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2025 (5) TMI 1367 - HC - Central ExciseCondonation of delay in filing the application for restoration - duty paid on fixed facility charges - Demand for CENVAT credit including Education cess and Secondary and Higher Education cess in terms of Rule 2014 of the CENVAT Credit Rules 2004 read with Section 11A (2) of the Central Excise Act 1944 - levy of Penalty and interest - definition of input - HELD THAT - We have perused the reasons given by the applicant for not being present on the day when the matter was called. The reasons are acceptable and are not being disputed by the assessee. Therefore the delay in filing the application is condoned and the appeal stands restored to its original file and number of this Court to be heard and disposed of. The application IA No GA/3/2025 is allowed. The learned Tribunal took note of the fact that identical issue was considered in the assessee s own case and by final order dated March 23 2018 the claim of the assessee with regard to CENVAT credit on the duty paid on fixed facility charges was allowed. While doing so the order passed by the co-ordinate Bench of the Tribunal in the case of Commissioner of Excise Hyderabad vs. Aurobindo Pharma Ltd. 2009 (3) TMI 908 - CESTAT BANGALORE was relied on. The revenue challenged the said order before this Court in CEXA 52/2019 and the said appeal was dismissed by the Hon ble Division Bench by judgment dated February 24 2020. Thus the issue in the assessee s own case having been decided the revenue cannot take a different view in the matter though the only distinction in the instant case is that the fixed facility charges is in respect of the facility which was provided for supply of liquid oxygen whereas in the other case it was liquid nitrogen. That apart the clarification issued by the Central Board of Excise and Customs dated November 10 2014 also comes to the aid and assistance of the assessee wherein it was clarified that in the months back there is supply of gas all elements of consideration such as price of gas at designated rate per unit of gas and FFC would be added to determine the assessable value for payment of Central Excise Duty. Further it was clarified that where the gases so supplied are used by another assessee as inputs admissibility of the duty paid on gases as reflected in the invoice for all situations would be decided in accordance with the provisions of the CENVAT Credit Rules 2004. That apart on facts it is not in dispute that the supplier had paid the duty and the value of the gas which was supplied was also included in the assessable value. Therefore we find that the learned Tribunal was fully right in allowing the assessee s appeal. Accordingly the appeal filed by the revenue is dismissed and the substantial questions of law are answered against the revenue.
1. ISSUES PRESENTED and CONSIDERED
The Court considered the following core legal questions: (a) Whether the fixed facility charge (FFC) claimed by the assessee qualifies as an "input" under the CENVAT Credit Rules, 2004, thereby making the duty paid on such charge admissible as CENVAT credit? (b) Whether the Customs, Excise and Service Tax Appellate Tribunal (Tribunal) erred in allowing the fixed facility charge as an input for the purpose of CENVAT credit? 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Admissibility of Fixed Facility Charge as Input under CENVAT Credit Rules, 2004 Relevant legal framework and precedents: The primary legal framework involved is the CENVAT Credit Rules, 2004, particularly the definition of "input" under Rule 2(k). The Central Excise Act, 1944, specifically Section 11A(2), and Rule 2014 of the CENVAT Credit Rules were also relevant to the demand for CENVAT credit recovery. The Tribunal's reliance on the coordinate Bench decision in Commissioner of Excise, Hyderabad vs. Aurobindo Pharma Ltd., 2010 (261) ELT 1066 (Tri.-Bangalore) was significant, as that case dealt with a similar issue concerning fixed facility charges and their eligibility as inputs. Court's interpretation and reasoning: The Court noted that the fixed facility charge is a payment made for the provision of a facility essential for the supply of gases (liquid oxygen in the present case, liquid nitrogen in the precedent). The Court observed that the definition of "input" under the CENVAT Credit Rules is broad enough to include such charges if they are connected to the manufacture of final products. The Court emphasized that the nexus between the fixed facility charge and the manufacturing process was established, as the facility was integral to the supply of input gases used in production. Key evidence and