Custom, Excise & Service Tax Tribunal
Brahmaputra Cracker &Amp; Polymer Ltd vs Dibrugarh on 15 January, 2020
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO.2
Excise Appeal No.75336 of 2018
(Arising out of Order-in-Original No.IV(16)28/TECH/COMMR/DIB/2017-18/PART-
III/8254 dated 26 October 2017 passed by Commissioner of CGST & Central Excise,
Dibrugarh.)
M/s. Brahmaputra Cracker & Polymer Limited
(Main Fire Station Building, 1st Floor,
BCPL Project Site Lepetkata,
Dibrugarh-786007.)
...Appellant
VERSUS
Commissioner of CGST & Central Excise,
Dibrugarh
(Milan Nagar, Dibrugarh-786003.) .....Respondent
APPEARANCE
Mr.Z.U.Alvi, Advocate for the Appellant (s)
Mr.K. Chowdhury, Authorized Representative
CORAM: HON'BLE SHRI P.K.CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE SHRI P.V.SUBBA RAO, MEMBER (TECHNICAL)
FINAL ORDER NO__75077/2020
DATE OF HEARING : 25 July 2019
DATE OF DECISION: 15 January, 2020
PER BENCH:
STATEMENT OF FACTS
1. M/s.Brahmaputra Cracker & Polymer Limited (hereinafter referred
to as the 'Appellant'), a public sector undertaking (PSU), filed the
present appeal against the impugned order/letter C.No.
IV(16)28/TECH/COMMR/DIB/2017-18/PART-III/8254 dated 26.10.2017
issued by the Commissioner of CGST & Central Excise, Dibrugarh
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Excise Appeal No.75336 of 2018
(hereinafter referred to as the impugned letter) refusing to grant
registration to the premises of the appellant at Duliajan wherein,
according to the appellant, certain activities related to manufacture
have been undertaken. As a result, they are unable to avail CENVAT
Credit on capital goods - both imported and indigenous installed and
services of Erection & Commissioning received and consumed at
Duliajan Plant.
2. The Appellant, inter alia, manufactures and sells various grades of
polypropylene which is dutiable/ taxable under both Central Excise and
GST Law. Their main manufacturing unit is in Lepetkata, Dibrugarh,
Assam and their associated units are at Duliajan, Lakwa and Tinsukia
which carry on certain activities. The units located at Duliajan and
Lepetkata fall within the same jurisdiction of the same Central Excise
Commissionerate, though under different ranges.
3. Another unit of the Appellant is at Lakwa where C2+Liquid is
manufactured and transferred to the Lepetkata for which they have
taken separate Excise Registration of Lakwa Unit as dutiable goods are
being manufactured.
4. Their Duliajan unit is a gas compression and dehydration unit
(hereinafter referred to as 'GDU') where they purchase natural gas from
Oil India Ltd, compress it and dehydrate and transfer it to their
Lepetkata unit located 48 km away through a 18 inch pipe for use in
manufacture of dutiable polymers. The gas which is left after
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Excise Appeal No.75336 of 2018
manufacture (lean gas) is again sent by their manufacturing unit at
Lepetkata unit to the Duliajan unit which pumps it back into the Oil
India Ltd.
5. Thus, in their Duliajan plant they only compress and dry the gas
and do not create any new marketable commodity and they are also
not registered with the central excise department. They also receive the
lean gas and return it to the Oil India ltd. The appellant wanted their
processing plant at Duliajan to be included in the Registration of their
Lepetkata unit (where the goods are actually manufactured) so that
they can avail CENVAT credit on the capital goods (both domestic and
imported)installed at Duliajan and they can also avail CENVAT credit of
the service tax paid on input services used in Duliajan.
6. The appellant filed an application with Superintendent CE
Dibrugarh dt.25.11.2011 seeking registration under Rule 9 of Central
Excise Rules, 2002 and were issued a Registration Certificate No:
AADCB2356EEM001 dt.09.12.2011 for the Lepetkata Plant, Dibrugarh
Assam as manufacturer of Excisable goods. The certificate of
registration was re-issued on 24.07.2012. In their ER-1 Return they
claimed CENVAT credit on imported and indigenous capital goods
installed not in their factory at Lepetkata but in their processing plant
at Duliajan which was not part of their registered premises at all but
which was located 48 km away. They also filed a request with the
Superintendent of Central Excise seeking to include the following
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Excise Appeal No.75336 of 2018
additional facilities in their Central Excise Registration on the ground
that these units are connected by pipe lines to their manufacturing unit
at Lepetkata.
(i) LPG recovery plant Kakwa,
(ii) Gas Compressor (GDU) Station Duliajan and,
(iii) Tinsukhiya Rly Sdg,
They further followed up with the Commissioner who, by the impugned
letter rejected their request for inclusion of their Duliajan processing
plant in their Registration for Lepetkata manufacturing unit. Hence, this
appeal. The series of events and dates as submitted by the appellant
are as follows.
