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TMI Blog2020 (2) TMI 690X X X X Extracts X X X X X X X X Extracts X X X X ..... P") of 7.5 MW for generation of electricity. 3.The SISCOL, in order to expand its production capacity of the final product viz., iron and steel rod, apart from it CPP of 7.5 MW capacity already available with it, required additional power of 60 MW, therefore, they decided to set up another CPP. 4.At that time since the SISCOL was sick and also was under Restructuring Scheme under CDR (Corporate Debt Restructuring) and also was declared as a sick company by the BIFR (Board for Industrial and Financial Reconstruction), it had entered into an agreement with JSW Power Limited (JSWPL). 5.An agreement to that effect was entered into between SISCOL and JSWPL, as per which, SISCOL leased out a portion of its land to the extent of 50.14 acres to JSWPL where 2 x 30 = 60 MW CPP had to be established by JSWPL. As per the said lease deed dated 17.01.2005, a nominal lease amount of Rs. 10,000/- per annum was fixed. Pursuant to the lease agreement, the land entrusted by SISCOL to JSWPL was in turn pledged by the JSWPL with UTI Bank Limited to raise funds to the tune of Rs. 62 Crores. Since the entire cost of CPP project was roughly about Rs. 95 Crores, the balance cost to the extent of Rs. 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law, the Commissioner of Central Excise, Salem, vide Order-in-Original No.7/2007 (Commissioner) dated 03.10.2007 passed orders confirming the demand denying the availed CENVAT credit along with interest and also confirmed and demanded the amount which was utilised wrongly for payment of duty on the clearance of final product with interest and also imposed penalty under Rule 15(2) of the CENVAT Credit Rules, 2004 read with Section 11 AC of Central Excise Act, 1944 (Act) and further imposed penalty under Rule 26 of the Central Excise Rules, 2002 read with Rule 15 of CENVAT Credit Rules, 2004. 13.Aggrieved over the said Order-in-Original dated 03.10.2007, the Assessee filed Appeal before the CESTAT. The CESTAT on 05.11.2012 passed a split verdict, whereby, one Member of the CESTAT allowed the Appeal filed by the Assessee, however, another Member took a different view. Therefore, the point of difference in opinion in the following terms had been referred to a Third Member of the Tribunal. "POINT OF DIFFERENCE IN OPINION 56. In the facts and circumstances of the case,- Whether it is proper to allow Cenvat Credit of excise duty paid on excisable capital goods paid for and used by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Rs. 10,000/- was also fixed by SISCOL. Only in the earmarked land of 54.14 acres, by way of lease to JSWPL, it had established the CPP, for which, capital goods were purchased. Since the premises/office of JSWPL had been in the State of Karnataka and the capital goods for setting up CPP have to be brought in to the premises i.e., the land earmarked by SISCOL through the lease, while raising invoices, the JSWPL raised it in the name of JSWPL with Consignee SISCOL. The price for the said capital goods purchased by JSWPL had been paid or settled only by JSWPL and no payment had been made by SISCOL. 17.The learned counsel would also submit that, the entire capital goods purchased and utilised by JSWPL were used in the CPP only, which is not the factory of the SISCOL, who claimed to be the manufacturer of the final product i.e., steel and iron rod etc. Therefore, it become clear that, those capital goods since had been used in the CPP of JSWPL and not at the factory of the SISCOL, the SISCOL was not entitled to take any CENVAT credit. These factors, according to the learned counsel, had been unearthed only subsequently based on the intelligence input received by the Revenue and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting that, though the land of 54 acres had been earmarked by way of lease by SISCOL to JSWPL, the factory premises i.e., the factory campus of SISCOL has never been changed. Moreover, in the year 2005 itself, the group company of JSWPL had decided to take over the SISCOL and pursuant to the said decision only, the JSWPL was entrusted by the SISCOL to set up the CPP and that is the reason why 54 acres of land was earmarked by way of lease by SISCOL for a nominal amount of Rs. 10,000/- per year. The learned counsel would further submit that, though a decision was taken for the merger of SISCOL and JSW Steel Limited i.e., JSWSL earlier in the year 2005, the process went on for some time and ultimately by virtue of the order passed by the High Court of Bombay dated 22.02.2008, the SISCOL and JSWSL of Jindal Group got merged with from 01.04.2007. In the meanwhile, JSWPL also got merged with JSWSL with effect from 01.04.2005 as per the order of the High Court dated 14.11.2005. By explaining these factors, the learned counsel for the Assessee would submit that, even at the time of entering into a lease between SISCOL and JSWPL, for all practical purposes, there had been a take over of SI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tting up of power plant cannot be denied as the electricity is captively consumed with the factory of SISCOL. 