TMI Blog2023 (5) TMI 599X X X X Extracts X X X X X X X X Extracts X X X X ..... ly used for conversion of lime sludge into lime and the said lime was used in the manufacture of the final product of the appellant. The demand in terms of sub-Rule (5A) of Rule 3 of Cenvat Credit Rules, 2004 is not legal and correct. In the present case, first the capital goods was not removed from the factory consequently the same was exclusively used in or in relation to manufacture of final product of the appellant. Therefore, in this position, Rule 3(5A) has no application. The Revenue s only contention is that since the capital goods were sold by the appellant to M/s. JK Envirotech Limited and the ownership of the same stood transferred to M/s. JK Envirotech Limited the appellant is not entitled for Cenvat credit in terms of Rule 3(5A) of Cenvat Credit Rules - It is made clear that, for the purpose of taking Cenvat credit and even for manufacture of finished goods, ownership has no criteria. The only requirement is that the capital goods should be used in the manufacture of final product within the factory of the appellant which is not disputed in the present case. This issue has been examined time and again by this Tribunal in various judgments. In the case of M/S. L.G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeals are being allowed on merit, the personal penalty imposed on Shri Surendra Behani, General Manager is also not sustainable. Appeal allowed - decided in favour of appellant. - Excise Appeal Nos. 11856, 11869/2013, 11034/2015, 12117/2016, 11714/2017 and ST Appeal No. 10411 of 2020-DB - FINAL ORDER NO. A/11085-11090 / 2023 - Dated:- 2-5-2023 - HON BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) And HON BLE MR. C.L. MAHAR, MEMBER (TECHNICAL) Shri Anand Nainawati, Shri Ishan Bhatt, Advocates and Shri Sunil Vatvani Chartered Accountant for the Appellants Shri Kalpesh P Shah, Asst. Commissioner (AR) for the Respondent ORDER RAMESH NAIR : Brief facts of the case are that the appellant are engaged in the manufacture of writing and printing papers, paper board and bleached pulp falling under Chapter 48 and 47 respectively of the first schedule to Central Excise Tariff Act, 1985. They were also availing credit of inputs/capital goods and input services under the provisions of Cenvat Credit Rules, 2004. During the audit it was noticed that the appellant have shown sale of assets/ goods to M/s. JK Envirotech Limited. Though the said Lime Kiln was located w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed reliance on the following judgments:- (a) CCE Vs. Sunrise Chemicals Industries - 2010 (262) ELT 110 (Guj) (b) L.G. Balakrishnan Bros Limited vs. CCE - 2016 (340) ELT 78 (Tri.) (c) C.C.E. vs. Bhilai Steel Plant -2018 (12) GSTL 28 (Chhattisgarh) (d) Dalmia cements (Bharat) Limited vs. CCE - 2008 (224) ELT 484 (Tri.) (e) CCE vs. CESTAT Chennai - 2015 (323) ELT 290 (Mad. HC) (f) Indorama Synthetics (I) Limited vs. CCE - 2005 (190) ELT 193 (Tri.) (g) CCE vs. Indorama Synthetics (I) Limited - 2018 (15) GSTL 49 (Bom.) (h) Hero Motors Limited vs. CCE - 2014 (310) ELT 729 (All) (i) Tata Motors Limited vs. CCE - 2017 (349) ELT 786 (Tri.) (j) TVS Srichakra Limited vs. CCE - 2018 (15) GSTL 182 (Mad.) (k) Ultratech Cement Limited vs. CCE - 2014 (310) ELT 554 (Tri.) Affirmed by the Hon'ble High Court of Karnataka 2015 (321) ELT A150 (Kar.) (l) Bilag Industries Limited vs. CCE - 2010 (259) ELT 461 (Tri) (m) Jamna Auto Industries Limited vs. CCE - 2001 (130) ELT 181 (Tri) (n) Behr India Limited vs. CCE - 2016 (338) ELT 631 (Tri) (o) CCE vs. Biocon Limited - (2014) 51 Taxmann 34 (Karnataka) (p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as the ownership of capital goods is changed and accordingly the appellant is liable to pay duty under Rule 3(5A) of Cenvat Credit Rules, 2004. We find that there is no dispute in the fact that even though the Lime Kiln plant was sold to M/s. JK Envirotech Limited but the same remains situated within the factory premises of the appellant. Therefore, there is no physical removal of the capital goods from the factory premises of the appellant. For the ease of reference, sub Rule (5A) of Rule 3 of Cenvat Credit Rules, 2004 is reproduced below:- [(5A) If the capital goods, on which CENVAT credit has been taken, are removed after being used, the manufacturer or provider of output services shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by the percentage points calculated by straight line method as specified below for each quarter of a year or part thereof from the date of taking the CENVAT Credit, namely:- (a) for computers and computer peripherals: for each quarter in the first year @ 10% for each quarter in the second year @ 8% for each quarter in the third ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal is justified in setting aside the order of the authorities below despite the wrongful availment of Cenvat credit by the respondent on capital goods of which the respondent was not owner? 