TMI Blog2012 (10) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER NO. Per: Ashok Jindal: The appellant are in appeals against the confirmation of demand along with interest and various penalties by denying benefit of exemption under Notification No.67/95-CE dated 16.03.1995. 2. Brief facts of the case are as follows: 2.1 Appeal No.E/317/09. Demand of duty of Rs.3,09,84,240/- along with interest and penalty of Rs, 25,00,000/- under Rule 25 read with Rule 27 of Central Excise Rules, 2002. Benefit of exemption under Notification No. 67/95-CE dated 16.03.1995 was denied on the following grounds:- (a) Naphtha cleared, availing exemption under Notn. No. 4/2006-CE dated 1.3.2006 for manufacture of fertilizers under International Competitive Bidding (ICB). (b) On that much quantity of Naphtha, attributable to electricity generated in captive power plant/co-generation plant, used for manufacture of exempt goods viz. LPG (Domestic) and Superior Kerosene Oil (PDS) (c) On that much quantity of Naphtha, attributable to electricity generated in captive power plant/co-generation plant, used for allied activities like lighting in the artillery (sic) roads/yard, administrative building, canteen/cafeteria. 2.2 The demand has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he would be eligible for exemption to a product manufactured in a factory and captively consumed, under Notn. No.67/95. To substantiate the above reliance was placed on the ratio of following judgments: (i) Shakti Sugar Ltd. 2008 (230) ELT 676 (T) (ii) Lanco Inds. 2008 (227) ELT 395 (T) (iii) Godavari Sugar Mills 2007 (212) ELT 234 (T) (iv) Kothari Sugar (v) Chennai Petroleum (e) The intention of the Govt. has been made known by Rajkot Commissionerate Trade Notice No.56/2001 dated 21.6.2001 [2001 (131) ELT T-42], clarifying that clinker or other inputs, manufactured from cenvat availed inputs and captively used in the manufacture of cement exempted for supply to earthquake relief, was eligible for exemption under Notn. No.67/95 on reversal of credit on inputs. (f) Exemption to goods manufactured and used as inputs within the factory is available if the same are used in or in relation to manufacture of final products under preceding Notn. No.217/86-CE dated 2.4.86 as well as succeeding (present) Notn. No.67/95-CE dated 16.3.95. The said expression "in relation to manufacture of final product" mentioned in the said N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T 117 (T) iii. Indorama Synthetics 2006(199)ELT 175 (T) iv. Indorama Synthetics 2007(219) ELT 122 (Bom) v. Upheld by Hon'ble Supreme Court 2008 (226) ELT A-181 (SC) vi. Raymond Ltd. 2000(117)ELT 104 (T) vii. This judgment has been approved by Hon'ble Supreme in Gujarat State Fertilizers Chem Ltd. 2008 (229) ELT 9 (SC) 3.5 Indirect use of exempted materials also would satisfy the requirement under Notn. No.67/95 which view gets persuasive support from the ratio of following judgments: i. Rajasthan State Chemicals 1991 (55) ELT 44 (SC) ii. Indian Oil Corpn. Ltd. 2002 (148) ELT 1021 (T) iii. Ferro Alloys Corpn 2003 (159) ELT 1030 (T) iv. IFFCO 1996 (86) ELT 177 (SC) 3.6 Allowing of input service credit to outdoor catering (canteen) would render persuasive support for availability of exemption to electricity consumed in canteen/cafeteria, under Notn. No.67/95: i. Ultratech Cement 2010 (20) STR 577 (Bom) ii. GTC Industries - 2008(12) STR 468 (T.LB) 3.7 The following judgments relied upon by the Ld. Commissioner in the impugned Order would either do not apply or would support the Appellants. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ENVAT credit on the inputs stated hereinabove by the appellants. Therefore, matter needs examination on this issue and should be remanded. He further submitted that for the use of electricity in allied activities, the definition of input has been clearly defined in Rule 2(jk) of the CENVAT Credit Rules, 2004 and the definition of the phrase any other purpose' has been elaborated in the order of Hon'ble High Court of Bombay in the case of Indorama Synthetics (India) Ltd. v. CCE Nagpur reported in 2007 (219) ELT 122 (Bom.) and relied on by this Tribunal in the case of MCC PTA India Corporation Pvt. Ltd. 2010 (249) ELT 370 (Tri. Kol.) wherein it was held that credit of duty paid on fuel used in generation of electricity used in canteen of office building is not available. He further submitted that in Appeal No.E/1346/07, the appellant's claim that they buy power from Tata Power used for pumping. The said averment was not accepted by the learned Commissioner. Moreover the table which shows the electricity power procured from Tata power is about 35 times more power than required for pumping. Therefore, it seems that the appellant is buying power from Tata Power for some other use but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CENVAT Credit Rules, 2002 manufactured in a