23.We have considered the aforementioned submissions made by the respective learned counsel for the parties and we have given our anxious consideration to the materials placed before this Court. 24.Though initially SISCOL and JSWPL were different entities, at one point of time, somewhere in 2005 they seems to have come to an understanding, by thus, with the plan of taking over the SISCOL by the Jindal Group where the JSWPL is also a part, the JSWPL came forward to establish a CPP for the purpose of complete supply of electricity to be generated in the said CPP to SISCOL for enhancing its manufacturing capacity. A portion of the land to the extent of 50.14 acres was leased out to JSWPL only for a nominal amount of Rs. 10,000/- per annum by way of lease deed dated 17.01.2005. Pursuant to which, the JSWPL mortgaged the said land with UTI Bank limited to raise the fund to the tune of Rs. 62 Crores for the purpose of setting up the CPP. That apart, another sum of Rs. 28 Crores was invested by SISCOL in the form of shares in the JSWPL, the total cost of the CPP itself is around ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Southern Iron and Steel Company Limited, M/s Southern Iron And Steel Company Lted have agreed to supply the required water to M/s JSW Power Ltd. at the mutually agreed rates from their existing water availability. for SOUTHERN IRON AND STEEL COMPANY LTD." 28.Accordingly, the work of setting up of CPP for 60 MW started, where, in order to set up the power plant, capital goods were purchased and while placing the purchase orders, on the specific request, invoices were raised in the name of JSWPL - Consignee SISCOL. Since the SISCOL is already running the manufacturing unit/factory for manufacturing the final product of steel and iron rod, it has taken the CENVAT credit for those capital goods purchased and utilised or used at the CPP. Though the said CENVAT credit was allowed initially, subsequently the Revenue decided to reverse it on the ground that, the SISCOL was not entitled to take the CENVAT credit as the capital goods were not used in the factory premises of SISCOL, accordingly, the show cause notices were issued and ultimately it ended in Order-in-Original dated 03.10.2007 whereby the amount of CENVAT credit taken by SISCOL was demanded and also the excise duty was dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the final product for generation of electricity, as the CPP, according to the Revenue, is a separate unit of the different entity viz., JSWPL. Therefore, on both counts, the eligibility, as fixed above, under the relevant Rule, since has not been fulfilled by the SISCOL, it did not have any right to claim CENVAT credit, therefore, such a claim made by SISCOL cannot be treated as a lawful claim and therefore, it is liable to be reversed, he contended. 31.In this context, we would point out that, first of all, the CPP was set up only within the factory premises of SISCOL as the land leased out by SISCOL and the factory premises of SISCOL are one and the same or inseparable. This aspect has been demonstrated before this Court by the learned counsel for the Assessee, by providing the Map of the SISCOL Steel Plant, which includes the leased out area to JSWPL to set up the CPP. As per the Certificate issued by SISCOL, 6000 Cu.M. of water everyday was supplied by SISCOL to the CPP and before the CPP in fact was completed, the lease was terminated and the CPP unit was taken over by SISCOL. There is no prohibition in CENVAT Rules against lease of part of land. The leased portion continues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excise, Bhubaneshwar- II reported in 2007 (219) E.L.T. 960 (Tri.