TMI Blog2014 (2) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of electricity sent to grinding unit, can not be denied to the appellant for not following the prescribed procedures of Rule 4(5)(a) and Rule 4(6) of the Cenvat Credit Rules 2004 which allowed the appellant to send the clinker to grinding unit under job work and then clear the finished goods from the job worker’s factory premises when diversion of inputs/electricity is not alleged by the Revenue. Appeal filed by the appellants with respect to cenvat credit taken on structural items, electricity supplied to DMW plant used for supplying de-mineralized water to Gujarat Water Board and electricity supplied to residential colonies of the appellant is rejected. Appeal of the appellant with respect to Credit of inputs used for generating and supplying electricity to the grinding unit of the same group companies is allowed. As the issue of admissibility of cenvat credit on this inputs in the present proceedings was highly contentious and debatable this case is not fit for imposing penalties upon the appellant where credit is disallowed and are accordingly set aside - Decided in favour of assessee. - Appeal No. : E/464/2010-DB, E/844/2011-DB, E/196/2012-DB - ORDER No. A/10149 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed demand (Rs.) Order in Original passed by the Commissioner. Demand confirmed (Rs.) Demand dropped (Rs.) 31.07.2008 6,13,56,601 38-40/ COMMR./ 2009 2,50,26,083 3,63,30,518 02.02.2009 3,77,91,260 -do- 1,36,44,387 2,41,46,873 28.04.2009 15,76,16,543 -do- 6,41,13,285 9,35,03,258 TOTAL 25,67,64,404 10,27,83,755 15,39,80,649 3.1 Adjudicating Authority dropped the demand of Rs. 15,39,80,649/- accepting appellants submissions that credit of duty paid on inputs used for generation of electricity supplied to the Clinker unit was admissible, although the appellant had not followed any job work formalities. He, however, denied the CENVAT Credit on inputs used for generation of electricity supplied to the Grinding unit, jetty of the appellant and the residential colony. Adjudicating authority also imposed penalty on the appellant besides recovery of interest at appropriate rate. In the case of Orders in Original No. 14-28/ COMMR./ 2011 dated 06.04.2011, the Adjudicating Authority confirmed demand of Rs. 15,39,25,149 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 83 (SC)] and argued that it is a case of revenue neutrality as clinker unit could have cleared the clinker to the grinding unit under Rule 4(5)(a) and Rule 4(6) of the Cenvat Credit Rules 2004 and also removed the goods on payment of duty from the job worker. It was his case that for procedural violations substantial benefit of cenvat credit cannot be denied as the same is a revenue neutral exercise. It was also argued that the electricity supplied to the grinding unit is not a sale of electricity and that the ratio of Supreme Court laid in the case M/s Maruti Suzuki Ltd, vs CCE Delhi III [2009(240)ELT641(SC)], is not applicable to the facts of this case. (c) That despite separate registrations of the Clinker unit and the Grinding unit under the central excise law the Clinker unit, Grinding unit, Power Plant, DM water plant, Jetty, are parts of the same factory in as much as all these units and the connecting roads are on the same piece of land belonging to and in the exclusive possession and control of the appellant company. He drew our attention to the following case laws in this regard during the course of hearing : i) Sanghi Industries vs. CCE., Rajkot - [2006(206)ELT.575)T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated as parts of one factory. The appellant have themselves obtained separate registrations for their Clinker unit and Grinding unit. The appellant also treated its Grinding unit as a separate unit for claiming area based exemption under notification number 39/ 2001 CE dt 31.7.2001. That case laws cited by the appellant are not applicable to the facts and circumstances of the case in hand in view of the following case laws : (i) M/s Rollatainers Ltd vs CCE Delhi III [2004(170) ELT 257 (SC)] (ii) M/s Sintex Industries Ltd vs CCE [2013(287) ELT 261 (Guj)] (iii) CCE Ludhiana vs M/s Vardhman Industries Ltd [2007 (219) ELT 65 It was thus argued by the Revenue that three separate registered units has to be treated as three separate factories and not one factory. (c) That the inputs of Clinker unit used for generation of electricity supplied to the Grinding unit are not eligible for CENVAT Credit to the Clinker unit as the same are not used in or in relation to the manufacture of clinker in the Clinker unit from where the cenvatable inputs were sent. (d) That as the jetty is not part of the Clinker unit, CENVAT Credit of the inputs