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2019 (5) TMI 913 - AT - Central ExciseCENVAT Credit - wrongly availed CENVAT Credit - capital goods used for construction of power plant - period from April 2005 to September 2006 - Rule 14 of CENVAT Credit Rules, 2004 read with Section 11AB of the Central Excise Act, 1944 - Whether the plot of land leased out by the appellant to 2nd party formed the part of factory premises of the Appellant? - Who owns, operates and maintains the Thermal Power Plant erected on that plot of land? - HELD THAT:- It is quite evident that on the said plot marked as A-31 MIDC Industrial Area, Butibori Nagpur, apart from factory of Appellant, quite a good number of other things including the leased out land to 2nd Party, Plot identified as Indo Rama Textiles Ltd., residential complex, temple etc are located. Just because these facilities are located on the same plot they cannot be called the factory premises of the Appellant - since the thermal power plant at material time at least before the merger of 2nd Party with Appellant was under a distinct management and was owned by the distinct company, even if located on the same plot cannot be said to part of the manufacturing operations of Appellant. Thermal power plant erected at A-31 MIDC Industrial Area, Butibori District Nagpur, has been erected on the plot which do not form the part of factory premises of the Appellant - All the statutory permissions required for setting up and operating the Thermal Power Plant at the aid premises have been obtained by and granted to 2nd Party - 2nd Party has constructed, erected, owns, operates and maintains the thermal power plant strictly in a commercial manner and is free to sell the power generated on acceptable and agreeable commercial terms - Appellant purchase the power generated in the power plant. They have priority in purchase and only after fulfilling their needs can 2nd Party sell the surplus power to third party. The thermal power plant at A-31 MIDC Industrial Area, Butibori District Nagpur is not the captive power plant of the appellant. Whether the CENVAT Credit in respect of Capital Goods, receive by the 2nd Party on the leased plot and used by them for erection/ installation of thermal power plant will be admissible to appellant for the reason that invoices showed them as consignee? - HELD THAT:- Capital goods in question were being procured by the 2nd Party for use by themselves for erection of the Thermal Power Plant at Butibori. Thus mention of consignee as “M/s Indo Rama Synthetics Limited, A-31 MIDC Industrial Area Butibori Nagpur” on invoices was nothing but an attempt to create entitlement to CENVAT Credit for the Appellant, without passing the actual ownership/ possession or right to use the said goods in their favour. It is quite evident that 2nd Party was constructing, installing erecting, owning, operating and maintaining the said Thermal Power Plant as its own business asset for generating profits for itself by way of sale of power. Appellant had no role, authority over the 2nd Party or over the Thermal Power Plant. They were purchasing the power generated in the Thermal Power Plant on commercially and mutually agreeable terms and conditions from the 2nd Party. Thus the goods covered by the invoices on which they were shown as consignee were never received by them in their factory premises but were but were received by the 2nd Party on the plot leased out to them by Appellants. 2nd Party has not only received the said goods but have reflected the same in their book of accounts as capital/ fixed assets - Since the goods were never received by the Appellant’s in their premises the and were not installed, operated or used in any process of manufacture of final products, these mention of their name as consignee on the invoices is nothing but to create the instrument/ document for passing on the inadmissible credit to them. Just because the Thermal Power Plant has been set up on the plot leased out by the Appellant, it would not entitle them to the CENVAT Credit in respect of the inputs and capital goods procured by the lessor. Whether the CENVAT Credit on Capital Goods is admissible in respect of those Capital Goods which are reflected as Capital Assets in book of accounts of the other legal entity and have been capitalized therein? - HELD THAT:- It is quite evident that CENVAT Credit on the Capital Goods can be availed only if the same are received in the factory of manufacturer of final product and is used the factory of manufacture. In the present case when the goods have not been received by the manufacturer in his factory the credit would not be admissible to him - when the capital goods are capitalized in the account books of 2nd Party, then by adopting this device Appellants could not have claimed the credit in respect of the same goods in view of Rule 4(4) of the CENVAT Credit Rules, 2004. Further appellants have submitted that credit of ₹ 1,70, 55,003/- has been denied to them in respect of the Capital Goods received in their premises after the merger of Appellants and 2nd Party with effect from 01.02.2007. We find force in the arguments of the appellant that after merger both the entities have become one and the credit cannot be denied on the ground that they were distinct earlier at time of placement of order. After merger the goods received were received by the appellants only in their premises and used by them. Hence we have to set aside the order dated 21.08.208 and remand the matter back to Commissioner for determination of CENVAT Credit to be disallowed after merger of the two entities. Whether CENVAT Credit in respect of those goods which are not identifiable but classified under Chapter 84 of First Schedule to Central Excise Tariff Act, 1985? - HELD THAT:- Since we are not adjudicating the case in relation to excisablity of the thermal power plant we do not dwell into submissions made by both the sides on this issue and various case laws relied upon by the revenue - However in the remand proceedings in respect of the goods received after the date of effect of merger of two units, Commissioner should consider these issues afresh while considering the case for allowing or disallowing the credit in respect of the goods received after date of merger. Whether demand is hit by limitation and penalty under Rule 15 of CEVAT Credit Rules, 2004 read Section 11AC justified in the present case on the Appellant? - HELD THAT:- Since both the show cause notices have been issued within normal period of limitation from date of taking the CENVAT Credit sought to be denied we hold that demand is no hit by limitation as provided for by Section 11A(1) of Central Excise Act, 1944 - Also charge of suppression is well established against the appellants. Since we find that appellants have availed the inadmissible credit by suppressing the relevant and complete information from the department we also uphold the penalties imposed under Rule 15 of CENVAT Credit Rules, 2004 read with Section 11AC of Central Excise Act, 1944 - Since the appellants have taken the inadmissible credit the demand for interest too is sustained. Appeal allowed in part and part matter on remand.
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