List of Dates & Events
Date Event
30.03.2010 BCPL's order No:BCPL/C&P/MR-5055/SK/2015 for Gas Turbine Package
on M/s.BHEL Hyderabad.
26.02.2011 Filing of Bill of Entries by M/s.BHEL Hyderabad towards imported
to consignment of Gas Turbine Package by BHEL on payment of Basic
20.11.2011 Customs Duty and CVD.
05.05.2011 Filing of B/E No: 3413437 by BHEL at JNPT for the consignment of Gas
Turbine Package imported by them against M/s.BCPL's order
dt:30.03.2010 on payment of Customs Duty including total CVD + Addl.
Duty Rs.2,10,091/-.
07.07.2011 Filing of B/E No:40080060 by BHEL at JNPT for the consignment of Gas
Turbine Package imported by them against M/s.BCPL's order
dt:30.03.2010, on payment of Customs Duty including total CVD +
Addl.Duty Rs.21,125/-.
30.08.2011 Filing of B/E No:4504712 & 4504801 by BHEL at JNPT for the
consignment of Gas Turbine Package imported by them against
M/s.BCPL's order dt:30.03.2010, on payment of Customs Duty including
total CVD + Addl. Duty Rs.21,125/-.
26.09.2011 Despatch of consignments comprised in B/E NO.:4504581 vide L/R
No:71271 ex-JNPT after clearance on payment of Customs Duty and Addl.
Duty/CVD.
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Excise Appeal No.75336 of 2018
26.09.2011 Despatch of consignments comprised in B/E No.3413437 dt:05.05.2011,
4008060 dt: 07.07.2011 & 4504712 dt: 30.08.2011 vide L/R No:71272
ex-JNPT after clearance on payment of Customs Duty and Addl.
Duty/CVD.
30.09.2011 BHEL's (importer's) invoice No: ID-HY-3010867 for the Gas Turbine
Package covered under BCPL's PO dt:10.05.2010 and dispatched ex-JNPT
to BCPL Duliajan vide LR No:71271 and 71272 both dated 26.09.2011,
involving Addl. Duty/CVD of Rs.18,54,88,945/-.
25.11.2011 Filing of Application by M/s.BCPL for Registration U/r-9 CER 2002 as
manufacturer of excisable goods with Superintendent CE Dibrugarh.
27.12.2011 Filing of B/E No: 5576147 by BHEL at JNPT for the consignment of Gas
Turbine Package imported by them against M/s.BCPL's order dated
30.03.2010, on payment of Customs Duty including total CVD +
Addl.Duty Rs.1,15,41,437/-.
09.12.2011 Registration Under Central Excise Rules as manufacturer of Excisable
goods by M/s.BCPL Lepetkata Dibrugarh Assam and issuance of
Registration Certificate No:AADCB2356EEM001.
January 2012 Filing of ER-1 Return by M/s.BCPL Lepetkata Dibrugarh Assam exhibiting
availment of Credit on imported Capital Goods amounting to
Rs.18,48,35,920/- on imported Capital Goods and Rs.29,70,57,181/- on
indigenous Capital Goods.
03.03.2012 Filing by M/s.BCPL Lepetkata Dibrugarh Assam application vide
BCPL/Tax/ED/2011-12 to Superintendent CE Dibrugarh for inclusion in
the Registration of the connected Plants/Installations at:
(i) GAIL - LPG Recovery Plant Lakwa Distt.Sibsagar,
(ii) BCPL - Compressor (GDU) Station Duliajan Distt.Dibrugarh.
(iii) BCPL - Railway siding Lalmati Distt. Dibrugarh.
24.07.2012 Issuance by Superintendent CE Dibrugarh of amended Registration
Certificate U/r 9 CER 2002 to BCPL Lepetkata Dibrugarh.
March 2012 No response from the Department as regard BCPL's request
to dt:03.03.2011 for inclusion in the Registration as Manufacturer of
January 2014 Excisable goods U/r 9 CER 2002 of three installations including the
connected Compressor (GDU) Station Duliajan.
22.01.2014 Email from [email protected] (Assistant Commissioner C.E.) for
physical verification of the sites of the connected installations for inclusion
in the Registration U/r 9 CER 2002 of BCPL Lepetkata Dibrugarh.
03.02.2014 BCPL's letter to Superintendent CE Dibrugarh furnishing 2 sets of
requisite documents namely application for amendment to the CE
Registration for inclusion of the three installations at Lakwa, Duliajan and
Tinsukhia Rly. Sdg. And other financial documents.
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Excise Appeal No.75336 of 2018
01.03.2014 Query from Sr. Manager Finance BCPL about modus-operandi for
availment of credit of CVD on consignment imported by BHEL, B/E being
in the name of BHEL who raised importer invoice on BCPL.
04.03.2014 Email from Sr. Manager Finance BCPL to GM (PE) GAIL about admissibility
of Credit to BCPL on imported Capital goods.