2. The case of Revenue, as propounded by the learned counsel for the appellant, is that respondent-assessee is carrying on job-work for M/s. Pidilite Industries Limited. That the capital goods which were used for the purposes of manufacturing final product were owned by M/s. Pidilite Industries Limited and did not appear in the balance sheet of respondent-assessee for financial year 2004-05. That though the capital goods may have been received by respondent-assessee from M/s. Pidilite Industries Limited, the said capital goods having not been installed in the factory premises of M/s. Pidilite Industries Limited, the owner of the capital goods, the credit of excise duty paid on such capital goods cannot be availed of by respondent-assessee, who is only doing job work for M/s. Pidilite Industries Limited. 3. As the adjudicating officer did not grant credit far the duty paid on capital goods, the assessee carried the matter in appeal before Commissioner (Appeals) but did not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r does the Rule refer to ownership of the capital goods. The only requirement prescribed by the Rule is use of capital goods received in the factory after the prescribed date and used in the manufacture or production of final products. The respondent-assessee has/fulfilled all the requisite conditions of the Rule. 5. It is not the case of appellant-Revenue that even M/s. Pidilite Industries Limited had claimed credit for the same capital goods which were supplied by M/s. Pidilite Industries Limited to respondent-assessee. In the circumstances, there is no legal infirmity in the impugned order of Tribunal so as to warrant interference. 6. The appeal is accordingly dismissed in absence of any question of law, much less a substantial question of law. (b) In the case of LG Balakrishnan Bros. Limited, the Tribunal held as under:- 9. The next issue is regarding amount payable on capital goods under Cenvat Credit Rules, 2004 consequent upon the sale and transfer of Chain Division to a new Joint venture company. An amount of Rs. 1,17,33,687/- has been confirmed for recovery from the appellant in terms of Rule 3(5) of Cenvat Credit Rules, 2004. The original authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Weaving Mills Ltd. Anr. (supra) examined the scope of term removal . It was held that there can be no doubt that the word removal contemplates shifting of a thing from one place to another. In other words, it contemplates physical movement of goods from one place to another. The Tribunal in Dalmia Cements (Bharat) Ltd. v. Commissioner of Central Excise, Tiruchirapalli reported in 2008 (224) E.L.T. 484 (Tri.-Chennai) following the ratio of the Hon ble Supreme Court in the above decision examined the scope of application of Rule 3(5) of Cenvat Credit Rules, 2004. The Tribunal observed as follows :- 9. We also find that one of the decisions cited by ld. Consultant for the Revenue, indeed, supports the assessee s case and the same is the Apex Court s decision in J.K Spinning and Weaving Mills case (supra). In that case, their lordships had examined, inter alia, the meaning of place of removal defined under Section 4(4)(b) of the Central Excise Act. After noting that the term removal had not been defined anywhere in the statute, the Apex Court observed as under :- There can be no doubt that the word removal contemplates shifting of a thing from one place to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the present case. In view of the above, the interpretation with regard to Rule 3(5) of CCR, 2004, as made by the Tribunal in the present case is fully justified and it calls for no interference at the hands of this Court. 