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M/s. Brahmani River Pellets Ltd. Versus Commr. of Central Excise, Customs & Service Tax, BBSR-I

2015 (11) TMI 45 - CESTAT KOLKATA

Single registration in central excise - two separate units at a distance of 221 km - Held that:- Merely because the exempted iron ore concentrate manufactured at a separate plant and transported through pipe line for exclusive use in the manufacture of iron oxide pellets, to another factory situated 221 kms away would not make the two factories as one and the same. In our opinion also, the transfer of raw materials i.e. iron ore concentrate in slurry form through pipe line from Barbil factory to .....

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d to their manufacturing unit at Jajpur for manufacture of the said dutiable pellets falling under Chapter 26 of CETA, 1985 - Exemption under Notification No. 4/06-CE dated 1/03/2006 - Held that:- Out of iron ore fines(uneven sizes) iron ore concentrates in slurry form are manufactured and transported/cleared through pipelines to their pellet plant. The said iron ore concentrate became chargeable to duty w.e.f 01.03.2011. Therefore, it cannot be said that the inputs were directly used by bringin .....

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ation to the manufacture of Iron Ore concentrates at the benefication plant at Barbil.

However, we find force in the contention of the ld. Advocate that in procuring the iron ore concentrate in slurry form through pipe line from their Barbil plant to Jajpur plant, the services used, fall within the scope of input services being specifically covered under the inclusive part of the definition of input service as prescribed at Rule 2(l) of Cenvat Credit Rules, 2004, hence, eligible to c .....

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> Regarding levy of interest for availing the credit we find that a new plea has been raised by the Appellant, whereby it is claimed that they have availed the CENVAT credit at Jajpur plant in their books of accounts only on theoretical basis; actual production of iron ore concentrate(which become dutiable from 01.03.2011) at Barbil plant commenced from 06.06.2013. In our opinion these facts need to be scrutinized and thereafter the applicability of interest provision be accordingly decided in .....

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I. 2. Briefly stated the facts of the case are that the appellant having its factory at Jajpur, Orissa engaged in the manufacture of iron oxide pellets falling under Chapter 26 of CETA, 1985. A Show Cause Notice was issued to them alleging that the appellant had irregularly availed CENVAT Credit at their Jajpur Plant amounting to ₹ 5,61,96,857/- during the period from November, 2009 to August, 2010 on inputs, capital goods and input services received and used in their beneficiation plant a .....

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nufacture of Iron Ore Concentrate, exempted under Notification No. 4/06-CE dated 1/03/2006, hence not eligible to CENVAT Credit in view of Rule 6 (1) and Rule 6 (4) of CENVAT Credit Rules, 2004. The Ld. Commissioner on adjudication, confirmed the demand and imposed penalty of ₹ 2.00 Crores under Rule 15 (1) of the CENVAT Credit Rules, 2004. Hence the present appeal. 3. Advancing the argument on behalf of the appellant, the Ld. Advocate Shri S.C. Mohanty for the appellant had submitted that .....

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lant. He submits that the inter-mediate product is transferred from the Barbil plant to Jajpur in slurry form through specially designed pipeline and the entire quantity of slurry concentrates are consumed in their Jajpur plant for manufacture of iron oxide pellet and not cleared/sold to any one else. 4. It is his submission that CENVAT Credit availed on capital goods used for manufacture of exempted inter-mediate product i.e. iron ore cencentrate which had been ultimately used in the manufactur .....

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the inputs, capital goods and input services used in Barbil Plant are admissible. In support, he has referred to the decision of Honble Supreme Court in JaypeeRewa Cement Vs. CCE 2001 (133) ELT 3 (SC), Vikram Cement Vs. CCE 2005 (187) ELT 145 (SC) and 2006 (194) ELT3 (SC). 5. Further, he has submitted that since Barbil plant is their captive plant, they requested to include the said beneficiation plant in the ground plan/ registration certificate of Jajpur factory, which was erroneously rejecte .....

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Credit if the Mines are captive mines so that they constitute one integrated unit together with the cement factory. Further, the Ld. Advocate has submitted that the input services used in the beneficiation process at Barbil and bringing slurry through pipelines are definitely eligible to CENVAT Credit as the same are used in or in relation to manufacture of final products. It is his submission that the input services used in bringing the slurry have deep nexus with the manufacturer of the final .....

