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2014 (11) TMI 782 - AT - Central ExciseCenvat Credit - Capital goods - capital goods were used to set up power plant for generation of electricity - allegation that concerned power plant is not an integral part of the manufacturing unit - allegation that there is no relation between M/s. SISCOL and M/s. JSWPL and it would lead to neighbour taking the credit on capital goods. - Effective date of allowance of CENVAT Credit - Difference of opinion - Majority order - Held that:- the Lessor (SISCOL) requested to the Lessee (JSWPL) to set up a power plant in the premises of the Lessor (SISCOL) to take care of the power generation of the Lessor to which Lessee has agreed. - M/s. SISCOL had provided their land to M/s. JSWPL with a condition to set up a power plant and the electricity generated would be consumed in manufacturing activities of M/s. SISCOL. It may be seen from the documents and records that in 2004, M/s. SISCOL was declared as sick unit under SICA, 1985. CDR Cell report would show that SJG came toward for financing the sick unit M/s. SISCOL, as finance acts as an engine of growth. It appears from the Show Cause Notices that M/s. JSWPL, one of the companies of SJG, have expertise in constructing and operating Power Plants and M/s. JSW Steel Ltd. another company of SJG, is one of the purchasers of the final product of M/s. SISCOL. It is recorded in the CDR Cell report that there was proposal of merger of M/s. SISCOL with SJG, which is corroborated by Director’s report dated 26-4-2005 of JSWPL balance sheet. It is mentioned in “Unit III Debentures Trust Deed” dated 22-9-2005 of M/s. JSWPL that with a view to finance its 2 x 30 MW plant at SISCOL, the company has approached the Debenture holders. JSWPL declared to TNEB by letter dated 6-1-2005 that Captive Power Plant is installed inside the SISCOL premises to meet the present and future power requirements of SISCOL. Further, TNEB approved as SISCOL Captive Power Plant located in the company’s premises. Rule 4(3) of CCR, 2004 provides that the Cenvat credit in respect of the capital goods shall be allowed to a manufacturer, even if the capital goods are acquired by him on lease, hire-purchase or loan agreement, from a financing company. Rule 4(3) has a wide amplitude in so far as it would cover the cases of various types of financial arrangements for availing credit on the capital goods. It is contemplated that under this sub-rule (3) of Rule 4 would cover the cases where the ownership of the capital goods does not vest in the manufacturer until the loan is repaid. There must be an agreement for the purpose of acquiring the capital goods. The Tribunal in the case of Iljin Automotive India Ltd. v. CCE, Chennai - [2004 (2) TMI 561 - CESTAT, CHENNAI] observed that variations/unusual features in the agreement covering the lease arrangement were not relevant for determining the eligibility of credit. It is clear that title of the property is not relevant for availing Cenvat credit on capital goods. Even prior to 31-8-2006, it was a Captive Power Plant of M/s. SISCOL as approved by TNEB under the Electricity Act. SISCOL was a sick unit. They entered into lease agreement with M/s. JSWPL, a relationship had already been developed prior to October, 2005, as evident from CDR Cell report, JSWPL balance sheet, etc., for financial accommodation to get loan from UTI Bank Ltd. for setting up C.P.P. and one of the considerations is that electricity would be supplied to M/s. SISCOL, which is an integral part of manufacturing activities of M/s. SISCOL. - It is proper to allow Cenvat credit to M/s. SISCOL from October, 2005 on capital goods used in setting up Power Plant for generation of electricity, which was captively consumed within the factory of M/s. SISCOL for manufacturing of their final product - Decided in favour of assessee.
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