Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *   CBIC issues draft rules for Customs valuation *  Top Headlines: Threshold for Benami deals, green bond investors, and more *  Govt aims 1-hour clearance for goods at all ports *  Exporters Allowed To Use RoDTEP, RoSCTL Scrips To Pay Customs Duty, Transfer Them; Rules Amended *  Millions of labourers to be affected by brick producers’ strike over hike in GST, coal rates *  Inauguration of ‘kendriya GST parisar’ *  Transporter can seek Release of Conveyance alone, not Goods under GST Act: Madras HC *  GST: Quoting of DIN Mandatory for Responding to Notice, Govt Modifies Portal *  Firms can soon file claims for GST credits of ?400 cr *  CBIC issues modalities for filing transitional credit under GST. *  Mumbai: Man creates 36 fake GST firms, arrested for input tax credit fraud of Rs 23 cr *  Report to restructure Commerce Ministry under study; idea is to set up trade promotion body: Goyal *  Firms can soon file claims for GST credits of ?400 cr *  Gambling Alert! Govt May Levy Up To 28% GST; UP, Bengal Back Move *  EPFO backs raising retirement age to ease pressure on pension funds *  India Moving Up Power Scale, Set to Become Third Largest Economy By 2030 *  Airfares Get Expensive: What Changes for Flyers From Today? *  IRCTC Latest News: Passengers to Pay More For Cancelling Confirmed Rail Tickets Soon. *  IBC prevails over Customs Act, says Supreme Court. *  As GST enters sixth year, a time for evaluation and reassessment *  There’s GST on daily essentials as Centre needs money to buy MLAs: Arvind Kejriwal *  Now, GST on cancellation of confirmed train tickets, hotel bookings *  GST kitty for top States could rise 20% in FY23, says Crisil *  French customs officials seize another cargo vessel over Russia sanctions *  TradeLens builds on Asia momentum with Pakistan Customs deal *  Hike tax on tobacco, reduce affordability & increase revenue: Civil society organizations to GST council *  Bihar: ?10 crore tax evasion on tobacco products detected in raids *  Centre failed on GST, COVID; would it be anti-national? Rajan on Infosys row *  Service Tax not Chargeable on Income Tax TDS portion paid by recipient: CESTAT grants relief to TVS *  Foreign portfolio investors make net investment of Rs 7575cr in Sep so far
Subject News *  Run-up to Budget: Monetary threshold for GST offences may rise to Rs 25 cr *   GST (Tax) E-invoice Must For Businesses With Over Rs 5 Crore Annual Turnover *   Both Central GST and excise duty can be imposed on tobacco, rules Karnataka high court *   CBIC Issues Clarification On Extended Timelines For GST Compliance *   CBIC Issues Clarification On Extended Timelines For GST Compliance *  Budget 2023- 9.6 crore gas connections *  GST: Tamil Nadu Issues Instructions for Assessment and Adjudication Proceedings *  GST: CBIC Extends Last Date for filing of ITC *  GST collection in September surpasses Rs 1.4 lakh crore for straight seventh time *  Dollar smuggling case: Customs chargesheet names M Sivasankar as key conspirator. *  Hike in GST rates fuels inflation *  Assam: CBI arrests GST commissioner in Guwahati *  GST fraud worth ?824cr by 15 insurance Cos detected *  India proposes 15% customs duties on 22 items imported from UK *  Decriminalising certain offences under GST on cards *  Surge in GST collections more due to higher inflation: India Ratings *  MNRE Notifies BCD and Hike in GST Rates as ‘Change in Law’ Events But With a Condition | Mercom India *   Solar projects awarded before customs duty change allowed cost pass-through *  Rajasthan High Court Dismisses Writ Petitions Challenging Levy Of GST On Royalty *   GST revenue in September likely at Rs 1.45 lakh crore *  Govt working on decriminalising certain offences under GST, lower compounding charge *  Building an institution like GST Council takes time, trashing is easy: Sitharaman *  GST collections in Sept may touch ?1.5 lakh crore *  KTR asks Centre to withdraw GST on handlooms *  After Gameskraft, More Online Gaming Startups To Receive GST Tax Claims *  Madras HC: AAR Application Filed Under VAT Does Not Survive After GST Enactment *  Threshold for criminal offences under GST law may be raised *  Bengaluru: Gaming company faces biggest GST notice of Rs 21,000 crore *  CBIC clarifies Classification of Cranes for GST, Customs Duty *  Customs seize gold hidden in bicycle in Kerala airport  

Comments

Print   |    |  Comment

PJ/Case Law/2013-14/1936

Whether capital goods cenvat credit admissible for power generating plant if part of the generated electricity was sold out?