10. In view of the above settled decision, we find that the provisions of Rule 3(5) are not attracted in the present case. The original authority s attempt to distinguish the above findings is not appropriate. He found that these decisions are regarding change of ownership of whole factory whereas here only a part of the factory is transferred. We find such finding as untenable. Further, regarding question of issue of invoice by the appellant for sale and transfer of capital goods and inputs to the new legal entity, we find on perusal of sample invoice that these are not invoices in terms of Rule 11 of Central Excise Rules, 2002. The appellant contended that the goods were identified with value for the purpose of business transaction and not for sale transaction in terms of Sales Tax or Central Excise provision. We note that the invoices issued did not contain the details of any removal, mode of transport, rate of duty, duty payable thereon, etc., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arh high court passed the following order:- Having heard the Learned Counsel for the Appellant-Revenue, we see that the issue sought to be raised is one which cannot be treated as giving rise to common substantial question of law for decision in favour of the Revenue in an appeal under Section 35G of the Central Excise Act, 1944. The adjudicating authority concurrently held that there is no fiscal removal of the capital goods and that the concept of removal as delineated by the Hon ble Supreme Court of India in J.K. Cotton Spinning and Weaving Mills Ltd. v. Union of India, 1987 (32) E.L.T. 234 (S.C.) and the decision of the Learned Tribunal in the case of L.G. Balakrishnan and Bros. Ltd. v. C.C.E., Trichy - 2016-TIOL-2356-CESTAT-MAD = 2016 (340) E.L.T. 708 (Tri.-Chennai) cover the issue in favour of the Assessee. It is accordingly held, even on assimilation of facts that removal in the case in hand does not include any fiscal removal of goods from one place to other. 2. For the aforesaid circumstances, we are of the view that this appeal does not deserve to be entertained. In the result, the appeal is dismissed in limine. (d) Tribunal Chennai in the case of Dalmi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Modvat/Cenvat credit on capital goods used in the mines of a cement manufacturer was not to be denied to them if the mines were captive mines which, along with the cement factory, constituted one integrated unit. In support of the assessee s contention that, unless there was physical removal of capital goods from factory, Modvat/Cenvat credit taken thereon cannot be asked to be reversed, ld. Sr. Advocate has cited the following decisions :- (1) Whirlpool of India Ltd. v. CC, New Delhi - 2003 (58) RLT 241 (CESTAT - Del.) (2) Metzeller Automotive Profiles India P. Ltd. v. CCE, Ghaziabad - 2004 (167) E.L.T. 208 (Tri.-Del.) (3) Associated Cement Companies Ltd. v. CCE, Belgaum - 2004 (173) E.L.T. 210 (Tri.-Bang.) (4) 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factually similar to the case of M/s. Majestic Auto Ltd. and, therefore, the decision in that case is squarely applicable. Ld. Consultant has also questioned the preposition that the Cenvat credit taken and utilized in accordance with law cannot be disallowed subsequently on any ground whatsoever. In this connection, he has referred to Rule 14 of the CCR, 2004 and has submitted that, where any credit has been utilized wrongly, the same could be recovered along with interest. 6. We have given careful consideration to the submissions. The inputs and capital goods, on which Cenvat credit had been availed by the assessee on receipt of the goods in their factory, were used in the setting up of the power plant in question and the input services, 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in Rule 7 . In Final Order No. 814/07 ibid - 2007 (216) E.L.T. 217 (Tribunal), we made an attempt to decipher the meaning of the expression as such used in the above provision. As the same expression has been used in an identical context in sub-rule (5) of Rule 3 of the CCR, 2004, we have the advantage of making useful reference to the following excerpt from Final Order No. 814/07 ibid :- 6........Both sides have dwelt much on the expression as such used in sub-rule (4) of Rule 3 of the CCR. According to learned Counsel, removal of capital goods as such means removal of unused capital goods, whereas, 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 whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital goods, whether used or not, on which Cenvat credit has been taken, are removed from the factory, the manufacturer of final products shall pay an amount equal to the credit availed in respect of such capital goods. But one cannot ignore the second leg of sub-rule (4), which says that such removal shall be made under the cover of an invoice referred to in Rule 7. Rule 7 of CCR lists out of the documents on the basis of which Cenvat credit on inputs or capital goods can be taken by a manufacturer of final products. One of these documents is an invoice issued