used in the generation of electricity suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nputs sent by the appellant to the job worker power plant, for generation of electricity brought back to the appellant for manufacture of final product, were held to be eligible for CENVAT Credit. We find that the DMW unit and the Administrative Block, are situated within the Clinker unit of the appellant and use of electricity is these units has to be considered as a use in connection with the manufacture of final product clinker. Therefore, proportionate credit of inputs sent by the Clinker unit to the Power plant under Rule 4(5)(a) corresponding to generation of electricity used in the DMW plant and Administrative Block, will be eligible as CENVAT Credit in the same manner as has been held by this Tribunal in the appellant s own case reported as 2006 (206) ELT 575 (Tri. Del.). However, CENVAT Credit is not available with respect to such quantities of inputs which have been used by the Clinker unit for supplying electricity to the DMW plant for making de-mineralized water for the Gujarat Water Board for supplies to nearby villages. 9. We also find that CENVAT Credit of inputs used at the Power plant for generation and supply of electricity to residential colonies within the Cli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate. It is also not the case of revenue that end product of one factory is raw material for the other factory. From the above facts it is apparent that there is no commonality between the two factories, both are separate establishments run by separate Managers though at the apex level it is maintained by the appellant company. There are separate staff, separate finished goods. Simply because both the factories may have common boundaries that will not make it one factory. Accordingly, we are of the opinion that the view taken by the Tribunal does not appear to be well-founded and likewise, the view taken by the Commissioner, Central Excise. Accordingly, we allow both these appeals, set aside the order of the Tribunal passed on June 7, 2002 as well as the order passed by the Commissioner, Central Excise, New Delhi-III on September 28, 2001 in both the appeals. No order as to costs. 10.1 In view of the above law interpreted by the apex court grinding unit can not be considered as the same factory extension of the clinker unit and appellants contention on this account needs to be rejected. 11. It was argued by the appellant that the judgment of M/s Maruti Suzuki Ltd vs CCE Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions for allowing CENVAT credit. - (5) (a) The CENVAT credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re-conditioning, or for the manufacture of intermediate goods necessary for the manufacture of final products or any other purpose, and it is established from the records, challans or memos or any other document produced by the manufacturer or provider of output service taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred eighty days, the manufacturer or provider of output service shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise, but the manufacturer or provider of output service can take the CENVAT credit again when the inputs or capital goods are received back in his factory or in the premises of the provider of output service. (6) The Deputy Commissioner of Central Excise or the Assistant Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plant as job worker. The only irregularity committed by the appellant was that they did not follow the prescribed procedures. It has been a settled position of law now that a substantial benefit of cenvat credit cannot be denied for not following the prescribed procedures when it is not disputed that inputs on which credit is taken have been utilized for manufacture of final product on which Central Excise Duty has been paid/payable. In the case of sister concerns such captive consumption of materials become a case of revenue neutral exercise. It is not the case of the Revenue that electricity supplied to the grinding unit and its jetty has been diverted elsewhere. Further, it is economical in the modern competitive working to have a larger power plant catering to power requirements of various units of the same group of companies rather than having small power plants for each unit. Accordingly, cenvat credit with respect to inputs, sent to the power plant by the clinker unit for generation of electricity sent to grinding unit, can not be denied to the appellant for not following the prescribed procedures of Rule 4(5)(a) and Rule 4(6) of the Cenvat Credit Rules 2004 which allowed t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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