factory and used within the factory of production; (ii) goods specified in column (1) of the Table hereto annexed (hereinafter referred to as 'inputs') manufactured in a factory and used within the factory of production in or in relation to the manufacture of final products specified in column (2) of the said Table; from the whole of the duty of excise leviable thereon which is specified in the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) or additional duty of excise leviable thereon, which is specified in the Schedule to the said Special Importance Act : Provided that nothing contained in this notification shall apply to inputs used in or in relation to the manufacture of final products which are exempt from the whole of the duty of excise or additional duty of excise leviable thereon or are chargeable to nil rate of duty, other than those goods which are cleared,- i. to a unit in a Free Trade Zone, or ii. to a hundred per cent Export Oriented Undertaking or iii. to a unit in an Electronic Hardware Technology Park, or iv. to a unit in a Software Tech ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduct which is captively consumed for manufacture of excisable goods. Molasses is an excisable product. When molasses is used in the manufacture some other excisable product, then the molasses captively consumed need not discharge any duty burden. However the entitlement to Notification 67/95 is subject to a condition. The condition is that the final product should be dutiable or otherwise the exemption would not be applicable. According to Revenue when molasses is used in the manufacture of Rectified Spirit, the Rectified Spirit, which emerges, is not excisable. Therefore, the Notification benefit cannot be available. This is the main contention of the Revenue for denying the benefit of Notification to molasses captively consumed. However, it is the appellants' contention that the molasses is not completely used for the production of exempted/non-dutiable product because a part of Rectified Spirit is converted to Denatured Spirit which is dutiable. Our attention was invited to amendment to Notification No. 67/95-C.E. by Notification No. 31/2001-C.E. dated 1-1-2001. In terms of the said amendment, the appellants are entitled for the benefit of the exemption Notification in a situa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject to a condition. The condition is that the final product should be dutiable or otherwise the exemption would not be applicable. According to Revenue, when molasses is used in the manufacture of Rectified Spirit, the Rectified Spirit, which emerges, is not excisable. Therefore, the Notification benefit cannot be available. This is the main contention of the Revenue for denying the benefit of Notification to molasses captively consumed. However, it is the appellant's contention that the molasses is not completely used for the production of exempted/non-dutiable product because a part of Rectified Spirit is converted to Denatured Spirit, which is dutiable. Our attention was invited to amendment to Notification No. 67/95 Central Excise by Notification No. 31/2001 Central Excise dated 1.1.2001. In terms of the said amendment, the appellants are entitled for the benefit of exemption Notification in a situation where there is manufacture of both dutiable and exempted final products, provided the manufacturer discharges the obligation prescribed in rule 57 AD of the Central Excise Rules, 1944, which is pari materia with Rule 6 of the Cenvat credit rules, 2002. this is the poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of fertilizers under ICB and on the quantity of naphtha, attributable to electricity generated in captive power plant/co-generation plant, used for manufacture of exempt goods viz. LPG (Domestic) and Superior Kerosene Oil (PDS). 14. As contended by the learned Advocate that electricity used for allied facilities within the refinery like lighting in the artillery (sic) roads/yard, administrative building, canteen/cafeteria that they are integral part of the refining process, without which the refinery would not be able to function. In fact, Yard lighting refers to the lighting that is on the roads in between the process units and the tank farms to facilitate movement of men and machinery in the refinery. Canteen is a statutory requirement in a factory of their size without which the refinery would not be legally permitted to function. Administration building houses the functions that related to the refinery activities and due to safety factors they are house separately from the process units. Therefore the contention of the appellant is that these activities also covered for exemption under Notification No.67/95 for captive consumption. The appellant has relied on the decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llied activities like lighting in the artillery (sic) roads/yard, administrative building, canteen /cafeteria. 