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TMI Blog2022 (11) TMI 1091X X X X Extracts X X X X X X X X Extracts X X X X ..... ong Products Limited. 2. The original Appellant was the Commissioner of Central Excise, Customs & Service Tax and by virtue of the amendment has been substituted by the Principal Commissioner of GST and Central Excise, Bhubaneswar Commissionerate. 3. While admitting the present appeal on 7th May, 2021 the following questions were framed for consideration: "(i) Whether CENVAT Credit can be allowed to an assessee on capital goods used in the factory (Power Plant of KMCL) meant for another company/assessee (NINL) for manufacture of final products which are different and distinct i.e. KMCL manufactures 'Coke' and NINL manufactures 'Steel' as the final product? (ii) Whether under Rule 57AA of the Central Excise Rules, 1944 or Rule 2 of CENVAT Credit Rules, 2001, the capital goods used in the power plant of KMCL is Cenvatable when the final products (Power) is non excisable? (iii) KMCL having consciously established the Captive Power Plant within the premises of another company (NINL) which requires 75% of power, whether CENVAT Credit can be allowed on capital goods for the captive power plant when it is not exclusively used in the manufacture of Coke, that too when the coke oven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of final product; (ii) used in the factory of manufacture of the final products in or in relation to manufacture of the said final product." 8. According to the Department, even if the CPP of KMCL were to be situated inside the factory of NINL and satisfied the criteria laid down by the Central Board of Excise & Customs (CBEC) to constitute as part of the same factory, no MODVAT/CENVAT credit would still be available since the Power Plant was designed predominately to cater to the requirements, not of KMCL, but of NINL. It must be mentioned here that according to the Department, 75% of the power generated in the CPP was meant for NINL. Thus, it was contented by the Department that the entire power and steam generated in the CPP was not being used in the manufacture of final products of KMCL but in the manufacture of final products of NINL, which was a different factory and, therefore, such CENVAT/Credit could not be availed of. 9. The Department contended that the CC Rules specifically mentioned that capital goods and inputs for the purposes of the said Rules should be used in or in relation to the manufacture of final products within the factory of production. Use of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side the factory premises of NINL, which was a separate premises altogether, could not be included in the ground plan of KMCL. Therefore, the installation of a Captive Power Plant inside the premises of NINL did not satisfy the definition of 'Factory' under Section 2(e) of the CE Act. The premises of KMCL and that of NINL were two disjoint premises. One had the Coke Oven Plant and the other was the Power Plant. The Power Plant was surrounded completely by the registered premises of NINL. (iii) The power or electricity produced by KMCL was not an excisable commodity, therefore, CENVAT Credit of duty paid on the capital goods and inputs used in the power plant was not admissible in terms of Rule 57AH of the CE Rules read with Rule 12 of the CC Rules. 75% of the power generated in the Captive Power Plant was in fact used by NINL and not KMCL. "The power generated should have been meant for manufacture of excisable goods inside the factory premises but in the instant case, the power has been sold to other unit. The unit could not fulfil the conditions of Rule 57AA of Central Excise Rules, 1944/ Rule 2 of the CENVAT Credit Rule, 2001." 12. Mr. Mishra, learned Senior Standing Counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initially NINL was promoted by MMTC Limited, a Government of India undertaking along with the Government of Odisha for setting up an Integrated Iron & Steel Plant at Duburi on the basis of a single feasibility report. In order to meet the institutional norms pertaining to Promoters' contribution and for arranging the required funds, the Promoters decided to bifurcate NINL into two units. One unit was to be KMCL which would manufacture Blast Furnace Coke for exclusive use by NINL. The idea was to make the industrial unit an Integrated Conventional Iron and Steel Plant. Thus, NINL and KMCL were to be inter-dependent both technologically and operationally. Both the plants were to be inter-linked and inseparable. The manufacturing activity in the Coke Oven Plant could not be conceived without power supply from the Power Plant. 15. Although the Coke Oven complex and CPP were in different locations, they belonged to the same factory and satisfied the requirement that "the said goods are to be used in the factory of the manufacturer of final products". The only restriction for availing credit under the CENVAT Scheme was that the capital goods were not to be exclusively used for manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated by public road, canal or railway line." How the two premises are to be considered to be part of the same factory by the Commissioner of the Central Excise has been set out in the above instructions of the CBEC. It only shows that as long as the two portions are integrally connected and inter-linked with the manufacturing process of excisable goods, it can be considered to be part of the same factory premises. In other words, merely because the Coke Oven Plant and the CPP may have been in two separate locations would not result in there being considered to be not part of the same factory premises. 19. An important factor which has to be taken note of in this context is that an agreement was executed between the Government of Odisha and KMCL on 28th June, 2000 where under a land to an extent of 249.45 acres on which both the Coke Oven Plant as well as the CPP Plant were located had subsequently been transferred to KMCL. 20. As regards the selling of 75% of the power to NINL, there is indeed no restriction under the CENVAT Scheme that after captive use of power, the surplus power cannot be sold to any other party. The only restriction is that the capital goods are not to be exc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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