22.04.2015 BCPL's letter to Assistant Commissioner CE Dibrugarh further to their
initial request dt:03.03.2012 and communication dt:03.02.2014 to
Superintendent C.E. Dibrugarh for inclusion in C.Ex Registration of BCPL
Lepetekata amongst three connected installations of the Compressor
(GDU) Station Duliajan. Requisite clarification furnished to ACCE
Dibrugarh.
18.05.2015 Filing in the office of Commissioner CE Dibrugarh by BCPL (in furtherance
to initial request dt:03.03.2012 and further clarifications dt:03.02.2014
and 22.04.2015) of the letter furnishing documents about commonality of
work force, management, Sales Tax & Income Tax Assessment and
Connectivity of operations of the three sites/ installations at Lakwa,
Duliajan and Lalmati Rly. Sdg.. Copies of the letters marked to Addl.
Commissioner C.E. Dibrugarh.
17.12.2015 Assistant Commissioner, O/o Commissioner C.E. Dibrugarh's letter to
BCPL Lepetkata referring their letter dt:18.05.2015 and communicating
that Commissioner C.E. rejected the request for common C.Ex.
Registration for three Addl. premises purportedly on the ground of
segregation by public road/Railway Line and non satisfaction of conditions
vide para-6 Chapter-2 of C.Ex. Manual.
18.12.2015 BCPL's letter to the Department regarding confirmation as to whether the
activity undertaken at Duliajan Installation of compressing Natural Gas
into CNG constituted manufacture U/S 2(f), CNG becomes an
intermediate product for the main Installation of Cracker and Polymer
Plant.
2015-2016 Availment of Credit amounting to Rs.11...... Crores by BPCL on Capital
goods received in Duliajan Installation.
2016-2017 Reversal of the credit entry of Rs.11....... Crores by BPCL on the
apprehension lest the availment of credit BCPL on the Capital goods
installed in Duliajan Installation may be deemed as irregular.
08.07.2016 BCPL's request to Chief Commissioner C.CE & ST Shillong for Single
Registration for whole of Assam under BCPL being. BCPL being a joint
venture Public Sector Company with Share holding of GAIL (CPSU) 70%,
OIL (CPSU) and Numaligarh Refinery Ltd. (NRL), Govt. of Assam (PSU)
engaged in the manufacture of HDPE, LLDPE AND PPLE of capacity 0.28
Million Ton per year usi9gn Natural Gas, Naptha & Butene-1.
The main Cracker Plant being located Lepetkata Dibrugarh while case
sweetening and C2 + recovery Unit at Lalwa and (intake of Natural) Gas
de-hydration & Compression at Duliajan. Tinsukhia Rly. Sdg. Serving as
facility unloading Naptha, one of the three main inputs.
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Excise Appeal No.75336 of 2018
27.09.2016 Assistant Commissioner CGST Excise & Service Tax Dibrugarh's letter in
response to BCPL's 8/07/2016 to BCPL rejecting U/Not:19/2016-CE(NT)
dt:01.03.2016 the request for Single Registration for whole of Assam
purportedly on the ground of installation of plant at different locations.
10.03.2017 BCPL's letter dt:10.03.2017 to Addl.Commissioner GST, C & CE in
response to Commissioner rejection dt:27.09.2016 of Single Registration
clarifying the position as regards intertwined operations of the three
installations at Duliajan, Lakwa and Lapetkta.
06.04.2017 BCPL's letter to Commissioner Dibrugarh emphasizing the inseparable
integrity of the intertwined operations of the three installations and
pressing their request for inclusion of the operationally interconnected
installations within the registration for Lepetkta Plant.
06.07.2017 Former meeting in the office of Commissioner CGST C, & CE OF BCPL's
representative with Chief Commissioner CGST, C & CE on the issue of
Single Registration for the four integrated installations and admissibility of
the credit on the capital goods installed therein.
11.07.2017 BCPL's letter (pursuant to the meeting dt:06.07.2017) praying for carry
forward of the CENVAT Credit on Capital goods installed at:
-Lakwa (Gas Sweetening & C2+Recovery Plant),
-Duliajan (intake of Natural Gas and de-hydration Compression and
Pumping the main CNG inputs directly to Lepetkta Plant),
-Lepetkta Plant turning out the final products, HDPE, LLDPE and PPE.
-and Tinsukia Rly. Sidg. (uploading Naptha input and pumping the same
to Lepetkta Plant).
-The request was accompanied with Diagrammatic representation of
integrated manufacturing processes spread over the four installations and
justification for Single Registration.
15.07.2017 BCPL's letter to Commissioner CGST, C & CE Dibrugarh, referring to the
deliberations of the meeting dt:06.07.2017 emphasizing the factors
justifying single registration namely,
(i) All installations were under jurisdiction of CE Range.
(ii) Processes undertaken at each installation inseparably
intertwined and interconnected with the other.
(iii) None unit operating under any area based exemption.
