2018 (9) TMI 822 – RAJASTHAN HIGH COURT – 2018 (16) G. S. T. L. 196 (Raj.) – CENVAT Credit – input/input service used in Captive power plant – captive consumption of power generated – electricity generated partly consumed captively and partly supplied to other plants – Whether the ld. CESTAT was right in law in holding that the assessee was entitled to avail the full credit of Excise Duty/service tax paid on input/input services under in their captive power plant when all the power generated through the captive power plant was not used by them for the manufacture of finished goods but part of the power generated was also supplied/wheeled out to the other plants?
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Held that:- Revenue placed reliance in the case of Supreme Court in Maruti Suzuki India Limited [2009 (8) TMI 14 – SUPREME COURT] where SC came to the conclusion that if the product namely electricity sold to third party or even sister concern, then it will not be entitled to Cenvat credit – the judgement do not apply to
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vnath, Mr. Sameer Jain, Mr. Vivek Sharma, Ms. Mahi Yadav, Mr. Daksh Pareek And Mr. Arjun Singh Order 1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has allowed the appeal of the assessee. 2. This Court while admitting the appeal on 04.12.2017 framed following substantial question of law: 1) Whether the ld. CESTAT was right in law in holding that the assessee was entitled to avail the full credit of Excise Duty/service tax paid on input/input services under in their captive power plant when all the power generated through the captive power plant was not used by them for the manufacture of finished goods but part of the power generated was also supplied/wheeled out to the other plants? 3. Counsel for appellant has taken us to the definition of Input . Rule 2(k) reads as under: Rule 2. ……………………………………………&h
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final product; (D) motor vehicles; (E) any goods, such as food items, goods used in a guesthouse, residential colony, club or a recreation facility and clinical establishment, when such goods are used primarily for personal use or consumption of any employee; and -/ (F) any goods which have no relationship whatsoever with the manufacture of a final product. Explanation – for the purpose of this clause, free warranty means a warranty provided by the manufacturer, the value of which is included in the price of the final product and is not charged separately from the customer;] 4. He has also taken us to Rule 2(l), wherein Input Services, reads as under: Rule 2…………………………………………………………… (l) input service means any service, (i)used by a provider of taxable service for providing an output service; or (ii) used by the manufacturer, whe
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structure or a part thereof; or (b) laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or [(B)] specified in sub-clauses (o) and (zzzzj) of clause (105) of section 65 of the Finance Act, in -/ so far as they relate to a motor vehicle which is not a capital goods; or (BA) specified in sub-clauses (d) and (zo) of clause (105) of section 65 of the Finance Act, except when used by – (a) a manufacturer of a motor vehicle in respect of a motor vehicle manufactured by him; or (b) a provider of output service as specified in sub-clause (d) of clause (105) of section 65 of the Finance Act, in respect of a motor vehicle insured or reinsured by him; or] (C ) such as those provided in relation to outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, membership of a club, health and fitness centre, life insurance, health insurance and travel benefits extended to employees on vaca
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appreciate that the sister units of the assessee respondent cannot be treated as one and the same. In this regard the Hon'ble Supreme Court while dealing with the issue of eligibility to exemption in the case of Rollatainers Ltd. v. CCE, Delhi has laid the following law: -/ 7. There is no two opinion that both the factories are near to each other and it is owned by the same owner and the common balance sheet is maintained. But, by this can it be said that both the factories are one and the same? The definition of the factory as defined in Section 20(e) of the Central Excise Act, 1944, reads as under: (e) factory means any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process connected with the production of these goods is being carried on or is ordinarily carried on; 8. Simply because both the factories are in the same premises that does not lead to th
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cordingly, we are of the opinion that the view taken by the Tribunal does not appear to be well-founded and likewise, the view taken by the Commissioner, Central Excise. Accordingly, we allow both these appeals, set aside the order of the Tribunal passed on June 7, 2002 as well as the order passed by the Commissioner, Central Excise, New Delhi-III on September 28, 2001 in both the appeals. No order as to costs. G. BECAUSE the ld. CESTAT failed to appreciate that it is settled proposition of law that the sister units of the assessee respondent having different registration are distinct entities and cannot be treated as one and the same and -/ therefore under the Central Excise provisions the assessee respondent was not entitled to take cenvat credit in respect of those input and input services which were not used in or in relation to the manufacture of final products in their own factory. H. BECAUSE the ld. CESTAT grossly erred in permitting full Cenvat credit on input and input service