findings: The assessee, a Public Sector Undertaking, had entered into an agreement with a gas supplier, who paid duty on the fixed facility charges. The value of the gas supplied, including the fixed facility charge, was included in the assessable value for excise duty. Additionally, the Central Board of Excise and Customs (CBEC) issued a clarification dated November 10, 2014, stating that all elements of consideration for supply of gas, including fixed facility charges, are to be included in the assessable value and that the admissibility of duty paid on such charges as CENVAT credit is to be decided under the CENVAT Credit Rules, 2004. Application of law to facts: The Court applied the legal framework and the CBEC clarification to the facts, finding that the fixed facility charge paid by the assessee had a direct nexus with the manufacture of finished goods. Since the supplier had paid the duty and the charge was included in the assessable value, the duty paid on the fixed facility charge qualified for CENVAT credit under the Rules. Treatment of competing arguments: The revenue contended that the fixed facility charge had no nexus with manufacturing and thus duty paid on it was not eligible for credit. However, the Court rejected this argument, relying on the Tribunal's earlier decision in the assessee's own case and the precedent of Aurobindo Pharma Ltd. The only factual distinction-type of gas supplied-was held to be immaterial. The Court also noted that the revenue had previously challenged the issue and lost before the Division Bench, which dismissed the appeal, thereby establishing precedent in favour of the assessee. Conclusions: The Court concluded that the fixed facility charge was rightly treated as an input under the CENVAT Credit Rules, 2004, and the duty paid on it was admissible as CENVAT credit. Consequently, the Tribunal did not err in allowing the claim. Issue 2: Whether the Tribunal erred in allowing the fixed facility charge as input Relevant legal framework and precedents: The same legal provisions and precedents as above apply here. The Court examined whether the Tribunal's decision was legally sustainable. Court's interpretation and reasoning: The Court found that the Tribunal had correctly applied the law and relevant precedents, including the coordinate Bench's decision and CBEC clarification. The Tribunal had considered the factual matrix and the nexus between the fixed facility charge and manufacture, and had not committed any error in law or fact. Key evidence and findings: The Tribunal's order dated 3rd May, 2018, was based on the assessee's own prior case, which had been upheld by the Division Bench of the High Court in 2020. The factual distinction regarding the type of gas (liquid oxygen vs. liquid nitrogen) was not sufficient to alter the legal position. Application of law to facts: The Tribunal applied the CENVAT Credit Rules and the relevant precedent correctly to the facts, allowing the fixed facility charge as input. Treatment of competing arguments: The revenue's arguments were considered and rejected based on the binding precedents and the CBEC clarification. Conclusions: The Tribunal's order was upheld as correct and justified. 3. SIGNIFICANT HOLDINGS The Court held: "The issue in the assessee's own case having been decided, the revenue cannot take a different view in the matter though the only distinction in the instant case is that the fixed facility charges is in respect of the facility which was provided for supply of liquid oxygen whereas in the other case it was liquid nitrogen." "The clarification issued by the Central Board of Excise and Customs dated November 10, 2014 also comes to the aid and assistance of the assessee wherein it was clarified that in the months back there is supply of gas, all elements of consideration, such as price of gas at designated rate per unit of gas and FFC would be added to determine the assessable value for payment of Central Excise Duty." "Where the gases so supplied are used by another assessee as 'inputs', admissibility of the duty paid on gases as reflected in the invoice for all situations would be decided in accordance with the provisions of the CENVAT Credit Rules, 2004." "We find that the learned Tribunal was fully right in allowing the assessee's appeal. Accordingly, the appeal filed by the revenue is dismissed and the substantial questions of law are answered against the revenue." Core principles established include:
Final determination on each issue was against the revenue, upholding the Tribunal's order allowing the CENVAT credit claim on fixed facility charges paid by the assessee.
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