(iv) Entire accounting movement and record keeping relevant for
the purpose being at one place - Lepetkta.
And offering further justification for Single Registration and
consequent availment of credit on capital goods and its carry forward
from pre-GST Regime to the post regime.
21.07.2017 BCPL's letter to the Assistant Commissioner Dibrugarh highlighting the
problem and difficulty on the part of BCPL in taking two registration and
pressing for confirmation of Single Registration in order to enable to BCPL
to carry forward the credit on capital goods installed at Duliajan plant,
purportedly relying upon CESTAT's ruling in Adani Gas Vs. CCE
dt:30.01.2017.
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Excise Appeal No.75336 of 2018
25.09.2017 BCPL's representative meeting with Chief Commissioner GST C & CE
Shillong.
27.09.2017 BCPL's letter in continuation to their representative meeting with Chief
Commissioner GST Shillong urging him to supersede the decision
dt:26.09.2017 of Joint Commissioner CGST & CE purportedly denying
single registration, admissibility of credit on Capital goods and carrying
forward in the new GST Regime.
20.10.2017 BCPL's letter to Commissioner GST Dibrugarh and Chief Commissioner
CGST Shillong urging for superseding the negative decision of JCE-CGST
dt:26.09.2017.
25.10.2017 Addl. Commissioner CGST & CE Shillong's letter to BCPL in reply to their
representation dt:27.09.2017 suggesting filing of appeal against
Commissioner CGST & CE Dibrugarh's decision before Hon'ble CESTAT.
26.10.2017 Commissioner CGST, C & CE letter referring interalia to Chief
Commissioner letter dt: 25.10.2017 besides other correspondence to the
Commissionerate Dibrugarh's letter dt: 26.09.2017 and reaffirming the
decision and basis thereof for non-acceptance of request for single
registration of the Duliajan premises and Lepetkta/Lakwa premises and
consequent ineligibility to avail CENVAT Credit on Capital goods installed
at unregistered premise of Duliajan.
02.02.2018 Filing of appeal against Commissioner CGST & CE's order dt:26.09.2017
before Hon'ble CESTAT Kolkata.
7. Ld. Counsel for the appellant submits that the following are the
two issues to be decided:
a) Whether they are eligible for common registration for their
Duliajan plant and Lepetkata plant by inclusion of the former in
their registration certificate already issued for the latter.
b) Admissibility of CENVAT credit on the capital goods received in
their Duliajan plant based either on common registration or
irrespective of the registration.
8. He asserts that the Duliajan plant only provides inputs for further
manufacture in their Leptkata plant and both are connected through
their own 48 km pipeline and hence both should be given one
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Excise Appeal No.75336 of 2018
registration regardless of the fact that they are located far from each
other and they are also located in different range offices of the
Commissionerate. He relies on the CBEC's manual chapter2 para 3.2 of
which reads as follows:
"3.2 Separate registration is required in respect of separate
premises except in cases where two or more premises are
actually part of the same factory (where processes are
interlinked) but are segregated by public road, canal or
railway-line. The fact that the two premises are part of the
same factory will be decided by the Commissioner of Central
Excise based on factors, such as:
(1) Interlinked process product manufactured/produced in
one premises are substantially used in other premises
for manufacture of final products.
(2) Large number of raw materials are common and
received/proposed to be received commonly for both/all
the premises.
(3) Common electricity supplies.
(4) There is common labour/work force.
(5) Common administration/work management.
(6) Common sales tax registration and assessment.
(7) Common Income Tax assessment."
9. He would urge that both their plants are only separated by their
pipeline and hence they squarely fall under this para and hence are
eligible for a single registration.
10. As an alternative argument, he states that even if they are not
granted a single registration, CENVAT credit on the capital goods used
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Excise Appeal No.75336 of 2018
in their processing plant at Duliajan should also be allowed to be taken
and used in their Lepetkata plant.
11. Ld. DR opposes the claim of the appellant and supports the
impugned letter. He also asserts that the appellant is not entitled to
CENVAT credit on capital goods not used in the manufacture of their
final products.
12. We have considered arguments on both sides and perused the
records. The two issues in this case have been accurately put forth by
the Ld Counsel for the appellant (para 7 above) which we now proceed
to decide.
Registration
13. The first issue which falls for our consideration is whether the
appellant's Duliajan plant where the gas is merely dried and
compressed for supply to their manufacturing facility at Lepetkata
located 48 km away should be considered as part of the same
manufacturing facility and included in their registration or otherwise. It
would be profitable to examine the relevant legal provisions as
applicable during the relevant period. Article 246 of the Constitution
gives the Parliament exclusive jurisdiction to legislate on matters
included in List I to the Seventh Schedule to the Constitution. Entry 84
of this list reads as follows:
"Duties of excise on tobacco and other goods manufactured or
produced in India except-
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Excise Appeal No.75336 of 2018
(a) Alcoholic liquor for human consumption;
(b) Opium, Indian help and other narcotic drugs and narcotics,
but including medicinal and toilet preparations containing alcohol or
any substance included in sub-paragraph(b) of this entry."
