT 641.
5.2 It is also submitted by the appellant that the unit is a 100% EOU and the inputs used by the appellant in relation to the generation of electricity had been procured without payment of duty. In the circumstances, where the appellant used duty free inputs for generation of electricity used outside factory and where the appellant has not taken any credit on inputs used in relation to the generation of electricity, demand of duty by taking into the consideration 10% of the price of the electricity going outside the factory, is not sustainable.
5.3 In respect of the electricity used in the peripheral area in the factory, the contention is that, in the show-cause notice the allegation is that the demand is in respect of electricity consumed for peripheral activities within the factory. However, the adjudicating authority in the impugned order held that the appellant has failed to show that the electricity is used within the factory of production, in the absence of evidence the demand is confirmed. The contention is that the show-cause notice itself is admitted that the electricity was used for the peripheral activities within the factory therefore the impugned order is not sustainable on this issue also.
6. The Revenue reiterated the findings of the lower authority and held that as the Nitrogen is used for degassing of wagons and no duty is paid on such quantities, therefore the demand is rightly made. In respect of the electricity which is generated in the captive power plant and used outside the factory, the Revenue relied upon the findings in the impugned order.
7. We find that as the appellant is reversing credit in respect of inputs used in or in relation to the manufacture of LPG and in respect of Nitrogen which is used for degassing of wagons. We find that the appellant has cited the above decision in appellants own case before the adjudicating authority and the adjudicating authority has also taken note of that, however, no finding has been given in this regard.
8. In respect of electricity used outside the factory of production as well as in respect of peripheral area in the factory, we find that the Revenue has confirmed the demand on the ground that the appellant is liable to pay 10% on the price of electricity which is used outside the factory. We find that this issue is now settled by the decision of Honble Supreme Court in the case of Solaris Chemtech Ltd. (supra) and of Maruti Suzuki Ltd. (supra) relied upon by the applicant wherein the Honble Supreme Court held that electricity is not an excisable item as per Section 3 of CEA, 1944 and the manufacturer is liable to reverse the credit on duty availed as inputs used in the generation of electricity which is not used in the factory of the production.
9. In respect of demand on the electricity which is used for peripheral area in the factory, we find that the adjudicating authority held that the appellant has failed to show that the same is used within the factory, therefore this issue also requires reconsideration as in the show-cause notice the allegation is that the electricity is used in the peripheral area within factory gate.
10. In view of the above, we find the matter requires reconsideration by the adjudicating authority afresh.
11. The impugned orders are set aside after waiving the pre-deposit of duty, interest and penalty in respect of both appeals and the matter is remanded to the Commissioner of Central Excise to decide afresh after affording an opportunity of hearing to the appellant. The appeals are disposed of by way of remand.
(Dictated in open Court) (Sahab Singh) Member (Technical) (S.S. Kang) Vice President nsk 6