TMI Blog2022 (1) TMI 665X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Divisions of the respondent No.1 namely Group-II and LTCG have no independent existence. They are not separate legal entity. They are the Divisions of respondent No.1. These Divisions are functioning as a part of respondent No.1 itself. The respondent No.1, therefore, availed the Modvat Credit being duty paid on the capital goods used for the erection of the captive power plant. It is further pertinent to note that there is hardly any dispute by the appellants that the goods are not falling under Rule 57-Q of the Rules 1944, being capital goods. The CESTAT was right in rejecting the appeal filed by the Revenue and uphelding the order passed by the Commissioner (Appeals). 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 - HELD THAT:- The issue has become purely academic. Besides, the Commissioner (Appeals) has recorded a concrete finding that the procedural lapse on the part of the respondent N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est 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 respondent No.1-M/s. Larsen Toubro Ltd., Awarpur are engaged in the manufacture of cement. The respondent No.1 is holder of a Central Excise Registration. The respondent No.1 for availment of Modvat Credit filed declaration with the Assistant Commissioner, Central Excise, Division Chandrapur. During the course of scrutiny of the Central Excise records for the month of October 1998, it was observed that the respondent No.1 has availed credit on the goods used for erection of the captive power plant, as a capital goods under Rule 57-Q of the Central Excise Rules, 1944 (hereinafter referred to as the Rules 1944 ). The scrutiny revealed that the respondent No.1 was not entitled to avail the Modvat Credit. The five show cause notices dated 30.04.99, 02.07.1999, 19.07.1999, 29.03.2000 were therefore, issued to the respondent No.1. It was stated in the show cause notices that the captive power plant 2 X 23 MW was erected in the premises of the noticee by the other divisions of M/s. Larsen Toubro Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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.1 installed a captive power plant 2 X 23 MW in the factory premises of the respondent No.1, by the divisions of respondent No.1 namely Group -II and LTCG. These two divisions of the respondent- company do not have any separate legal entity per se and perform their function as a part of the respondent No.1. The respondent No.1 on their own erected the power plant in the factory. The respondent No.1 have a single Central Excise registration for the entire factory and for manufacture of excisable goods. The registered ground plan of the respondent/factory covers the area where the power plant was erected. The electricity generated through this power plant is used captively within the factory for the manufacture of dutiable cement. The respondent No.1, therefore, availed Modvat credit during the period from October 1998 to December 1999 being duty paid on the capital goods used for erection of the captive power plant under Rule 57-Q of the Rules 1944. It is the case of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned 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 the respondent No.1/factory covers the area where the power plant has been erected. The learned Advocate submitted that other Divisions of the respondent No.1 i.e. Group-II and LTCG have erected captive power plant as a part of the respondent No.1 s legal entity. These divisions are not separate legal entity. The learned Advocate submitted that as per Rule 57-Q(1) of the Rules 1944 the respondent No.1 is entitled for Modvat Credit in respect of the specified goods used in the factory of the manufacturer. The learned Advocate pointed out that goods were received within the factory of the manufacturer and therefore, the respondent No.1 has correctly availed Modvat Credit. The learned Advocate relying upon Rule 57-Q(6) of the Rules 1944 submitted that the respondent No.1 was entitled to avail the credit of a specified duty paid on capital goods manufactured by him for the manufacture of final products in his factory. In order to seek support to his submission, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 separate legal entity. They are the Divisions of respondent No.1. These Divisions are functioning as a part of respondent No.1 itself. The respondent No.1, therefore, availed the Modvat Credit being duty paid on the capital goods used for the erection of the captive power plant. It is further pertinent to note that there is hardly any dispute by the appellants that the goods are not falling under Rule 57-Q of the Rules 1944, being capital goods. 11] In view of this factual position, it would be necessary to appreciate the submission in the background of the law laid down in the decisions relied upon by the learned Advocates for both the parties. The CESTAT has held that Rule 57-Q sub-rule 6 of the Rule 1944 allows capital goods credit to a manufacturer in respect of his factory and since M/s. Larsen Toubro Ltd. as a whole to be treated as a one manufacturer, there can be no objection to erection and manufacture of a power plant by another unit of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 manufacture of tyre cord and other such goods, which are their final product. It would therefore not be correct to say that the components were used exclusively in the manufacture of the generating set. It would be more appropriate to say that these components were put together into a generating set for the manufacture of tyre cord and other final product. The explanation that the departmental representative tendered, if accepted, would in effect result in denying modvat credit contrary to the provisions of law, in a very large number of cases. The definition of capital goods in the Table to Rule 57Q, includes components, spares and accessories of various machines, machinery, apparatus, appliances etc specified therein. Every time any manufacture brings in a components to replace a damaged or worn out components in any of the machinery in its factory, it could be argued that the component it is not directly used in the manufacture of the final ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 claim Modvat credit for such duty. 6. It would also be pertinent to mention that on the basis of the order passed by the CEGAT in the present case, manufacturers in other parts of the Country claim Modvat credit of the excise paid on the components of the DGPP. These matters were decided by different Bench of the CEGAT in favour of the manufacturers following the decision rendered by the CEGAT in the present case. The Revenue filed a reference petition against one such order in the High Court of Rajasthan in Jodhpur being other Tax Reference Civil Appeal No. 18 of 2003 (Union of India v. Aditya Cement and Anr.) which reference was rejected by a Division Bench of said High Court on 27-3-2008. Another case was decided by another Bench of the CEGAT in the case of M/s. Century Rayon Ltd. The Revenue challenged this order in Central Excise Application No. 12 of 2002 which has also been rejected by the Bombay High Court on 7th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding 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 question No.1 it has become purely academic. Besides, the Commissioner (Appeals) has recorded a concrete finding that the procedural lapse on the part of the respondent No.1 would not be a ground to deny the Modvat credit, which the respondent No.1 is otherwise entitled. The CESTAT Mumbai has confirmed this order of the Commissioner. The reliance has been placed on Board circular No. 441/7/99-CX dt. 23.02.1999. In our view, the decision of the Commissioner (Appeals) confirmed by the CESTAT on these grounds does not warrant any interference. In our view, therefore, this question is also required to be answered in favour of the respondent No.1. 15] In view of the above, we conclude that there is no substance in the appeal filed by the Revenue. The appeal deserves to be dismissed. Hence, the following order. ORDER i] The Central Excise Appeal is dismissed. ii] The parties shall bear their own costs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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