by a manufacturer for clearance of inputs or capital goods as such in terms of the provisions of the CER, 2002. Rule 11 of the CER, 2002 mandates that no excisable goods shall be removed from a factory or a warehouse except under an invoice 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y clear that the provisions of Rule 3(5) of the CCR, 2004 are not applicable to the instant case. 8. In the case of BILT Industrial Packaging Company (supra), covered by Final Order No. 814/07 - 2007 (216) E.L.T. 217 (Tribunal), we had also considered a line of decisions, some cited by the assessee and others cited by the Revenue. Most of such decisions have been cited before us in the present case also. While ld. Counsel has cited a number of decisions to establish that physical removal of capital goods from factory is a peremptory condition for invoking Rule 3(5) of the CCR, 2004, ld. Consultant has argued to the contra by relying on the Tribunal s decision in Majestic Auto case (supra). As our final order in BILT Industrial Packaging Co. has dealt with these aspects also, we would like to reproduce 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the decisions cited by ld. Consultant for the Revenue, indeed, supports the assessee s case and the same is the Apex Court s decision in J.K Spinning and Weaving Mills case (supra). In that case, their lordships had examined, inter alia, the meaning of place of removal defined under Section 4(4)(b) of the Central Excise Act. After noting that the term removal had not been defined anywhere in the statute, the Apex Court observed as under :- There can be no doubt that the word removal contemplates shifting of a thing from one place to another. In other words, it contemplates physical movement of goods from one place to another. The word removal has not been defined under CCR, 2004 either. In the circumstances, the above observation of the Apex Court assumes significance and has to be followed as binding 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 asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eversed by the Allahabad High Court in Hero Motors Ltd. v. Commissioner of Central Excise, Ghaziabad [2014 (310) E.L.T. 729 (All.)]. A cursory glance at the said decision would reveal that the case was also a case of lease and in the said case also the capital goods remained installed in the same premises and in the said circumstances, the Allahabad High Court held as under :- 22. In the present case we find substance in the contention of Shri Bharat Ji Agarwal that at the time of obtaining registration HBSA Pvt. Ltd. had submitted a ground lay out plan, which was approved by the Superintendent, Customs and Central Excise, Range-6, Division-III, Ghaziabad on 21-8-1998 and in which the engine assembly on ground flour in the premises of Majestic Auto Limited was clearly demarcated. The plant and machinery was installed and was never removed from the premises. The I.C. Engines manufactured by HBSA Pvt. Ltd. in the same premises were used by the appellant. Once it was admitted that the capital goods, on which Modvat Credit was taken by the appellant remained installed in the same premises, which was leased out and continued to be engaged in the manufacture of I.C. Engine, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law are answered in favour of the 2nd respondent/assessee and against the appellant/Revenue. 20. In the result, finding no merits warranting interference with the order of the Tribunal, these appeals are dismissed. However, in the circumstances of the case, there shall be no order as to costs. 7. In view of the above judgments, the law is settled that even though the ownership of the capital goods has been changed but the capital goods remained installed and used within the factory premises of the assessee, the Cenvat credit cannot be demanded under Rule 3(5A) of Cenvat Credit Rules, 2004. Following the above decisions coupled with our observations, we are of the view that the demand of Cenvat credit of capital goods in the present case made under Rule 3(5A) is not sustainable. 8. As regard the appeal No. ST/10411/2020 wherein the demand of Cenvat credit in respect of input service used in relation to the activity of conversion of lime sludge into lime by M/s. JK Envirotech Limited, we find that even though the input service was used in the processing related to conversion of lime sludge into lime but the same was directly connected to manufacture of final product of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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