2018 (7) TMI 165 – CESTAT HYDERABAD – TMI – CENVAT Credit – scope of 'Factory' – capital goods – Whether the compressor used at the gas well to pump gas into tankers which is about 30 K.M. away from the manufacturer can also be considered as a part of the factory premises of the appellant? – Held 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 products subject to some exceptions. The current case does not fall in those exceptions. Therefore, the capital goods in this case i.e. compressor must be used in the factory of the manufacturer of the final products if CENVAT credit must be allowed.
–
The definition of “Factory” has been given in Central Excise Act and this clearly does not cover the gas well where the compressor has been installed – It is true that the goods are finally required for the manufacture and so are many other raw materials sourced from various places with
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
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 pumps the gas from the gas well into tankers and these tankers are driven to appellant s factory for use in manufacturing the tiles. The appellant purchased a compressor in the month of July 2013 which has been lying in their factory and availed 50% credit of CENVAT credit, treating the same as capital goods. In October 2013, they shifted the compressor from their factory (compressor was never used within the factory) o the gas well located 30 K.M away, after intimating the department. Since then, the compressor is being used to pump the gas into tankers which are then driven to the factory and the gas is used to manufa
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
llant 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 hence the compressor used in the gas well is eligible for capital goods credit. He requested that the credit may be allowed and the Order-in-Appeal may be set aside. He relied on the following case laws: (a) Glaxo Smithkline Consumer Health Limited vs. CCE, Chandigarh [2017 (348) E.L.T. 328 (Tri.-Chan)] wherein it is held that Bulk Milk Coolers and DG sets installed away from factory in milk collection centres were treated as integral part of the unit and availment of CENVAT credit was allowed on the capital goods installed at such centres. (b) Reliance Industries Limited vs. Union of India [2018 (360) E.L.T. 244 (Bom)]
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
-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 manufacturer of the final products for generation of electricity for captive use within the factory or for providing output service . He argued that in the present case, the capital goods are not used for production and they are also not used within the factory of manufacture, the gas well where the compressor has been installed, cannot be called the factory of the manufacturer simply because the raw material which is sourced there will ultimately be used in the factory of the manufacturer. He draws my attention to the definition of Factory in the Central Excise Act, 1944 which applies all the rules including CENVAT credit rules, which rea
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =
ctory 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 products subject to some exceptions. The current case does not fall in those exceptions. Therefore, the capital goods in this case i.e. compressor must be used in the factory of the manufacturer of the final products if CENVAT credit must be allowed. The next question is whether the compressor used at the gas well to pump gas into tankers which is about 30 K.M. away from the manufacturer can also be considered as a part of the factory premises of the appellant. The definition of Factory has been given in Central Excise Act and this clearly does not cover the gas well where the compressor has been installed. I understand that there were cases where, based on the facts of
= = = = = = = =
Plain text (Extract) only
For full text:-Visit the Source
= = = = = = = =