Case:- COMMISSIONER OF C. EX., RAIPUR Vs JINDAL STEEL & POWER LTD.
 
Citation:- 2013 (295) E.L.T. 321 (Tri. – Del.)

 
Brief facts:- The respondents were manufacturers of Sponge Iron and other Iron and Steel products chargeable to Central Excise duty. They had captive power plant. During the period of dispute i.e. during November, 1999 to August, 2000, they had installed additional machinery for enhancing the power generation capacity and availed capital goods Cenvat credit amounting to Rs. 1,50,84,086/- in respect of the same. The department being of the view that since these capital goods had been used for generation of electricity which was non-excisable and since bulk of the electricity generated was being sold to the State Electricity Board as during the period of dispute, the power generated by the captive power plant was in excess of the respondent’s actual requirement issued a show cause notice for denying Cenvat credit in respect of power generating machinery, its recovery along with interest and imposition of penalty. The show cause notice was adjudicated by the Commissioner vide order-in-original dated 29-8-2001 by which the proceedings against the respondent were dropped. However, this order of the Commissioner was reviewed by the Board under Section 35E(l) of the Central Excise Act, 1944 and the Board by Review Order dated 27-8-2002 directed the Commissioner to file a review appeal for determination of the points as mentioned in the review order. Accordingly, the Commissioner filed a review appeal in terms of the provisions of Section 35E (4) of the Central Excise Act, 1944. This appeal was decided by the Tribunal vide Final Order No. A/452/2003, dated 5-9-2002 [2003 (158)E.L.T.178 (T)] by which Revenue’s appeal was dismissed. The Tribunal while dismissing the appeal observed that modvat credit cannot be denied to the respondent as the power plant installed is part of their expansion plan to enhance the production capacity of sponge iron as steel and ferro alloys for which more power would be required by them. Against this order of the Tribunal, the department filed appeal under Section 35G before the Chhattisgarh High Court. In the appeal filed by the Revenue, the following questions of law were raised for decision of Hon’ble High Court :-
(a)    Whether the respondent can avail Modvat Credit facility with respect to the electricity produced in their captive power plant, when the electricity produced was at relevant time being sold to the MPEB as a final product itself and when the same is not excisable under the Act.
(b)    Whether Modvat credit facility can be extended to the respondent, with respect to the electricity produced in their captive power plant, when the same was not being used for manufacturing/production of their excisable final product in the fact and circumstances of the case.
(c)    Whether Modvat credit facility could have been claimed by the respondent contingently on the electricity being produced by them on the ground that it will be used for the manufacturing/production at some future date after the expansion of their sponge iron unit.
 
The Hon’ble Chhattisgarh High Court decided the Department’s appeal vide order dated 4-9-2012 setting aside the Tribunal’s order and remanding the matter afresh in the light of the Apex Court’s decision in the cases of -
(a)   Commissioner of Central Excise, Chennai-Iv. Chennai Petroleum Corporation Ltd. reported in 2007 (211)E.L.T.193 (S.C.)
(b)  Maruti Suzuki Ltd. v. Commissioner of Central Excise, Delhi-Ill reported in 2009 (240)                    E.L.T.641 (S.C.).
 
Appellant’s contentions:- Ms. Ranjana Jha, ld. Joint CDR, assailing the impugned order of the Commissioner and reiterating the points raised in the Revenue’s appeal against the Commissioner’s order, pleaded that during the period of dispute, the power generation by captive power plant already installed in the respondent’s factory was more than the actual power consumption and, therefore, the new power generation machinery was used for generation of power which was sold outside, that the respondent for this purpose had entered into an agreement with the State Electricity Board for the sale of power, that since the electricity was not excisable product, the capital goods installed in the factory for generation of additional electricity, which was being sold outside the factory, would not be eligible for Cenvat credit and that in this regard, she relied upon the Apex Court’s judgment in the case of Maruti Suzuki Ltd. v. Commissioner of Central Excise, Delhi-Ill reported in 2009 (240)E.L.T.641 (S.C.). She, therefore, pleaded that the impugned order permitting the Cenvat credit in respect of the power plant machinery was not correct.
 