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. CESTAT in case of Hindustan Zinc Ltd. has been accepted on monetary limit and not on merit. K. BECAUSE the Final order No. 52132- 52133/2017-EX[DB] dated 02.03.2017 of the ld, CESTAT in case of Hindustan Zinc Ltd. has not been accepted by the Department on merits and is being appealed against. L. BECAUSE the Final order No. 53340- 53343/2017-Ex[DB] dated 17.04.2017 of the ld. CESTAT in case of Shree Cement Limited, Ajmer has not been accepted by the Department on merits and is being appealed against. 5. Counsel for appellant has contended that the observations made by the Tribunal are as under:-/ Here, the excess electricity has been cleared by the appellant at the agreed rate in favour of their sister concern units and have also cleared such electricity in favour of the grid for distribution. Therefore, the appellant are not entitled to take Cenvat Credit to the extent of excess electricity transferred to the sister concern units at the contractual rates. 5(iii). Obviously, the elec
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the Cenvat Credit Rules, 2004 as enumerated in the foregoing para. 6. From the above it is clear that Cenvat Credit is only available to such input/ inputs services which is used in the generation of that quantum of electricity which has been used captively in the production of final product and the input/ input services which has been used in the generation of electricity which has been wheeled out to the sister concern units of the appellant is not considered as the input and input services in terms of definitions given here in above. Hence, credit taken on that quantity of electricity which has been wheeled out to the sister concern units is not admissible to the appellant. The ratio of the case laws cited by the appellant can not be applied in these cases. 6. He has also contended that the Tribunal in paras 3 to 5 has seriously committed error in allowing the appeal, which reads as under: -/ 3. The Ld. Counsel submits that the Cenvat Credit in respect of inputs and input services
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Revenue that the inputs and input services are not used in respect of power which is generated and captively consumed. We find no merits in the arguments put forth by the adjudicating authority in denying the cenvat credit to the appellant as in an identical issue, in respect of very same assessee, but situated at Chittorgarh, Rajasthan, this bench vide Final order No. A5189s 51899/2016 held as under: Heard both the sides and examined the appeal records. The short point for decision is whether or not the appellant is eligible to avail the credit on input services used in the generation of electricity which is partly cleared to their sister units who are also engaged in the manufacture of dutiable final products. The admitted fact is that the Cenvat credit on input services used in the generation of power is eligible to the appellant as long as the electricity is used in the manufacture of dutiable final product. The only dispute is relating to the usage of electricity captively within
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the cases but still goes ahead and applies the ratio. As mentioned earlier in this order, the Hon'ble Supreme Court was dealing with the sale of electricity to outside parties and not to clearance of electricity to another manufacturing unit of the appellant. The input service credits attributable to the electricity sold to utility companies are not available to the appellants as held by the Hon'ble Supreme Court. This, the appellants are not contesting and have already reversed the amount towards such input service credits. 7. He has relied upon the first order which is against the judgment of Gujarat High Court where the appeal is admitted by the Hon ble Supreme Court which is referred in Commissioner Vs. Bilag Industries Pvt. Ltd., 2015 (322) E.L.T. A174 (Guj) which reads as under: The appeal is admitted. The following substantial questions are framed in this appeal for determination of the Court: (a) Whether in the facts and circumstances of the case, the Tribunal has commi
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generate electricity and also to produce steam. Part of this electricity and steam supplied to its sister concern, a 100% EOU, situated outside its factory premises. It is economical in the modern competitive working to have a larger power plant catering to power requirements of various units of same group of companies rather than having small power plants for each unit Cenvat credit cannot be denied. It was further held that issue of admissibility of credit on supplies made to a 100% EOU was under litigation and different courts given different interpretations regarding admissibility of cenvat credit on inputs involved in the issue. Extended period of limitation not invocable. 8. He has also relied upon in Commissioner vs. Ultra Tech Cement Ltd., 2015 (320) E.L.T. A259 (S.C.), which reads as under: 1. Leave granted. 2. For the reasons given in our judgment delivered today in the case of Maruti Suzuki Ltd. v. Commissioner of Central Excise, Delhi-III Civil Appeal No. of 2009 – (arising
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tion of electricity wheeled out to third parties was not input and service of inward transportation thereof was not input and service. Electricity like money would lose its identity once it is used with electricity obtained from other sources – No nexus established between final product of third party sold to assessee and electricity sold to it by assessee, no question of apportionment arose – Electricity was sold for consideration to third parties, who were independent entities and not job workers of assessee – No material on record that establishes an obligation on part of third parties to supply products to assessee in consideration of assessee selling the electricity to them – Assessee having sold electricity to third parties lost all control or rights in respect thereof – Even if electricity was by chance used for manufacture of final product sold by third parties to assessee, it would make no difference for it cannot be said that same was used by assessee itself – Assessee not en