14. Central Excise Act, 1944 pre-dates the Constitution but continues
to be in force as per Article 372 of the Constitution. Nevertheless, this
Act is squarely covered by the aforesaid entry 84 of List I of the
Seventh Schedule.
15. Section 3 of the CE Act is the charging section and the other
sections are the machinery sections which provide the modalities for
giving force to the charging section (including the provisions for
registration). It reads as follows:
"Section 3. Duties specified in First Schedule and the Second
Schedule to the Central Excise Tariff Act, 1985 to be levied. -
(1) There shall be levied and collected in such manner as may be
prescribed, -
(a) a duty of excise to be called the Central Value Added Tax
(CENVAT)] on all excisable goods (excluding goods produced or
manufactured in special economic zones) which are produced or
manufactured in India as, and at the rates, set forth in the First
Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);
(b) a special duty of excise, in addition to the duty of excise
specified in clause (a) above, on excisable goods excluding goods
produced or manufactured in special economic zones specified in
the Second Schedule to the Central Excise Tariff Act, 1985 (5 of
1986) which are produced or manufactured in India, as, and at
the rates, set forth in the said Second Schedule.
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Excise Appeal No.75336 of 2018
Provided that the duties of excise which shall be levied and
collected on any excisable goods which are produced or
manufactured,-
(i) Omitted.
(ii) by a hundred per cent export-oriented undertaking and
brought to any other place in India, shall be an amount equal to
the aggregate of the duties of customs which would be leviable
under the Customs Act, 1962 (52 of 1962) or any other law for
the time being in force, on like goods produced or manufactured
outside India if imported into India, and where the said duties of
customs are chargeable by reference to their value; the value of
such excisable goods shall, notwithstanding anything contained in
any other provision of this Act, be determined in accordance with
the provisions of the Customs Act, 1962 (52 of 1962) and the
Customs Tariff Act, 1975 (51 of 1975)."
16. From this section, it is evident that there must be goods which
are excisable goods and which must be either manufactured or
produced for this charging section to apply. If these elements are
missing, the activity falls outside the scope of this Act. The key terms
used in the charging section are 'excisable goods', 'manufacture' and
'production'. 'Excisable goods' is defined in Section 2 (d) and
'manufacture' in section 2 (f). The term 'production' is not defined in
the Act and neither is the term 'goods'. Sections 2 (f) and 2(d) are
as follows:
"Section 2(d): "excisable goods" means goods specified in
the First and Second Schedules of Central Excise Tariff Act,
1985 as being subject to a duty of excise and includes salt;
Section 2(f): "manufacture" includes any process, -
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Excise Appeal No.75336 of 2018
i) incidental or ancillary to the completion of a
manufactured product;
ii) which is specified in relation to any goods in the Section
or Chapter notes of the First and Second Schedules to
Central Excise Tariff Act, 1985 as amounting to
manufacture;
iii) which, in relation to the goods specified in the Third
Schedule, involves packing or repacking of such goods in
a unit container or labelling or re-labelling of containers
including the declaration or alteration of retail sale price
on it or adoption of any other treatment on the goods to
render the product marketable to the consumer;
and the word "manufacturer" shall be construed accordingly
and shall include not only a person who employs hired labour
in the production or manufacture of excisable goods, but also
any person who engages in their production or manufacture on
his own account."
17. The term 'goods' itself is not defined and hence, through a series
of judicial decisions, it is now well settled that 'goods' is understood as
having the same meaning as in the Sale of Goods Act section 2 (7)
of which defines 'goods' as follows:
"goods" means every kind of moveable property other than
actionable claims and money; and includes stock and shares,
growing crops, grass, and things attached to or forming part
of the land which are agreed to be severed before sale or
under the contract of sale;
18. Thus, for the excise duties to apply, they must be "goods" in
terms of the above definition and the goods must be "excisable goods"
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Excise Appeal No.75336 of 2018
and they must be either manufactured or produced. The definition of
'manufacture' in section 2(f) is an inclusive definition indicating what all
elements need to be included in the manufacture. Through a series of
judicial decisions, it is now well settled that every processing of goods
does not amount to manufacture and only such processes which result
in emergence of new distinct, marketable goods amount to
manufacture. Else, excise duty cannot be levied as mere processing
does not amount to manufacture. It is not open for the officers to treat
any odd process as manufacture and to compel the processor to obtain
registration and pay excise duty. Conversely, it is not open to the
processor to say that he wants to call his process as manufacture even
if it is not and to ask for central excise registration and pay excise duty.
However, the definition of 'manufacture' under the Central Excise Act
includes any activity which is incidental or ancillary to manufacture. For
instance, 'packing' (except in respect of some goods where a legal
fiction is created), does not amount to manufacture. However, if the
factory is manufacturing the product and then packing and dispatching
it, the packing becomes included in the manufacture. The manufacturer
cannot exclude the packing value while paying the central excise duty.