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s his submission the Appellant had commenced manufacture of the dutiable product viz. Iron Ore Concentrate after the said unit was registered with the Central Excise Department w.e.f. 26/11/2012 and removed the same w.e.f. 07/06/13 on payment of duty. The Ld. Advocate has categorically submitted that production of slurry concentrates commenced from 06/06/2013, even though the Central Excise registration was obtained on 26/11/2012. It is his submission that the capital goods were never used in th .....

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r CENVAT Credit Rules, 2004. The Ld. Advocatehas fairly submitted that this alternative argument is now raised for the first time before this Tribunal and this plea was not raised before the adjudicating authority. Rebutting to the contention of the Ld. Special Counsel for the Revenue that the capital goods procured prior to registration of the beneficiation plant would not be eligible to the credit, the Ld. Advocate has submitted that in view of the Boards Circular bearing No. 88/88-94-CX date .....

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S.C. Jana for the Revenue has submitted that factory located at Barbil at a distance of more than 221 Kms. from their Jajpur plant, where the finished goods viz. iron oxide pellets are manufactured, cannot be treated to be situated in the precincts of the later factory in view of the decision of the Hon ble Supreme Court in the case of South Eastern Coal Fields Ltd. Vs.CCE -2006 (200) ELT 357 (SC) and Central Coalfields Ltd. Vs. CCE, Jamshedpur-2001 (137) (ELT) 752 (Tri-Kolkata). In the present .....

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itted that unlike in the aforementioned cases, no input service or input or capital goods was ever used by them in any of their captive mines or in any process of manufacture and it had no nexus with the manufacture of dutiable iron oxide pellets at their Jajpur plant. In the present case, the duty paid capital goods, inputs and input services in question were received, installed and also used at the Barbil plant used in or in relation to the manufacture of exempted iron ore concentrates. It is .....

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t and used there in or in relation to the manufacture of exempted iron ore concentrates in that plant. It is, therefore, clear that the CENVAT Credit of duty paid on such input services which were used in or in relation to the manufacture of exempted iron ore concentrates at Barbil plant, cannot be allowed to be utilized for payment of duty on iron oxide pellets manufactured at Jajpur plant. 10. Further countering the contention of the Ld. Advocate for the Appellant that the appellant had obtain .....

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d perused the records. The principal issue for determination is: whether the appellants Jajpur Unit engaged in the manufacture of Iron oxide pellets, a dutiable product, are eligible to avail CENVAT Credit on inputs, capital goods and input services used in or in relation to manufacture of iron ore concentrate at their Barbil Plant, which were ultimately be transferred to their manufacturing unit at Jajpur for manufacture of the said dutiable pellets falling under Chapter 26 of CETA, 1985. 12. .....

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age and inter dependence of manufacture of the iron ore slurry and the finished product, namely iron oxide pellets, both these units ought to be considered as one and the same factory, entitled to unified registration under the Central Excise Act, 1944. 13. We find that while rejecting the said contention, the adjudicating authority has after analyzing the meaning and scope of factory defined at Section 2(e) of the CEA, 1944 and the scope of the word precincts as per the Collins English Dictiona .....

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tion. Similarly the manufacturing of iron ore concentrates in the benefication plant is also an independent manufacturing operation with manufacturing of separate excisable goods i.e. iron ore concentrates.Manufacturing activity leading to manufacture of iron ore concentrates is in no way connected to the manufacturing activity of pellets. The iron ore concentrates are raw materials for manufacture of pellets. These are cleared independently and since are in slurry form are transported through p .....

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gh a pipe line. Transportation is a separate activity independent of manufacturing operation. It is matter of convenience that the iron ore concentrates are transported through a pipe line. Existence of a pipe line which is a special transportation facility cannot functionally connect, both the plant, treating them an integrated plant. If that be so then all plants supplying raw materials to another plant by any mode of transport would be treated a integrated plants or parts of other plants and .....

