TMI Blog2005 (1) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... PP, LLDPE, etc., which consume the products manufactured by the NCU. The principal raw material for manufacture of petrochemical products is Naphtha which is procured from Indian Oil Corporation or other indigenous oil refineries or by direct imports from overseas, on payment of duty. A small portion of the Naphtha, either as such, or after being partially processed (internally known as CLS comprising NRS/Py Gas/C-6 Raffinate, etc.), is also sent to a power plant for generation of electricity or steam, which are in turn used for production of the final products within the appellant's factory. 3.Electricity is a vital input for the functioning of the plant in the petrochemical complex. Steam is also an essential input for the Naphtha Cracking Unit where Naphtha is fed along with the steam. It is, therefore, necessary for the appellant to maintain an uninterrupted supply of electricity and steam of an acceptable quality. For the purpose of meeting its requirement of electricity and steam, a combined cycle co-generation electricity plant (hereinafter referred to as 'power plant' 116 MW capacity) was setup by the appellant in a joint venture with M/s. Larsen and Toubro Limited. The J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products by the appellant in its factory. 5.By letter dated 1-4-2000/28-4-2000, the Superintendent of Central Excise gave the approvals, as sought for, and confirmed that Cenvat credit on Naphtha used in or in relation to manufacture of final product, would be admissible subject to satisfaction of other terms and conditions. However, the letter stated that Cenvat credit on Naphtha used for generation of electricity and steam by the power plant would not be allowed. Against this letter, the appellant filed an appeal before the Commissioner of Central Excise (Appeals), Calcutta. The Commissioner of Central Excise (Appeals) passed Order-in-Appeal dated 27-2-2004 rejecting the appeal, rejecting the contention of the appellant that the power plant is situated within the premises of the registered factory of the appellant. He held that the power plant is under the ownership of a different company, HPLCL and the land on which the power plant is situated is assigned by the appellant to HPLCL by way of a deed of assignment and as such, it no more remains the part of the factory premises of the appellant. According to the Commissioner (Appeals), the factory of the appellant and the power p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence to the previous letters and finally referring to a meeting, which the representative of the appellant had with the Commissioner on 31-5-2000. The letter stated "after due deliberations, the learned CCE pointed out that since the power plant has been set up by a separate company, namely, HPLCL, and not us, it would not be possible to consider the power plant as our captive power plant. Accordingly, he conveyed reluctance to allow Cenvat credit on Naphtha used for power plant on that ground. Nevertheless, the Ld. CCE was pleased to convey that we are entitled to Modvat/Cenvat Credit in respect of the duty paid on Naphtha by sending Naphtha to HPLCL for further processing on job work basis". Finally, the appellant wrote that "In view of the aforesaid discussions, as has been very kindly confirmed by the Ld. CCE and your goodself, Cenvat Credit is admissible to us on Naphtha used for generation of electricity and steam by HPLCL on job work basis. Further, since we are a new assessee, we request your goodself to kindly let us the procedural aspects, if any, to be followed by us under the job work mode". 8.On 12-7-2000, the Superintendent of Central Excise clarified the procedura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended period of limitation. It also denied any liability for interest or penalty. As regards the point whether or not the power plant is located within the factory premises of the appellant, the Commissioner of Central Excise, Haldia, agreed with the finding of the Commissioner (Appeals) that the power plant is located outside the factory premises of the appellant. As for the question whether the appellant is eligible for the benefit of Cenvat credit under Rule 4(5)(a) of Cenvat Credit Rules, the Commissioner has held that this Rule is not applicable because what is returned back from the premises of HPLCL is electricity and not any excisable goods. According to the Commissioner, the appellant sent partially processed Naphtha, i.e. CLS to the power plant belonging to a different company, namely, HPLCL for generation of electricity and steam and in that process, the character of the inputs gets totally converted from raw material to energy. Rule 4(5)(a) emphasises return of the inputs or partially processed inputs from the job worker's premises after further processing such as testing, repair, re-conditioning or any other purposes and not for complete conversion of input or partial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13.As regards the second issue, the Counsel for the appellant has submitted that the appellant is entitled to the benefit of the Cenvat credit under the job work procedure. He has urged that merely because the character of the inputs is changed, when they are received back, it is not relevant. Electricity is an intermediate product used in the manufacture of the final product and the change of the identity of the input does not bar the admissibility of Cenvat credit under the job work procedure. In this connection, he relied upon a number of judgments the Supreme Court, High Courts and the Tribunal. He further submitted that the Commissioner himself had agreed in the discussions with him (referred to above) that the appellant could take Cenvat credit by following the job work procedure. He also submitted that the expressions "further processing" and "any other purposes" used in the rule