On the other hand, if A manufactures the product and sells it to B who
only packs or repacks and sells it/ transfers it further, B is not a
manufacturer and is not liable to excise duty.
19. Unlike Income Tax, Central Excise Law is focused on the
manufacturing facility or the factory and not on the corporate entity. If
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a corporate entity has several manufacturing facilities and some other
offices and establishments, a separate registration has to be obtained
for each of the manufacturing facilities and none for the other
establishments and offices. If one of the other facilities undertakes
some processing which is clearly not manufacturing, it is not open
either for the Revenue or for the Assessee to treat it as manufacture.
The test of manufacture must pass. Conversely, it is not open to either
side to say that although some activity amounts to manufacture, they
want to treat it as "not manufacture".
20. The relevant provisions regarding Central Excise Registration are
as follows:
Section 6 of the Central Excise Act, 1944
"SECTION 6. Registration of certain persons. -
Any prescribed person who is engaged in-
(a) the production or manufacture or any process of
production or manufacture of any specified goods included in
the First Schedule and the Second Schedule to the Central
Excise Tariff Act, 1985 (5 of 1986), or
(b) the wholesale purchase or sale (whether on his own
account or as a broker or commission agent) or the storage of
any specified goods included in the First Schedule and the
Second Schedule to the Central Excise Tariff Act, 1985 (5 of
1986), shall get himself registered with the proper officer in
such manner as may be prescribed."
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Excise Appeal No.75336 of 2018
Rule 9 of the Central Excise Rules, 2002
"Rule 9 Registration. -
(1) Every person, who produces, manufactures, carries on
trade, holds private store-room or warehouse or otherwise
uses excisable goods, shall get registered:
Provided that a registration obtained under rule 174 of
the Central Excise Rules, 1944 or rule 9 of the Central Excise
(No. 2) Rules, 2001 shall be deemed to be as valid as the
registration made under this sub-rule for the purpose of these
rules.
(2) The Board may by notification and subject to such
conditions or limitations as may be specified in such
notification, specify person or class of persons who may not
require such registration.
(3) The registration under sub-rule (1) shall be subject to such
conditions, safeguards and procedure as may be specified by
notification by the Board."
CBEC's manual chapter2 para 3.2 as applicable during the period:
"3.2 Separate registration is required in respect of separate
premises except in cases where two or more premises are
actually part of the same factory (where processes are
interlinked) but are segregated by public road, canal or
railway-line. The fact that the two premises are part of the
same factory will be decided by the Commissioner of Central
Excise based on factors, such as:
(1) Interlinked process product manufactured/produced in
one premises are substantially used in other premises
for manufacture of final products.
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Excise Appeal No.75336 of 2018
(2) Large number of raw materials are common and
received/proposed to be received commonly for both/all
the premises.
(3) Common electricity supplies.
(4) There is common labour/work force.
(5) Common administration/work management.
(6) Common sales tax registration and assessment.
(7) Common Income Tax assessment."
21. As can be seen from the above, Central Excise Registration is
required for a manufacturing facility and not for any facility owned by
the manufacturer. If there are more than one manufacturing facilities,
each of these require a separate registration. In fact, the appellant
themselves have two registrations. There are cases where the same
factory is split on to opposite sides of a road or pipeline or railway
track. In such cases, effectively, it is the same factory with different
parts of it working on either side. For such cases, CBEC's manual
instructs that a single registration may be given.
22. The present case is not one such. It is case where the assessee
has a registered manufacturing facility and a facility 48 km away where
no manufacturing but only some processing (which undisputedly does
not amount to manufacture) takes place and the two facilities have a
common pipe through which the processed gas is transported to the
manufacturing facility. The appellant's argument is that since the gas is
transported through the pipeline (and not through trucks, etc.) and the
pipeline is connected to both the processing unit and the manufacturing
facility, both should be treated as a single unit and they should be
18
Excise Appeal No.75336 of 2018
given a single registration. It is their assertion that this is covered by
the CBEC's manual. We do not agree with this assertion for following
reasons:
a) The CBEC's manual dealt with cases where the factory is split by
the intervening road, railway line or pipe etc. and not cases
where two units, located far from each other, are merely
connected by pipes.
b) Central Excise Registration has a specific requirement and it is
not open for either the assessee or the Revenue to register or not
register any premises beyond the legal provisions.
c) The Duliajan plant in this case is merely processing the gas and is
not engaged in any manufacture and therefore, it cannot be
treated as a part and parcel of the manufacturing facility at
Lepetkata.
d) Conversely, it is also not open to the Revenue to compel
registration of premises of any assessee where no manufacturing
takes place even if such places are connected by pipes to a
manufacturing facility. It is also not open to the Revenue to
demand duty on the processing activities carried out at such
premises even if they are connected by a pipe to actual
manufacturing unit.
e) The provisions relating to the Registration are in the CE Act and
Rules and it is not open to this Tribunal to modify them or enlarge
or constrict their scope.