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to manufacturing of such excisable goods are undertaken in that area. Any area not surrounding the main area cannot be treated as the part of the main area. In the instant case both the plants are not located in one place. Since the Barbil plant is located at 221 km. away from Jajpur plant without any geographic contiguity its location cannot be treated as an areas surrounding to Jajpur plant. 6.3 Both the plants as discussed above manufacture, separately distinct excisable goods in separately d .....

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factories as one and the same. In our opinion also, the transfer of raw materials i.e. iron ore concentrate in slurry form through pipe line from Barbil factory to Jajpur Pellet factory cannot be construed that the Barbil plant is a captive plant of the Jajpur factory and entitled to a single Registration. 15. The next contention of the Ld. Advocate for the appellant is that in view of the judgment of the Honble Supreme Court in the case of Vikram Cement Vs. CCE, Indore-2006 (194) ELT (3) (SC) .....

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e, Calcutta Vs. AL Noori Tobacco Products 2004(170) ELT 135(SC) emphasizing the necessity of care and caution in applying the principle of precedent observed as: 11.Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclids theorems nor as provisions of the statute and that too taken out of their context. These observations m .....

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951 AC 737 at p. 761), Lord Mac Dermot observed : The matter cannot, of course, be settled merely by treating the ipsissimavertra of Willes, J as though they were part of an Act of Parliament and applying the rules of interpretation appropriate thereto. This is not to detract from the great weight to be given to the language actually used by that most distinguished judge. 12.In Home Office v. Dorset Yacht Co. [1970 (2) All ER 294] Lord Reid said, Lord Atkins speech is not to be treated as if it .....

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etting of the facts of a particular case. 13. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper. 14. The following words of Lord Denning in the matter of applying precedents have become locus classicus : Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may .....

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and branches. My plea is to keep the path to justice clear of obstructions which could impede it. 16. In the Vikram Cements case, their Lordships have been confronted with the issue whether duty paid on explosives and other inputs, capital goods used inthe mines situated at a distance from the factory for extraction of lime stone which were used in the manufacture of cement and klinkers classifiable under Chapter 25, are eligible to CENVAT Credit or other wise. 17. The facts of the present case .....

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required sizes of iron ore fines. From the Allflux, the fines are transferred to Magnetic Separator, wherein magnetic impurities are removed from the iron ore fines.Then the iron ore fines are sent to the Thickener, where the settling behavior of iron ore fines densification takes place. The required density product is the final product, which is pumped to slurry tank for storage. From slurry tank, the material is transferred to the Pellet plant through Geho Pump Slurry Lines. 18. A careful ana .....

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nto Iron ore concentrates in slurry form. In our opinion, therefore, the ratio laid down in Vikram Cements case is not applicable to the facts of the present case. Consequently, the Appellants are not eligible to avail credit at their Pellet plant at Jajpur on the duty paid on the inputs, Capital goods and input services which are used in or in relation to the manufacture of Iron Ore concentrates at the benefication plant at Barbil. However, we find force in the contention of the ld. Ad .....

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they had availed the CENVAT Credit on the capital goods, inputs and input services in their books of accounts at their Jajpur plant for its use at Barbil Plant, during the relevant period i.e. February ,2009 to August, 2010, however, they had taken Central Excise Registration for their Barbil plant on 26/11/2012 and the beneficiation plant became operational only from 06/6/2013. It is thus their contention that they are eligible to avail CENVAT Credit on the input, input services and capital go .....

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ed on payment of duty, they are eligible to avail and utilize the said CENVAT credit at their Barbil plant. 21. We find that this issue has been raised for the first time before this Tribunal and it is difficult to ascertain whether they have merely taken CENVAT Credit on their records at Jajpur plant before manufacture of iron ore concentrate at Barbil plant and not utilized the same; these facts need scrutiny and verification by the department. 22. On the issue of imposition of penalty, we fin .....

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ea has been raised by the Appellant, whereby it is claimed that they have availed the CENVAT credit at Jajpur plant in their books of accounts only on theoretical basis; actual production of iron ore concentrate(which become dutiable from 01.03.2011) at Barbil plant commenced from 06.06.2013. In our opinion these facts need to be scrutinized and thereafter the applicability of interest provision be accordingly decided in the light of the principles of law settled in this regard. We summarize our .....

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