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TMI Blog2007 (11) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices and utilize the same for payment of duty on their final product viz, cement. During the period from March, 2004 to March, 2005, they had set up a power plant of capacity of 29 MW in their factory premises and had also taken Cenvat credit of the duty paid on inputs and capital goods received in their factory in relation to the setting up of the power plant and also credit of the service tax paid on input service utilized for the erection and commissioning of the power plant. The credit so availed was utilized for payment of duty on cement, too. Scrutiny of records and investigations conducted by the department revealed that the said power plant was leased out by DCL to M/s. Keshav Power Pvt. Ltd. (KPPL, for short) under a Lease Deed dated 24-3-2005 with retrospective effect from 15-3-2005. The entire power plant (including land measuring 5.38 acres on which the power plant was set up) with ancillary machinery and equipments was so leased out. The lease period was 10 years. As per the lease deed, KPPL had to pay a monthly rent of Rs. 18,37,500/- to DCL. Upon termination of the lease, KPPL were to handover physical possession of the property to DCL. It was the liability of KPPL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cess of Rs. 10,89,351/-) being the total amount of the alleged inadmissible credit availed by M/s. DCL on capital goods, inputs and input services during the period from March, 2004 to March, 2006 (b) appropriate the payments already made towards such demand (c) levy interest on the above amount and (d) impose penalty. The above demand was based on the allegation that M/s. DCL had, by leasing out the power plant with ancillary equipments to another company, removed from their factory the capital goods and inputs used for setting up the power plant and, consequently, in terms of Rule 3(5) of the CCR, 2004, they were liable to pay an amount equal to the credit taken on such inputs and capital goods. It was also alleged that the credit taken on input services used in the setting up of the power plant, which was subsequently transferred to M/s. KPPL, was also inadmissible. The SCN invoked the extended period of limitation by alleging that M/s. DCL had suppressed the lease of power plant, with intention to evade payment of the amount required under Rule 3(5) ibid. M/s. DCL denied the above allegations and contested the SCN proposals. In adjudication of the dispute, ld. Commissioner conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed ground plan incorporating the cement plant and the power plant. There was no suppression of any relevant fact by M/s. DCL, nor did they intend to evade payment of any amount to the Revenue under Rule 3(5). It was their bona fide belief that they were entitled to avail the credit in question, unaffected by their transactions with M/s. KPPL under the lease deed. For these reasons, the extended period of limitation was not invocable against them. The entire demand is liable to be set aside as barred by limitation. 4. Ld. Sr. Advocate has cited case law in support of some of the above contentions of the assessee. Relying on the Apex Court's judgment in Shyam Oil Cake Ltd. v. CCE, Jaipur, 2004 (174) E.L.T. 145 (S.C.), he has argued that nothing can be deemed in the context of applying any provision of law to a given set of facts unless the law contains an express deeming provision. He has submitted that, under Rule 3(5) of the CCR, 2004, inputs or capital goods, on which Cenvat credit had been taken, were to be removed as such from the factory so as to make the manufacturer liable to pay an amount equal to the credit availed. Rule 3 does not contain any deeming provision whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Indorama Synthetics (I) Ltd. v. CCE, Nagpur - 2005 (190) E.L.T. 193 (Tri.-Mum.) In support of the assessee's contention that ownership is immaterial for availment of Cenvat credit on capital goods, ld. Counsel has cited the following decisions :- (1) HIS Automotives Ltd. v. CCE, Chennai, 2004 (163) E.L.T. 116 (Tri. -Chennai) (2) Modernova Plastyles P. Ltd. v. CCE, Mumbai, 2004 (60) RLT 448 (CESTAT-Mum.) (3) JBM Sungwoo Ltd. v. CCE, Chennai, 2005 (70) RLT 69 (CESTAT -Chennai) 5. Ld. Consultant for the Revenue has expressed the view that the present case has to be decided on its own facts and circumstances without reference to any of the cases cited by ld. Counsel. He has submitted that, even before the power plant in question was commissioned, M/s. DCL had transferred it on lease, along with the land on which it stood, to another legal entity viz. M/s. KPPL. The capital goods and inputs used in relation to the setting up of the power plant, thus, ceased to be in the actual possession or use of M/s. DCL. Therefore, according to ld. Consultant, the capital goods and inputs must be deemed to have been removed from the cement factory of M/s. DCL, for purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, on which Cenvat credit had been availed by the party, were utilized for the erection and commissioning of the power plant. It is not in dispute that the power plant was set up in a stretch of land which was part of the cement factory premises and its precincts covered by the approved ground plan of the factory and the same was set up for generating electricity for captive use for the manufacture of cement and ancillary purposes. In other words, it was set up as a captive power plant. The main issue arising in this case is whether, on account of the power plant having been leased out to