19
Excise Appeal No.75336 of 2018
23. In conclusion, we find in the given factual matrix that the
appellant is not entitled to get their Duliajan processing plant
included in their registration for Lepetkata manufacturing plant.
CENVAT Credit.
24. The second issue to be considered is whether the appellant is
entitled to the CENVAT credit on the capital goods and services received
at their Duliajan plant even if it is not part of their registered premises.
CENVAT credit is governed by the Cenvat Credit Rules, 2004 framed
under Section 37 of the Central Excise Act, 1944 and Section 94 of the
Finance Act, 1994. Both these sections empower the Central
Government to frame Rules under the respective Acts. Thus, CCR, 2004
is a delegated legislation. Whenever the Parliament delegates powers to
make Rules, it always does so to some arm of the State which is
answerable to it such as the Government. The Rules which are notified
are then placed by the Government before the Parliament where the
Committee on Subordinate Legislation and at times the rules are
changed on the directions of the Committee to bring them in conformity
with the legislative intent.
25. It is now settled by a five member Constitutional bench of the
Hon'ble Supreme Court in the case of Commissioner of Customs
(Import) Mumbai vs Dilip Kumar and Company [2018 (361) ELT
577(SC)] that where the words in a statute are clear and plain and
unambiguous and only one meaning can be inferred, Courts are bound
20
Excise Appeal No.75336 of 2018
to give effect to the said meaning irrespective of the consequences.
Their Lordships were seized of the question of whether an exemption
notification should be construed strictly or liberally. In that
background, their Lordships examined the core principles of
interpretation of statutes, especially fiscal statutes in various judicial
pronouncements dating back as far as 1890 till that date and held as
follows in paras 19, 20, 25 & 26 of the judgment.
"19. The well-settled principle is that when the words
in a statute are clear, plain and unambiguous and only
one meaning can be inferred, the Courts are bound to
give effect to the said meaning irrespective of
consequences. If the words in the statute are plain and
unambiguous, it becomes necessary to expound those words
in their natural and ordinary sense. The words used declare
the intention of the Legislature. In Kanai Lal Sur v.
Paramnidhi Sadhukhan, AIR 1957 SC 907, it was held that if
the words used are capable of one construction only then it
would not be open to the Courts to adopt any other
hypothetical construction on the ground that such
construction is more consistent with the alleged object and
policy of the Act.
20. In applying rule of plain meaning any hardship
and inconvenience cannot be the basis to alter the
meaning to the language employed by the legislation.
This is especially so in fiscal statutes and penal
statutes. Nevertheless, if the plain language results in
absurdity, the Court is entitled to determine the meaning of
the word in the context in which it is used keeping in view
the legislative purpose [Assistant Commissioner, Gadag Sub-
Division, Gadag v. Mathapathi Basavannewwa, 1995 (6) SCC
21
Excise Appeal No.75336 of 2018
355]. Not only that, if the plain construction leads to anomaly
and absurdity, the Court having regard to the hardship and
consequences that flow from such a provision can even
explain the true intention of the legislation. Having observed
general principles applicable to statutory interpretation, it is
now time to consider rules of interpretation with respect to
taxation.
25. We are not suggesting that literal rule de hors the strict
interpretation nor one should ignore to ascertain the interplay
between 'strict interpretation' and 'literal interpretation'. We
may reiterate at the cost of repetition that strict
interpretation of a statute certainly involves literal or plain
meaning test. The other tools of interpretation, namely
contextual or purposive interpretation cannot be applied nor
any resort be made to look to other supporting material,
especially in taxation statutes. Indeed, it is well-settled that
in a taxation statute, there is no room for any intendment;
that regard must be had to the clear meaning of the words
and that the matter should be governed wholly by the
language of the notification. Equity has no place in
interpretation of a tax statute. Strictly one has to look to
the language used; there is no room for searching
intendment nor drawing any presumption.
Furthermore, nothing has to be read into nor should
anything be implied other than essential inferences
while considering a taxation statute.
26. Justice G.P. Singh, in his treatise 'Principles of Statutory
Interpretation' (14th ed. 2016 p-879) after referring to Re,
Micklethwait, (1885) 11 Ex 452; Partington v. A.G., (1869)
LR 4 HL 100; Rajasthan Rajya Sahakari Spinning & Ginning
Mills Federation Ltd. v. Deputy CIT, Jaipur, (2014) 11 SCC
672, State Bank of Travancore v. Commissioner of Income
22
Excise Appeal No.75336 of 2018
Tax, (1986) 2 SCC 11 and Cape Brandy Syndicate v. IRC,
(1921) 1 KB 64, summed up the law in the following manner
-
"A taxing statute is to be strictly construed. The well- established rule in the familiar words of LORD WENSLEYDALE, reaffirmed by LORD HALSBURY AND LORD SIMONDS, means :
'The subject is not to be taxed without clear words for that purpose : and also that every Act of Parliament must be read according to the natural construction of its words. In a classic passage LORD CAIRNS stated the principle thus: "If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable construction, certainly, such a construction is not admissible in a taxing statute where you can simply adhere to the words of the statute. VISCOUNT SIMON quoted with approval a passage from ROWLATT, J. expressing the principle in the following words: "In a taxing Act one has to look merely at what is clearly said. This is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used."
