2022 (11) TMI 1091 - HC - Central Excise
CENVAT Credit - capital goods used in the factory (Power Plant of KMCL) meant for another company/assessee (NINL) for manufacture of final products which are different and distinct - Department contended that the CC Rules specifically mentioned that capital goods and inputs for the purposes of the said Rules should be used in or in relation to the manufacture of final products within the factory of production - HELD THAT:- The definition of Factory does not preclude the possibility of there being two or more premises which can be “segregated by public road, canal or railway line.” How the two premises are to be considered to be part of the same factory by the Commissioner of the Central Excise has been set out in the above instructions of the CBEC. It only shows that as long as the two portions are integrally connected and inter-linked with the manufacturing process of excisable goods, it can be considered to be part of the same factory premises. In other words, merely because the Coke Oven Plant and the CPP may have been in two separate locations would not result in there being considered to be not part of the same factory premises.
An important factor which has to be taken note of in this context is that an agreement was executed between the Government of Odisha and KMCL on 28th June, 2000 where under a land to an extent of 249.45 acres on which both the Coke Oven Plant as well as the CPP Plant were located had subsequently been transferred to KMCL.
Selling of 75% of the power to NINL - HELD THAT:- There is indeed no restriction under the CENVAT Scheme that after captive use of power, the surplus power cannot be sold to any other party. The only restriction is that the capital goods are not to be exclusively used for manufacture of ‘exempted products’. It is nobody’s case that the final manufactured products of KMCL or that of NINL are ‘exempted products’. In this context, it should be noticed that ‘power/ electricity’ is not a final product. It is generated in the CPP of KMCL and is used in the manufacture of excisable goods in the Coke Oven Plant.
In COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX, JAIPUR VERSUS SHREE CEMENT LIMITED [2018 (9) TMI 822 - RAJASTHAN HIGH COURT], a similar question arose. There, one factory manufactured duplex board and the other paper. They were separately registered with the Central Excise Department. The question that arose was whether the excess electricity cleared by the Assessee in favour of its sister concern units would make it ineligible for CENVAT Credit. The Court answered the question in the negative. It was held that electricity generated by the CPP was being used for the sister concern which was part of the company itself and, therefore, would still constitute captive consumption of electricity. In other words, the Assessee was held to be eligible for the CENVAT Credit.
Thus, the power generated in the CPP of KMCL is used in the manufacture of the excisable goods by KMCL - the mere fact that the surplus power may have been sold to NINL would not disentitle KMCL to the benefit of CENVAT Credit on capital goods.