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oil/Naphtha used in generation of electricity and steam, part of which was transferred to adjacent unit. Held : Assessee was entitled to credit on Furnace oil/Nephtha only to the extent to which they were using electricity and steam within their factory. -/ 4. Sanghi Industries Ltd. vs. Commissioner of Central Excise, Rajkot, 2014 (302) E.L.T. 564 (Tri. Ahmd.), wherein it has been observed as under: …. Factory – Clubbing of Sister units situated in different premises having different registration cannot be considered as same factory. Appellants contention that such units should be treated as same factory as the transmission lines and road linking such units under their possession and control rejected. 9. Therefore, he contended that the view taken by the Tribunal is required to be reversed and he is not entitled to the extent of the electricity which is given to the sister concern. To that extent, the matter is required to be remitted back in view of the decisions referred herei
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ppellant is eligible to avail the credit on input services used in the generation of electricity which is partly cleared to their sister units who are also engaged in the -/ manufacture of dutiable final products. The admitted fact is that the Cenvat credit on input services used in the generation of power is eligible to the appellant as long as the electricity is used in the manufacture of dutiable final product. The only dispute is relating to the usage of electricity captively within the plant of generation or also outside the generation unit by the same manufacturer. Considering that the electricity has been used in the manufacture of dutiable final products and also the fact that all units belong to the appellant the denial of credit is not justifiable in the present case. Further, it is a fact that if the appellant were to follow the procedure for input service distribution the credit eligibility on part of the electricity cleared to sister unit could not have been questioned and
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such input service credits. 2. D.B. Judgment of Tribunal in – M/s Hindustan Zinc Ltd. vs. CCE & ST, Jaipur-II, Appeal No.E/2068, 2067/2012-EX (DB) wherein it has been observed as under: 5. on careful consideration of the submissions made by both the sides and perusal of records we find that the issue is regarding reversal of Cenvat credit attributable to the power generated and transferred to their sister concern. It is the case of the Revenue that the input services are not used in respect of the power which is generated and captively consumed. We find no merits in the arguments put forth by the adjudicating authority in -/ denying the cenvat credit to appellant as in an identical issue in respect of very same assessee but situated at Chittorgarh, Rajasthan. This bench vide final order no. A/51895-51899/2016 held as under – Heard both the sides and examined the appeal records. The short point for decision is whether or not the appellant is eligible to avail the credit on input ser
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is actually using the electricity or retained fully by the appellant himself without proportionate distribution. Such being the factual position, I find that the impugned orders are not sustainable. Further, the reliance placed in the impugned order on the ratio of Hon'ble Supreme Court in Maruti Suzuki Ltd. vs. CCE, Delhi- III (supra) appropriate. In fact the appellate Authority records that the facts are different in both the cases but still goes ahead and applies the ratio. As mentioned earlier in this order, the Hon ble Supreme Court was dealing the sale of electricity to outside parties and not to clearance of electricity to another manufacturing unit of the appellant. The input service credits attributable to the electricity sold to utility companies are not to the appellants as held by the Hon ble Supreme Court. This, the appellants are not contesting and have already reversed the amount towards such input service credits. 3. Commr. Of C.Ex. & CUS, Vadodara-II vs. Indeos
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anufacture of final products or for any other purpose. The important point to be noted is that, in the present case, excess electricity has been cleared by the assessee at the agreed rate from time to time in favour of its joint ventures, vendors etc. for a price and has also cleared such electricity in favour of the grid for distribution. To that extent, in our view, assessee was not entitled to CENVAT credit. In short, assessee is entitled to credit on the eligible inputs utilized in the generation of electricity to the extent to which they are using the produced electricity within their factory (for captive consumption). They are not entitled to CENVAT credit to the extent of the excess electricity cleared at the contractual rates in favour of joint ventures, vendors etc., which is sold at a price. 5. Commr. Of C. Ex. Vadodara vs. Gujarat State Fertilizers & Chem. Ltd., 2008 (229) ELT 9 (S.C), wherein it has been observed as under: 10. At the time when leave was granted in this