17. With regard to the Appeal No.E/1346/07, the appellant has already clarified and field an affidavit by Shri Suranjan Pal, Chief Manager Operation MPSPL certifying that MPPL never uses refinery power for pumping and finished goods and the said affidavit has proved by the appellant by filing purchase invoices/statement that during the impugned period they have purchased power from Tata Power Company and not used the refinery power for pumping and finished goods and the adjudicating authority has merely denied the claim of the appellant without any evidence, which is not correct view. Hence, the denial is not sustainable. 18. In view of the above observations, both the appeals are allowed by setting aside the impugned orders. (Pronounced in open Court on ..) Per: Sahab Singh: I have perused the order proposed by Member (J) and I am not able to agree with the Member (J) with regard to the issue regarding the exemption on that much quantity of Naphtha, attributable to electricity generated in captive power plant/co-generation plant, used for allied a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision are reproduced below:- 7. We, however further note that a part of the electricity so generated was also used by the appellant for non-manufacturing activities like residential premises, guest house, canteen etc., in which case the appellant would not have been entitled to credit of duty paid on the fuel. Such legal proposition stands confirmed by the Hon'ble Supreme Court in the case of CCE Vs. Solaris Chemtech Ltd. [2007 (214 ) ELT 481 (SC). Apart from laying down that Low Sulphur Heavy Stock used as fuel in the manufacture of electricity is an eligible input for the purposes of modvat credit, it has been held that the inputs used in electricity generated which is consumed by residential colony of factory worker families, schools etc, will not be eligible inputs for the purposes of modvat credit. As such that part of the fuel, which has been used in the manufacture of electricity, which has been further used for non-manufacturing activities, is required to discharge duty liability inasmuch as duty required to be paid on the same will not be available as credit to the appellant. 8. Having held that the duty is required to be confirmed only in respect of that pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own production in the pipe lines, the same would be liable to benefit or for Modvat credit in respect of fuel. It was held by the Tribunal that the entire electricity is used for loading of the appellants own production in the pipe lines, the same would be liable to the benefit or for modvat credit in respect of fuel. The issue regarding supply of electricity for allied activities like lighting in the artillery (sic) roads/yard, administrative building, canteen/cafeteria was not at all before the Tribunal. Therefore, I am of the view that the ratio of the judgment in the case of M/s Reliance Industries Ltd. is not applicable to the present case. 4. On the other hand, it was held by the Hon'ble Bombay High Court in the case of Indo Rama Synthetics (India) Ltd. supra that the furnace oil used in generation of electricity must have nexus with manufacture of goods in the factory. For the sake of convenience, para 19, 20 21 of the said judgment are reproduced below: 19. According to the assessee, the words any other purpose' in Rule 57B(iv) is wide enough to cover supply of electricity to the residential complexes. In other words, the submission is that once it is establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on the issue regarding the exemption on the quantity of Naphtha attributable to electricity generated in captive power plant/co-generation plant, used for allied activities like lighting in the artillery (sic) roads/yard, administrative building, canteen/cafeteria. As this issue is not related to Appeal No.E/1346/07, therefore the appeal No.E/1346/07 is allowed. 2. In Appeal No.E/317/09, the Member (Technical) is having a difference of opinion; therefore the same is placed before the Hon'ble Vice President/HOD for appointing a 3 rd Member to decide the issue. Difference of Opinion 3. Following difference of opinion is placed before the Hon'ble Vice President/HOD:- (a) Whether the exemption on the quantity of Naphtha attributable to electricity generated in captive power plant/co-generation plant, used for allied activities like lighting in the artillery (sic) roads/yard, administrative building, canteen/cafeteria is available to the appellant used in or in relation to the final product or for any other purpose within the factory of production as per Rule 2(k) of CENVAT Credit Rules, 2004 as held by Member (Judicial) OR Whether the appellants are not en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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