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TMI Blog2022 (1) TMI 665X X X X Extracts X X X X X X X X Extracts X X X X ..... Modvat Credit on duty paid inputs or any goods used in the manufacture of Captive Power Plant without filing the declaration under Rule 57G and without following the procedures required under rule 57(T)(7) and without obtaining registration certificate as required under Rule 174 (4) of the erstwhile Central Excise Rules, 1944. 2] The facts giving rise to the above substantial questions are as follows: The Assistant Commissioner Customs and Central Excise, Chandrapur vide order dated 26.11.1999 dis-allowed the Modvat Credit on Capital goods availed by the respondent No.1 and directed the recovery of the same with penalty. The Commissioner (Appeals) Central Excise and Customs, Bhopal vide order dated 05.02.2002 set aside the order passed by the Assistant Commissioner and held that the Modvat Credit availed by the respondent No.1 was according to the law and rules. The appeal filed by the Revenue against the order of Commissioner was dismissed by the Customs, Excise & Service Tax Appellate Tribunal, West Regional Bench at Mumbai (For short 'CESTAT') vide order dated 27.09.2005. The appellant-Revenue is in the appeal before this Court against the order passed by the CESTAT. 3] The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al goods, in the registration certificate as per Rule 174(7) of the Rules 1944 and also prior to filing a declaration of factory premises and the equipment of the power plant as per rule 44(3) of the Rules 1944. It is stated that this was in a total contravention of the provisions of Rule 174 (7) and Rule 44(3) of the Rules 1944. It was further stated in the notice that, the capital goods as mentioned were installed outside the registered factory premises and as such was not entitled for Modvat Credit under Rule 57-Q of the Rules 1944. It was the specific case of the Revenue that the Modvat Credit amounting to Rs. 16,09,399/- availed by the respondent No.1 was in contravention of the above Rules. As such, the Revenue called upon the respondent No.1 to show cause why the Modvat Credit availed by the respondent No.1 should not be dis-allowed and recovered and also why the penalty should not be imposed with interest. 4] The case of the respondent No.1 as can be seen from the reply to the show cause notice indicate that the respondent No.1 has denied the contents of the notices. It is the case of the respondent No.1 that they are engaged in the manufacture of Cement. The respondent No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not fall under any of the category of the goods prescribed as a 'excisable goods'. The learned Advocate submitted that therefore, the duty paid for erection of the power plant cannot be claimed as 'Modvat Credit'. The learned Advocate further submitted that the erection of the captive power plant does not amount to manufacture. In order to seek support to his submission, the learned Advocate relied upon the decisions in the case of Gajra Gears Ltd. .v/s. Commissioner of Customs & Central Excise 2015 (320) E.L.T. 38 (SC) and the decision in the case of Saraswati Sugar Mills .v/s. Commissioner of C. Ex., Delhi-III 2011(270) E.L.T.465 (SC). Relying upon these judgments the learned Advocate submitted that the CESTAT has committed error in dismissing the appeal filed by the Revenue. The learned Advocate by drawing our attention to the judgment of the CESTAT submitted that all the grounds raised by the appellant were not considered and decided. 8] The learned Advocate for the respondent No.1 submitted that the respondent No.1 has single Central Excise registration for the entire factory and for manufacture of excisable goods. It is submitted that the registered ground plan of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Advocates for both the parties. On perusal of the record and the law laid down in the decisions, we are of the opinion that there is no substance in the appeal. The substantial question No.1 will have to be answered in favour of the respondent No.1. Few facts having bearing with the substantial question of law arising the appeal may be stated. The respondent No.1-M/s. Larsen & Toubro Ltd. is a legal entity. The respondent No.1 has single Central Excise Registration for the entire factory and for manufacture of excisable goods. The registered ground plan of the respondent No.1's factory covers the area where the captive power plant has been erected. It is undisputed that the power plant is within the approved ground plan of the factory. It is further pertinent to note that the entire electricity generated is used captively within the factory for the manufacture of dutiable cement. The Commissioner (Appeals) and the CESTAT have accepted the case of the respondent No.1 that the captive power plant was constructed by the respondent No.1. The perusal of record would show that the Divisions of the respondent No.1 namely Group-II and LTCG have no independent existence. They are not sepa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inal products, and Rule 57Q relating to credit to be taken of duty paid on capital goods. Rule 57A, specifically provides that the inputs must be used in or in relation to the manufacture of the finished product. There is no such requirement in Rule 57Q. All that it requires is that the capital goods must be used in the manufacture of the specified final products. The requirement that the capital goods must be used in or in relation to the manufacture of the final product is absent. That this difference in wordings is deliberate is clear from the circular of the Board explaining the changes made in the budget of 1994 part of which relates to credit on capital goods incorporated in the Central Excise Rules. Paragraph 71.5 of this circular emphasises that "There is no reference to the expression "used in or in relation to the manufacture of final products". It goes on to say that "capital goods acquired by a manufacturer for use in his factory are eligible to modvat credit." 6. The manufacturer, in each case, acquired the components of the generating set, not for use in the manufacture of the generating set as a final product, but to generate electricity required for the manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt has affirmed the decision in Gujrat Ambuja Cement case (supra). The same view has been taken in Commissioner of Central Excise .v/s. Gujrat Ambuja Cement Ltd.2010 (256) E.L.T. 356 (H.P.). Para Nos. 5 and 6 of this decision are relevant. It would be advantageous to reproduce para Nos, 5 & 6. The same reads thus: "5. Both the arguments raised are without any merit. There can be no dispute that excise has been paid on some of the components of the DGPP. Since the DGPP is exempt from payment of excise no Modvat credit can be claimed by the manufacture of the DGPP, in the present case WDIL. However, there is no dispute that this DGPP is part and parcel of the factory of the respondent. It is definitely a capital good and therefore Rule 57Q is applicable. Rule 57Q enables a party to claim credit of duty paid on capital goods by the manufacturer of specified goods. Under Sr. No. 5 to the table of the said Rule, a manufacture is entitled to claim Modvat Credit on account of the excise paid on the components, spares and accessories of the goods exempt. A DGPP is a capital good. If duty is paid on the components used in its manufacture, we see no reason why the manufacturer cannot clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of dutiable finished goods. In the present case, the dispute relates to the denial of the credit on capital goods used in the manufacture of captive power plant and the power so generated is used in the manufacture of dutiable goods within the factory. The dispute is not relating to demand of a duty on the intermediate goods whereas in the judgment of Gajra Gears (supra) demand was raised on the intermediate goods. It is further pertinent to note that the department is not demanding excise duty on captive power plant or electricity. In our view, therefore, the decisions relied upon by the learned Advocate for the appellant are not applicable in this case. The decisions relied upon by the learned Advocate for the respondent No.1 are applicable to the facts situation obtained on record in this case. We are, therefore, of the opinion that the CESTAT was right in rejecting the appeal filed by the Revenue and uphelding the order passed by the Commissioner (Appeals). In our view, on appreciation of the facts and law no other view is possible. Accordingly, we answer question No.1 in favour of the respondent No.1. 14] As far as the question No.2 is concerned in view of answer to a ques ..... X X X X Extracts X X X X X X X X Extracts X X X X
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