-Del.) wherein the facts of the case are that M/s.SAIL has a steel plant at Rourkela. That plant was having a 'CPP' also. In 1999, the steel mills received a rotor for use in its captive power plant and took MODVAT (Capital goods) Credit. Subsequently, in 2001, the 'CPP' was spun off as a separate identity (subsidiary). In the subsidiary, M/s.SAIL continued to have 98% shareholding and remaining 2% went to National Thermal Power Corporation ('NTPC' - in short). In those set of facts, it was argued by the learned counsel for the appellants that the deal was executed for business of restructuring with intent to strengthening M/s.SAIL's core business activity and it was not a case of sale as normally understood. It is also the contention of the learned Counsel that in this case corporate veil was required to be lifted so as to arrive at the reality of the transaction and reach appropriate conclusion. Therefore, in that case, this Tribunal has relied on the judgment of the Hon'ble Supreme Court in the case of State of Uttar Pradesh v. V.Renusagar Power Co. and others reported in 1988 (4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f SJG, have expertise in constructing and operating Power Plants and M/s.JSW Steel Ltd. another company of SJG, is one of the purchasers of the final product of M/s.SISCOL. It is recorded in the CDR Cell report that there was proposal of merger of M/s.SISCOL with SJG, which is corroborated by Director's report dt. 26.4.2005 of JSWPL balance sheet. It is mentioned in "Unit III Debentures Trust Deed" dated 22.9.2005 of M/s.JSWPL that with a view to finance its 2 x 30 MW plant at SISCOL, the company has approached the Debenture holders. JSWPL declared to TNEB by letter dated 6.1.2005 that Captive Power Plant is installed inside the SISCOL premises to meet the present and future power requirements of SISCOL. Further, TNEB approved as SISCOL Captive Power Plant located in the company's premises. 68.3 Rule 4(3) of CCR 2004 provides that the cenvat credit in respect of the capital goods shall be allowed to a manufacturer, even if the capital good are acquired by him on lease, hire purchase or loan agreement, from a financing company. Rule 4(3) has a wide amplitude in so far as it would cover the cases of various types of financial arrangements for availing credit on the capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployees. 12.From the above submissions made on behalf of the respective parties, it is obvious that the main dispute in this case whether or not Renusagar Power Plant is captive plant of appellant company. Captive plant has not been defined in the Act or Rules. However, by the terminology used, it obviously means power generation plant supply only to the parent company. "Captive generating plaint is defined under Section 2(8) of Electricity Act, 2003 which reads: "Captive generating plaint" means a power plant set up by any person to generate electricity primarily for its own use and includes a power plant set up by any co-operative society or association of persons for generating electricity primarily for use of members of such co-operative society or association." This definition also states that captive generating plant means a power plant set up by any person or company to generate electricity for his own use. In the instant case, there is no dispute between the parties because power generated by Renusagar Power Plant was exclusively supplied to the appellant company, and, therefore, in our considered view, the power plant is captive power plant of the appellant. As such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since the final product of SISCOL is iron and steel rod etc. and for the purpose of production of such final product, the power to be generated from the CPP since was fully utilised, as per the provisions of CENVAT Credit Rules, the SISCOL can very well take the credit for the capital goods purchased and utilised at the factory premises of SISCOL where the CPP was established. 40.The factual matrix of this case, as has been discussed above, would give us an irresistible conclusion that, the place where the CPP was set up is part and parcel of the factory premises of SISCOL originally and it has never been separated as a separate unit or entity as the water was supplied by SISCOL to CPP and the power being generated by CPP would be fully supplied and would be utilised by the SISCOL alone. The major funds for setting up of CPP also was generated only from the sources of SISCOL. Even before setting up of CPP, permission was sought for by JSWPL from the Deputy Chief Inspector of Factories, Salem on the pretext that, the SISCOL was taken over by Jindal. Further, even under the condition of Rule 2(a)(1) and (1A) as quoted above, the capital goods purchased for the purpose of setting up ..... X X X X Extracts X X X X X X X X Extracts X X X X
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