Customs, Excise and Gold Tribunal - Bangalore
Cce vs Nava Bharat Ferro Alloys Ltd. on 18 February, 2003
Equivalent citations: 2003(86)ECC628, 2002ECR87(TRI.-BANGALORE), 2003(86)ELT628(TRI-BANG)
JUDGMENT S.S. Sekhon, Member (T)
1. The Respondents were issued with a show cause notice proposing to deny modvat credit on a number of capital goods used in the construction of a power plant in the factory premises of the Respondents. The notice was issued on the ground that the power plant assembled out of the duty paid bought out items was not "goods" as the said power plant had emerged as an immovable property. The show cause notice therefore alleged that the provisions of Sub rule (2) of Rule 57R would provide a protection only in respect of intermediate goods which were exempted or chargeable to 'Nil' rate of duty and did not cover non-excisable goods or immovable property.
2. The Commissioner passed the impugned order, holding that the power plant was a marketable product and therefore excisable goods; that the said power plant being used within the factory of production was exempt from payment of duty vide Notification No. 67/95-CE dated 16.3.95 as amended. The Commissioner therefore held that since the power plant was exempt from payment of duty, the modvat credit is available in view of the provisions of Sub-rule (2) of Rule 57R of the Central Excise Rules, 1944. Commissioner also held that modvat credit cannot be denied on the ground that electricity which emerges as an intermediate product is not an excisable item. He has held that the provisions of Rule 57R would apply in a situation where the intermediate product is an excisable commodity but exempt from payment of duty or subject to 'nil' rate of duty and that it would not be necessary to claim the protection of Rule 57R if the goods were non-excisable items.
3. It is against the above Order-in-Original that the present appeal has been filed by the Revenue on the following grounds -
(a) The Commissioner accepted that erection of power plant tantamounts to manufacture of goods but has held that the proviso to Rule 57R(2) of the Central Excise Rules, 1944 is not applicable in the instant case inasmuch as the said rule only covers intermediate products that are excisable and that electricity a non-excisable product, (generated by any power plant), is in turn used in the manufacture of the final excisable products, does not fall within the ambit of the Rule. A careful perusal of the substantive portion of Rule 57R(2) indicates that whether exempt or not, the coming into existence of any intermediate product shall not be a bar to grant of modvat credit on capital goods. This is provided (as per proviso) such intermediate goods find a mention as final products in Col. (3) of the table under sub-rule (1) of Rule 57Q. Thus the rule does envisage coming into existence of exempted intermediate products [vide main provision of Sub-rule (2)] but only if these find a mention in the table referred above, the modvat credit shall not be denied.
(b) The interpretation given by the Commissioner shall reduce the proviso to a nullify if intermediate items not mentioned in the table as a final product were to qualify the related capital goods as available for credit.
(c) Rule 57R(2) of the Central Excise Rules, 1944 only specifies the conditions under which the credit should not be varied or denied provided the intermediate goods are specified as final products in Annexure to Rule 57Q(1). It is thus clear that for electricity as on intermediate product to qualify its related capital goods for credit should be specified in the table under Rule 57Q. Since Electricity fails to satisfy the conditions, the capital goods used for its generation become ineligible for availing credit. The Commissioner's findings that the said Rule excludes non-excisable goods beyond the scope of the said Rule and appears to be unwarranted. As electricity is not specified as final product in Col. (3) of the Table below Sub-rule (1) of Rule 57Q, the credit of duty should have been denied.
(d) In view of the above, it appears that the Commissioner has erred in dropping the proceedings and the order of the Commissioner of Central Excise is not legally correct and proper.
4. After hearing both sides and considering the submissions it is found -
(a) The only ground taken in the show cause notice was that the items on which credit was taken have been used to assemble an immovable property and therefore the credit of duty is not available. There was no other ground set out in the show cause notice to deny the modvat credit. When the Commissioner in the impugned order has held that the power plant was an excisable commodity and therefore the Modvat credit is not deniable. Then, in the present appeal, filed by the Revenue when there is no challenge to these findings of the Commissioner nor is there a proposal/ground taken to revive the allegations in the show cause notice. Then such appeals are not maintainable.
(b) It is settled, by the following decisions, that where the items on which credit is taken are assembled Into an Immovable property, credit cannot be denied on the ground of the immovable property being non-excisable goods:
(a) Lloyds Metals & Engineers Ltd. v. CCE, Nagpur, 2002 (150) ELT 638
(b) United Phosphorus Ltd. v. CCE, & Cus. Vadodara, 2002 (150) ELT 650 following the same, there is no case made out ab initio.
(c) The ground taken in the present appeal that since electricity is a non-excisable Intermediate product which is therefore not specified as a final product under Rule 57Q and hence Modvat credit is not available was not a ground set out in the show cause notice and therefore this ground is liable to be not considered being beyond the proceedings.
(d) Elasticity generated by the power plant has ultimately been used in the manufacture of ferro-alloys only. It is so settled, by the following decisions that where the electricity generated in the power plant is ultimately used in the manufacture of the final product, capital goods credit cannot1 be:
denied. We rely on the following decisions -
(a) Visakhapatnam Steel Plant v. CCE, Visakhapatnam, Final Order No. 47/2003 dated 17.1.2003.
(b) Ballarpur Industries Ltd. v. CCE, Belgaum, 2000 (116) ELT 312 (LB.)
(c) Jawahar Mills Ltd, v. CCE, Coimbatore, 1999 (108) ELT 47 (LB.)
(d) CCE, Coimbatore v. Jawahar Mills Ltd., 2001 (77) ECC 1 (SC) : 2001 (132) ELT 3(SC)
(e) This bench of the Tribunal in the case of Vasavadetta Cement, 2002 (84) ECC 383 (T): 2002 (52) RLT 55 had allowed Modvat credit under Rule 57Q on Electric Generator Set parts, when used to assemble an Electric Generator Set in a Cement factory. In the present case, credit is being claimed on parts used in Electric Generating Plant held to be marketable by the Commissioner, which is not under challenge, following the same, we find no reason to deny the credit on parts, as claimed, which go to.
assemble an Electric Generating Plant in the manufacturing premises of a manufacturer of Alloy Steels.
5. In view of our above findings, the Revenue appeal is required to be dismissed.
We order accordingly.