an- other company (KPPL) w.e.f. 15-3-2005 for generation of electricity and supply thereof to the assessee at prescribed rates, the aforesaid capital goods and inputs should be held to have been removed as such from the assessee's factory and whether, consequently, they should be directed under Rule 3(5) ibid to pay an amount equal to the sum of the capital goods credit, input duty credit and input service tax credit utilized for payment of duty on their final product (cement) from 15-3-2005. Ld. Commissioner held that, as the land on which the power plant was situated had also been transferred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, according to learned SDR, it would mean removal of capital goods, whether used or unused. It is significant that the expression 'as such' was not used under the erstwhile Rule 57S which dealt with the manner of utilization of capital goods and the credit of the duty paid thereon. Sub-rule (1) of Rule 57S imposed a liability on the manufacturer of final product to pay appropriate duty of excise on his capital goods when removed from the factory for home consumption as if such capital goods had been manufactured in the said factory. Sub-rule (2) of Rule 57S prescribed the extent to which such duty of excise was payable. This sub-rule reads as under :- "(2) In a case, (a) where capital goods are removed without being used from the factory for home consumption, on payment of duty, or for export on payment of duty of excise, such duty of excise shall in no case be less than the amount of credit that has been allowed in respect of such capital goods under Rule 57Q; (b) where capital goods are removed after being used in the factory for home consumption on payment of duty of excise or for export under rebate on payment of duty of excise, such duty of excise shall be calculated by al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e signed by the owner of the factory or his authorised agent. Obviously, the invoice, mentioned under Rule 7 (1) of the CCR, 2002, issued by a manufacturer for clearance of inputs or capital goods as such, is the one specified under Rule 11 of the CER, 2002 which stipulates that excisable goods shall be removed from a factory/warehouse only under an invoice signed by the owner of the factory or his authorised agent. Contextually, it may also be noted that, while Rule 7 of the CCR, 2002 employs the word 'clearance', Rule 11 of the CER, 2002 uses the word 'removal'. Elsewhere in the CER as well as in the parent statute also, 'clearance' and 'removal' have been used synonymously. Removal of excisable goods under Rule 11 of the CER, 2002 is, beyond doubt, physical removal of the goods. Rule 4 of the CER, 2002 (which corresponds to Rule 9 of the erstwhile CER, 1944) mandates that no excisable goods, on which any duty is payable, shall be removed from factory/warehouse without payment of duty, the scheme is quite clear. Duty of excise can be collected only at the stage of removal of the excisable goods from the factory/warehouse and such removal must be effected under an invoice issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant paragraph of that order for the purpose of the present case :- "7. We note, that in the cases of Jamna Auto Industries (supra) and Whirlpool of India (supra), this Tribunal had occasion to consider a similar factual situation under the erstwhile Rule 57S of the CER, 1944. In both the cases, the assessees had sold their factories with capital goods therein after availing credit on such goods. The Tribunal held that the credit so availed was not recoverable in the absence of removal of capital goods from factory. In the case of Metzeller Automotive Profiles (supra), the question was whether, under sub-rule (1) of Rule 57AB of the CER, 1944, the assessee was liable to pay duty equivalent to the Modvat credit taken on their capital goods, consequent upon transfer of their factory to another company. It was held that they had no such liability in the absence of removal of the capital goods from the factory. A similar view as taken by the Tribunal in the case of Associated Cement Co. Ltd. v. Commissioner of Central Excise, Belgaum [2004 (173) E.L.T. 210 (Tri.-Bang.)] cited by learned Counsel. All these decisions were followed by the Tribunal in the case of Tata Motors Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g ruling. Accordingly, we are of the view that all the decisions cited by ld. Counsel in support of the assessee's contention that Rule 3(5) of the CCR, 2004 would not be invocable unless there was physical removal of capital goods/inputs are in accordance with the ruling of the Apex Court. 10. In the present case, it is also pertinent to note that the assessee's contention that the power plant continued to be their captive power plant even after its lease to KPPL has not been successfully rebutted. It is their definite case that the land on which the power plant is situate remained part of the approved ground plan of their cement factory even after 15-3-2005. For want of rebuttal, we have got to sustain this case of the assessee and to hold that the power plant remained a part of the assessee's cement factory and could be called "captive power plant". Consequently, it has also to be held that the capital goods in question, which formed an integral part of the power plant, remained within the factory premise3 of M/s. DCL even after the lease of the power plant to M/s. KPPL. In other words, there was no physical removal of any capital goods from the cement factory. 11. We are also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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