Sentini Ceramica Pvt. Ltd Versus CCT, Guntur GST
Central Excise
2018 (7) TMI 165 – CESTAT HYDERABAD – TMI
CESTAT HYDERABAD – AT
Dated:- 28-6-2018
Appeal No. E/30197/2018 – Final Order No. A/30648/2017
Central Excise
Hon'ble Mr. P. Venkata Subba Rao, Member ( Technical )
Shri G. Prahlad, Advocate for the Appellant
Shri Guna Ranjan, Superintendent /AR for the Respondent
ORDER
[ Order per: Mr. P.V. Subba Rao ]
1. This appeal has been filed by the appellant against Order-in-Appeal No. GUN-EXCUS-000-APP-134-17-18, dated 30.11.2017.
2. Heard both sides and perused the records. The issue in brief is that the appellant is the manufacturer of ceramic glazed tiles and is paying Central Excise Duty. He had also availed CENVAT credit on various raw materials used in the manufacture of ceramic glazed tiles. For manufacturing these items, the appellant also needs natural gas which is available at ONGC well which is located 30 K.M. away from their factory. The appellant pum
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issued to the appellant alleging irregular availment of CENVAT credit as the compressor was moved out of the factory and asking them to reverse the credit in terms of Rule 3(5) of CENVAT Credit Rules, 2004. The Show cause notice also proposed imposition of penalty and recovery of interest.
3. After following due process of law, Ld. Lower authority has confirmed the demands along with interest and penalty. Aggrieved, the appellant approached Commissioner (Appeals) who, vide impugned Orderin- Appeal dated 30.11.2017 upheld the Order-in-Original dt. 22.07.2015 in toto and rejected the appeal.
4. Ld. Counsel for the appellant argues that their final products cannot be manufactured without gas and the only way to get the gas is by pumping it from well which is 30 KM away from their factory. Hence they used the compressor to pump the gas into the tankers and bring it to the factory. In that sense, he argues that the gas well should be treated as an extension of their factory premises and h
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Indore [2006(194) E.L.T. 3(S.C) wherein Hon'ble Supreme Court has allowed credit on inputs viz; explosives used for blasting mines to produce limestone for use in the manufacture of cement by the assessee.
(e) CCE, Madurai vs. India Cements Ltd. [2002(150)E.L.T. 341 (Tri.- Chennai).
(f) Synthetic Packers Pvt. Ltd. vs. CCE (Appeals-I), Bangalore [2009(240)E.L.T. (Tri.-Bang.)]
(g) Jaypee Bela Plant vs. CCE, Bhopal [2005(180)E.L.T 31 (Tri.-Del.)]
(h) CCE Salem vs. Bharath Sanchar Nigam Ltd. [2017(7)G.S.T.L. 129 (Mad.)]
5. Ld. DR vehemently opposed the appeal and reiterated the arguments made in the Order-in-Original and Order-in-Appeal. It is his submission that credit can be allowed as per the definition of “capital goods” under Rule 2 (a) of CENVAT Credit Rules 2004. This rule allows credit in respect of capital goods used “in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in office or outside the factory of the manuf
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rried on.”
6. He relied on the following case laws:
(i) Rajhans Metals Pvt. Ltd. vs CCE Rajkot [2007-TIOL-1491- CESTAT-AHM)]
(ii) Atul Auto Limited vs. CCE, Rajkot [2009(237)E.L.T 102 (Tri.- Ahmd)]
(iii) Rajshanti Metals Pvt. Ltd. vs. CCE, Rajkot [2015(39)S.T.R. 875 (Tri.-Ahmd.)]
(iv) Leamak Healthcare Pvt. Ltd. vs. CCE, Ahmedabad [2017(49) S.T.R. 605 (Tri.-Ahmd.)]
7. There are a number of cases where the CENVAT credit has been disallowed to the appellants when the capital goods were used in places such as wind mills which are located far from the factory of the manufacturer, although the electricity so generated is ultimately provided to the factory for use in manufacture of final products. He argues that the ratio of these cases applies to the instant case.
8. Heard both sides and perused the records. I find that the definition “Capital goods” under Rule 2(a) of CCR 2004 specifically requires the goods to be used in the factory of the manufacturer of the final product
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treated as a part of the factory of the manufacturer. It is true that the goods are finally required for the manufacture and so are many other raw materials sourced from various places without which the manufacture cannot take place. All these places from where raw materials are sourced, cannot be treated as part of the factory of the manufacturer. There is nothing on record to show that the well is part of the registered premises of the factory of the manufacturer. I, therefore, find that the demand is sustainable and CENVAT credit is inadmissible. It needs to be reversed along with interest. However, in view of the cases cited by the appellant, I find that he has enough reason to suspect that they were entitled to the credit and hence I cannot attribute any malafide intent and therefore, I set aside the penalty imposed on them. The appeal is allowed partly to the extent of setting aside the penalties imposed in the Order-in-Original.
9. The appeal is allowed to the extent of settin
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