must be given wide amplitude and would even cover complete manufacture as seen from the provisions of Rule 4(6). In this connection, he also relied upon the Board's Circular dated 4-5-94. The Ld. Counsel also specifically relied upon the decision of the Tribunal in the case of Essar Steel Limited v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber 2000 to 30th June 2001 "input" means all goods, except high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not, and includes accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used for manufacture of final products or for any other purpose, within the factory of production, and also includes lubricating oils, greases, cutting oils and coolants. Explanation 1. — The high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2. — Inputs include goods used in the manufacture of capital goods which are further used in the factory of the manufacture. Rule 57AB. Cenvat credit. — [(1) A manufacturer or producer of final products shall be allowed to take credit (hereinafter referred to as the Cenvat credit) of, - (i) the duty of excise specified in the First Schedule to the Central Excise Tariff Act, 1985 (hereinafter refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y debiting the CENVAT credit or otherwise. However, the manufacturer can take the CENVAT credit again when the inputs or capital goods are received back in his factory........ From 1st July 2001 to October 2002 "Input" means all goods, except high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not, and includes lubricating oils, greases, cutting oils and coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used for manufacture of final products or for any other purpose, within the factory of product. Explanation 1. - The high speed diesel oil or motor spirit, commonly known as petrol, shall not be treated as an input for any purpose whatsoever. Explanation 2. - Inputs include goods used in the manufacture of capital goods which are further used in the factory of the manufacture. Rule 3. CENVAT credit. — (1) A manufacturer or producer of final products shall be allowed to take credit (hereinafter re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CENVAT credit shall also be allowed in respect of jigs,(b) fixtures, moulds and dies sent by a manufacturer of the final products to a job worker for the production of goods on his behalf and according to his specifications. The Commissioner of Central Excise having jurisdiction over(c) the factory of the manufacturer of the final products who has sent the inputs or partially processed inputs outside his factory to a job worker may, by an order, which shall be valid for a financial year, in respect of removal of such inputs or partially processed inputs, and subject to such conditions as he may impose in the interest of revenue including the manner in which duty, if leviable, to be paid, allow final products to be cleared from the premises of the job worker. 17.The aforesaid legal provisions clearly show that the definition of "input" covers goods used as fuel or for generation of electricity or steam used for manufacture of final products or for other purpose within the factory of production. As such, the intention seems to be clear that the definition of "inputs" covers specifically inputs used for generation of electricity or steam which is used for manufacture of final pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 1994 (73) E.L.T. 497 (S.C.), while dealing with the question as to what processes can be undertaking on job work in terms of Notification 119/75-C.E., the Supreme Court has observed that "insisting upon the same articles being returned to the customer after undergoing the manufacturing process at the hands of job worker may rob the Notification of any substance whatsoever". This observation was reiterated by the Hon'ble Supreme Court in the case of Wadpack (P) Ltd. reported in 1997 (89) E.L.T. 24 (S.C.) and in the case of Hindustan Mudran reported in 1997 (94) E.L.T. 474 (S.C.). In the case of Wyeth Laboratories Limited reported in 2000 (120) E.L.T. 218 (T-LB), Larger Bench of the Tribunal held that reading of these Rules 57D, 57F(2), 57F(4) in the light of the common understanding of the words, would indicate, that inputs in their course of conversion of when used in or in relation to the manufacture of the final products, may require re-processing, re-conditioning or any other processing and due to such partial and final processing can undergo and result in any stage of intermediate goods, by-products, refuse or/and waste. The Larger Bench further observed commercial prudence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in or in relation to the manufacture of final products. The inclusion clause in the Rule does not restrict or reduce the scope of the main clauses in the Rule. Moreover, the expression "availing the benefit of exemption specified in the Notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 214/86-C.E., dated 25th March 1986" is only an enabling provision which permits credit on inputs to the principal manufacturer, even in cases where the input is not received by it, but is received directly by the job worker and provides for taking Cenvat credit of the duty paid on the inputs used in the manufacture of intermediate products even when no duty is required to be paid on the intermediated products.., Rule 57AC of the 2000 Rules and Rule 4(5)(a) of July 2001 Rules provide an additional facility, and do not lay down any requirement that the following of Notification 214/86-C.E. is precondition for availment of Cenvat credit, in any case, where the intermediate product is not excisable or otherwise exempted from payment of duty, the question of availing the benefit of Notification No. 214/86 does not arise. We, therefore, do not see any force in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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