 
Respondent’s contentions:- Shri L.P. Asthana, ld. Counsel for the respondent, pleaded that during the period of dispute the respondents were in the process of expanding their capacity for manufacture of sponge iron and other steel products, that for this purpose only, they had augmented their power generation capacity as more power was going to be required for increasing their steel production, that just because during certain period, the power being generated by them was in excess of actual power requirement and excess power was sold to the State Electricity Board, the modvat credit of which could not be denied. In this regard, he relied upon the judgment of Hon’ble Chhattisgarh High Court in the case of CCE, Raipurv. HEG Ltd., wherein it was held that Cenvat credit would be admissible on the capital goods installed in the factory for captive power generation, even if, substantial portion of the electricity generated was being wheeled out to sister concern and was not being used in the factory and in this regard, the Apex Court’s judgment in the case of Maruti Suzuki Ltd.reported in 2009 (240)E.L.T.641 (S.C.)would not be applicable, that the facts of the present case were identical to the facts of the case of HEG Ltd.(supra) decided by the Hon’ble Chhattisgarh High Court, that the judgment of the Apex Court in the case of CCEv. Chennai Petroleum Corpn. Ltd.(supra), mentioned in the remand order dated 4-9-2012 of Chhattisgarh High Court had absolutely no relevance to the issue involved in this case and that it was the judgment of the same High Court in the case of HEG Ltd.(supra) which was applicable to the facts of this case. He, therefore, pleaded that there was no merit in the Revenue’s appeal.
 
Reasons of judgment:- The dispute in this case was about the machinery installed for augmenting the power generation in the captive power plant. There was no dispute that the machinery required for captive power plant was eligible for capital goods Cenvat credit. However, the department’s objection was that bulk electricity was being sold to the State Electricity Board and hence the Cenvat credit would not be admissible as the machinery had been used for generation of electricity, and that electricity had not been used in the factory. The Bench did not agree with this objection of the department, as it was not disputed that the respondent was in the process of enhancing their capacity for production of sponge iron and other iron and steel products for which they required more electricity and for this purpose only, their power generation electricity had been enhanced. Therefore, just because during the intervening period between installation of power generation machinery for generating additional power and installation of machinery for manufacture of sponge iron and other iron and steel products, the excess power being generated was being sold outside, the capital goods Cenvat credit in respect of power generation machinery could not be denied. The Bench found that identical point of dispute was involved in the case of HEG Ltd. wherein Hon’ble Chhattisgarh High Court vide judgment dated 30-9-2010 observing that the Apex Court’s judgment in the case of Maruti Suzuki Ltd. was not applicable, had held that Cenvat credit in respect of themachinery for captive power plant would be admissible even if the bulk of theelectricity generated was being wheeled out to the sister concern. They hadalso found that the issue involved in the Apex Court’s judgment in the case ofChennai Petroleum Corpn. Ltd. (supra) was totally different - whetherResidual Fuel Oil (RFO) obtained as residue after distillation of crude oil formanufacture of petroleum products would be liable to excise duty, if such RFOwas used as fuel for generating electricity and the electricity,instead of being used in the refinery, was sold to Tamil Nadu Electricity Board.The Apex Court held that to the extent electricity was sold out, RFO used in generation of such electricity would be liable to duty. The issue involved in thiscase stood totally different whether the power generation machinery could be said to have been exclusively used for manufacture of exempted excisablegoods when a part of electricity was being sold out. Therefore, the Apex Court’s judgment in case of Chennai Petroleum Corporation Ltd.(supra)was not applicable to the facts of this case. In view of the above discussion, they held that there was no merit in the Revenue’s appeal and the same was dismissed.
 
Decision:- Appeal was dismissed.
 
Comment:- The analogy drawn from the case is that capital goods cenvat credit with respect to power generating plant is admissible even if a part of the electricity generated is being sold to outsiders. In the present case, the appellant was in the process of enhancing their capacity for production of its goods for which it required more electricity and for this purpose only, their power generation electricity had been enhanced. Just because during the intervening period between installation of power generation machinery for generating additional power and installation of machinery for manufacture of goods, the excess power being generated was being sold outside, the capital goods Cenvat credit in respect of power generation machinery cannot be held to be inadmissible on the contention that the same is being used with respect to sale of non-excisable goods.

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com