TMI Blog2010 (9) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... Judgment per : Dhirendra Mishra, J.]. This excise appeal has been admitted on the following substantial questions of law : (1) Whether the learned Appellate Tribunal has erred in misinterpreting and inappropriately applying the earlier decision of the Tribunal in the present case, where the facts of the case are different? (2) Whether the learned Appellate Tribunal has correctly held that the respondent is not required to pay the irregularly availed Modvat/Cenvat credit, availed on the inputs used in the manufacture of electricity (non-dutiable product) sold to outside parties @ 8% of the value of such goods? 2. Briefly stated, facts necessary for adjudication of this appeal are that the respondent had two factories, one at Durg (Chhattisgarh) and another at Raisen (Madhya Pradesh), the former manufacturing sponge iron and the latter manufacturing graphite electrode. They had a Captive Thermal Power Plant (in short CPP ) of 12.8 MW capacity having three boilers, one steam turbine and a generator. The steam generated in these boilers was used to generate electricity which was used captively for manufacture of sponge iron. The substantial part of the surplus elect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise duty is payable on the steam/electricity generated in CPP or Boiler as also since surplus electricity so generated is supplied to their sister concern through MPEB Grid and is not used exclusively in their factory in the manufacture of sponge iron and as the electricity so generated/steam produced are also used for various other purposes other than that for the manufacture of sponge iron for which no separate recording and accounting is being done. 3. Whether the said CPP has any concern in any way in the manufacture of their final product sponge iron , as the same is exclusively used for the generation of electricity . 5. The Tribunal dealing with issue No. 1 - whether parts, accessories/spares of CPP qualify the test of capital goods under the erstwhile Rule 57-Q/57-AB of the Central Excise Rules, 1944 for availment of capital goods duty credit? - has referred to the arguments advanced by the assessee at length on this issue, wherein it was argued that boilers, turbine and generator and all components/parts thereof were integral parts of CPP, which generated electricity, which was an indispensable requirement for the manufacture of the specified final product - sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the substantial electricity generated by CPP installed in the premises at Durg has been wheeled outside to its sister concern at Raisen (MP), which is engaged in the manufacture of graphite electrode and the same is not used in their factory in the manufacture of final product - sponge iron. Placing reliance on the decision of the Hon ble Supreme Court in the matter of Maruti Suzuki Ltd. v. Commissioner of Central Excise, Delhi-III, 2009 (240) E.L.T. 641 (S.C.), it was argued that the assessee was not entitled for Modvat credit on capital goods used in its CPP as substantial part of the generated electricity has been transmitted outside the factory to its sister concern through MPEB Grid. 9. Mr. Kinger further submits that while dismissing the appeal of the revenue in the case of respondent/assessee itself vide order dated 7th November, 2009 passed in the matter of Union of India v. M/s. HEG Ltd. in Tax Case No. 50/2008, the law laid down by the Supreme Court in Maruti Suzuki has not been considered as it was not brought to the notice of this Court. 10. On the other hand, Mr. M.P. Devnath with Mr. Raja Sharma, learned counsel appearing for the respondent/assessee, would ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price. 12. We have heard learned counsel for the respective parties and perused the order of the Commissioner as also the impugned order. 13. We have already reproduced the findings of the Tribunal with respect to substantial questions of law mentioned in paragraph-4 in detail. The Tribunal, referring to the definition of capital goods under Rule 57-Q as amended from time to time by notifications, has held that boilers, turbine and generator and all components/parts thereof were integral part of CPP, which generated electricity, which was an indispensable requirement for the manufacture of specified final product - sponge iron - and thus, they are covered by definition of capital goods under Rule 57-Q. Even under the new Rules, which came into force w.e.f. 1-4-2000, the goods falling under Chapters 82, 84, 85 90 and components, spares and accessories thereof fall within the ambit of definition of capital goods, and thus, they were eligible capital goods for Modvat credit. 14. In Ballarpur Industries Ltd. v. Collector of Central Excise, Belgaum, 2000 (116) E.L.T. 312 (Tribunal-LB), the Larger Bench of the CEGAT, Northern Bench, New Delhi, while considering the identical issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy for availing Modvat credit. Per clause (b), the components, spare parts and accessories of the goods mentioned in clause (a) used for the purposes enumerated therein would also be capital goods and qualify for Modvat credit entitlement. 17. In Commissioner of Central Excise, Jaipur v. Rajasthan Spinning Weaving Mills Ltd., 2010 (255) E.L.T. 481 (S.C.), the question before the Supreme Court was whether the Tribunal was justified in allowing Modvat credit in respect of steel plates and M.S. channels used in the fabrication of chimney for the diesel generating set, by treating these items as capital goods in terms of Rule 57-Q of the Central Excise Rules, 1944. Referring to the decision of the Supreme Court in Jawahar Mills Ltd. - 2001 (132) E.L.T. 3 (S.C.) and dismissing the appeal of the revenue, it was held thus : 12. Inter alia observing that capital goods can be machines, machinery, plant equipment, apparatus, tools or appliances, if any of these goods is used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product, although this view was expressed in the light of the afore-noted definition of ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndors, joint ventures? In the above cited case, the assessee claimed Cenvat credit on inputs in accordance with the Cenvat Credit Rules, 2002. The assessee had installed three gas turbines in their factory for generation of electricity. From January, 2003 onwards, the assessee started using naphtha as fuel to run gas turbines and availed Cenvat credit on naphtha used for generation of electricity in gas turbines. During the disputed period, the assessee cleared a part of electricity generated in the factory to its joint ventures, vendors etc. for price. On these facts, it has been held thus : 20. To sum up, we hold that the definition of input brings within its fold, inputs used for generation of electricity or steam, provided such electricity or steam is used within the factory of production for manufacture of final products or for any other purpose. The important point to be noted is that, in the present case, excess electricity has been cleared by the assessee at the agreed rate from time to time in favour of its joint ventures, vendors etc. for a price and has also cleared such electricity in favour of the grid for distribution. To that extent, in our view, assessee was no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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