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Assessee. The decision rendered by the Tribunal is, thus, confirmed. The appeal is dismissed leaving the parties to bear their own costs. 6. Collector of Central Excise vs. Solaris Chemtech Limited, 2007 (214) ELT 481 (S.C.), wherein it has been observed as under: 2. In this batch of civil appeals the short question which arises for determination is : whether the assessee is entitled to MODVAT credit under Rule 57A on Low Sulphur Heavy Stock (LSHS) and furnace oil used for generating electricity captively consumed for the manufacture of the final products such as caustic soda, cement etc. 8. In our view, there is no merit in this civil appeal filed by the Department. At the outset, we may clarify that electricity is not an excisable item. Further, in this batch of civil appeals we are concerned with the electricity which is generated inside the plant by heating of LSHS and which is captively consumed and used to manufacture cement/caustic soda. Rule 57A, quoted above, has an Explanatio
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duct . Further, in the case of Collector of Central Excise v. Rajasthan State -/ Chemical Works 1991ECR465(SC) , it has been held that any operation in the course of manufacture, if integrally connected with the operation which results in the emergence of manufactured goods, would come within the term manufacture . This is because of the words used in Rule 57A, namely, goods used in or in relation to the manufacture of the final products . Electricity is one form of heat. It gets generated in several ways. LSHS is a fuel used in the generation of electricity. Since, electricity is selfgenerated and since it comes into existence as an intermediary product, its utilization for production of final product is crucial. Hence, MODVAT credit on LSHS used in production of electricity cannot be denied. Lastly, we may point out that in order to appreciate the arguments advanced on behalf of the Department one needs to interpret the expression in or in relation to the manufacture of final product
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ucts. The Department gave a narrow meaning to the word used in Rule 57A. The Department would have been right in saying that the input must be raw- material consumed in the manufacture of final product, however, in the present case, as stated above, the expression used in Rule 57A uses the words in relation to the manufacture of final products . The words in relation to which find place in Section 2(f) of the said Act has been interpreted by this Court to cover processes generating intermediate products and it is in this context that it has been repeatedly held by this Court that if manufacture of final product cannot take place without the process in question then that process is an integral part of the activity of manufacture of the final product. Therefore, the words in relation to the manufacture have been used to widen and expand the scope, meaning and content of the expression inputs so as to attract goods which do not enter into finished goods. In the -/ case of J.K. Cotton Spin
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s not possible. Therefore, keeping in mind the expression used in relation to the manufacture in Rule 57A we are of the view that the assessees were entitled to MODVAT credit on LSHS. In our opinion, the present case falls in Clause (c), therefore, the assessees were entitled to MODVAT credit under Explanatory Clause (c) even before 16.3.95. Inputs used for generation of electricity will qualify for MODVAT credit only if they are used in or in relation to the manufacture of the final product, such as cement, caustic soda etc. Therefore, it is not correct to state that inputs used as fuel for generation of electricity captively consumed will not be covered as inputs under Rule 57A. 7. Commissioner of CUS. & Central Excise, India vs. Jindal Polyester, 2014 (305) ELT 43 (All.), wherein it has been observed as under: 6. Being aggrieved, the Department has come out in the present appeal. In the memo of appeal, the following substantial question of law has been framed: Whether the Appell
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r Spirit used in or in relation to the manufacturer of the final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils cleared along with the final products, goods used as paint, or as packing materials or as fuel or for generation of electricity uses for manufacture of final products or for any other purpose within the factory of production. 14. The learned counsel produced various orders passed by the different Tribunals and they all do support the impugned order of the Tribunal. The learned counsel for the appellant could not refer any statutory regulation or rule to take a different view of the matter. It is logical that if two units are being run at one place, producing two different items and the electricity is supplied to both of them by a common generator, the Modvat facility shall be available to both the manufacturing units, unless statutorily provided otherwise. 15. It is neither expedient nor desirable unless
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for carrying out the manufacturing activity, the electricity generation also forms part of the manufacturing activity and the input used in that electricity generation is an input used in the manufacture of final product. This observation makes it clear that in the case where there is an arrangement for captive generation of electricity, it has to be treated as a requirement for carrying out manufacturing process and therefore credit would be admissible. Therefore, the key expression is captive arrangement . Captive arrangement means arrangement means arrangement made by the company for its own use and not for use by others. Therefore, when one company has various different units located at different geographical locations, all the units are manufacturing units, and the electricity generated in one unit are being consumed in the other unit of the same company in addition to it being consumed in the same unit also), it can be safely concluded that it is a case of captive generation and
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