26. This judgment of the five member Constitutional bench of the Supreme Court, which prevails over any contrary decisions of the lower courts or smaller benches leaves us with no option but to interpret the 23 Excise Appeal No.75336 of 2018 Act and Rules as they were framed and applicable during the period without any intendment and regardless of the consequences.
27. Our role is to apply the Rules as they existed during the relevant period. Rule 2(a) of the CCR 2004 defines capital goods as below:
"(a) "capital goods" means:-
(A) the following goods, namely:-
(i) all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter 90, heading No. 68.05 grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Excise Tariff Act;
(ii) pollution control equipment;
(iii) components, spares and accessories of the goods specified at (i) and (ii);
(iv) moulds and dies, jigs and fixtures;
(v) refractories and refractory materials;
(vi) tubes and pipes and fittings thereof; and
(vii) storage tank, used-
(1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office; or (2) for providing output service; (B) motor vehicle registered in the name of provider of output service for providing taxable service as specified in sub-clauses (f), (n), (o), (zr), (zzp), (zzt) and (zzw) of clause (105) of section 65 of the Finance Act;"
28. Input service is defined in Rule 2 (l) of the CCR, 2004 as follows:
"input service" means any service,-24
Excise Appeal No.75336 of 2018
(i) used by a provider of taxable service for providing an output service; or
(ii) used by the manufacturer, whether directly or indirectly, in or in relation to the manufacture of final products and clearance of final products upto the place of removal, and includes services used in relation to setting up, modernization, renovation or repairs of a factory, premises of provider of output service or an office relating to such factory or premises, advertisement or sales promotion, market research, storage upto the place of removal, procurement of inputs, activities relating to business, such as accounting, auditing, financing, recruitment and quality control, coaching and training, computer networking, credit rating, share registry, and security, inward transportation of inputs or capital goods and outward transportation upto the place of removal;"
29. A plain reading of the above Rules makes it clear that there is no room in them to provide for Capital Goods credit on capital goods used in a processing facility outside the factory which does not manufacture any goods but only supplies the processed goods as inputs to the manufacturing facility. Similarly, there is no scope in the Rules to allow CENVAT credit of service tax paid on services used not in the manufacturing facility itself but elsewhere in a processing facility owned by the same legal entity.
30. Learned Counsel for the appellant relied upon the case of the case of the Vikram Cement vs CCE Indore [2006 (194) ELT 3 (SC)] in 25 Excise Appeal No.75336 of 2018 which the Hon'ble Apex Court allowed MODVAT credit/ CENVAT credit on inputs, viz., explosives used for blasting mines to produce limestone for manufacture of cement/ clinkers even though these inputs were not used in the factory of manufacture. A perusal of this judgment shows that their Lordships interpreted the erstwhile MODVAT Rules under which Rule 57J provided for credit of duty in respect of inputs used in an intermediate product which, in turn, is used for manufacture of final products. The CENVAT Credit Rules which replaced the MODVAT Rules did not have a provision corresponding to Rule 57J. Their Lordships held that there is no difference between the CENVAT and MODVAT Rules and even in the absence of an explicit provision, credit of CENVAT of explosives is still available. The present case is completely different as the question is not with respect to MODVAT Credit/ CENVAT Credit on inputs but is the question of CENVAT Credit on capital goods.
31. Learned counsel also relied upon the judgement of the Apex Court in the case of Vikram Cement [2006 (197)ELT 145] in which it was held that MODVAT /CENVAT credit on capital goods used in captive mines which form an integrated unit with the factory is available. The ratio of this judgment does not apply to the present case as we have specifically examined the facts of this case and ruled that the processing plant at Duliajan is a separate processing plant and is not part of the manufacturing unit at Lepetkata. Further, we are also bound now by the five member Constitutional bench of the Supreme Court in the case of Dilip Kumar & Company (supra) which categorically 26 Excise Appeal No.75336 of 2018 held that fiscal statutes must be interpreted applying the Rule of plain meaning without any intendment and regardless of any consequences or hardships caused.
32. For these reasons, we find that the appellant is not entitled to CENVAT credit on the capital goods installed and the services used in their processing plant in Duliajan.
33. The appeal is rejected.
(Order pronounced in the open court on ...15 January, 2020....) Sd/-
(P.K.CHOUDHARY) MEMBER (JUDICIAL) Sd/-
(P.V.SUBBA RAO) MEMBER(TECHNICAL) sm