Whether credit admissible on water treatment plant situated in sister concern adjacent to assessee factory?

PJ/Case Law/2013-14/2053

Case:-LAKSHMI GAYATRI IRON & STEEL P. LTD. VERSUS COMMT. OF C.EX., HYDERABAD

Citation:2013(298) E.L.T. 448 (Tri.-Bang.)

Brief Facts:-The miscellaneous application filed by the appellant is for correcting some errors which had crept in the appeal memorandum and stay petition. On going through the application, it was found that these errors relate to facts and apparently occurred while filing the appeal. Accordingly, the application is allowed and party is allowed to make correction as proposed.
Coming to the stay application, it was submitted by the learned counsel that in this case CENVAT credit of more than Rs. 3.38 lakhs has been denied on the ground that the water treatment plant was not used in the factory of the appellant.
The dispute has arisen because the appellant chose to install a water treatment plant in the premises of their sister concern by name M/s. Gayathri Agro Industrial Power Ltd. (Gayathri Agro). The land on which water treatment plant was located was adjacent to the factory of M/s. Gayathri Agro which in turn was adjacent to the appellant's factory. Appellant entered into an agreement with their sister concern for taking the land on rent on which water treatment plant was situated and the entire water treated in the plant is fed to the boiler in which besides fuel required for the boiler, waste gases produced in the appellant company are also consumed for generating steam. The entire steam so generated is utilized by M/s. Gayathri Agro and the power so generated is supplied to the appellant and excess power is sold to the State Grid. Revenue has taken a view that the appellant is not entitled to credit of duty paid on water treatment plant since one of the requirements of definition of "capital goods" is that the same should be used in the factory has not been fulfilled. The view taken is that water treatment plant is located in the place belonging to M/s. Gayathri Agro and it cannot be said to be in the appellant's factory.

Appellant Contentions:-The learned counsel submitted that the water treatment plant can be said to be part of the factory since the land has been rented by them and water treatment plant has been purchased by them and consequently the power is also used by them and besides fuel, gases which are not usable by the appellant are fed into the boilers. Therefore there is considerable force in the submission that the appellant is eligible for the benefit of CENVAT credit on the capital goods on a prima facie basis.
Respondent Contentions:-The learned A.R. also submits that the department has also taken a ground for rejecting the claim that the water which was used for generating steam and the steam generated have been entirely used by M/s. Gayathri Agro and therefore it cannot be said that water treatment plant has been used in the factory of the appellant. However, on going through the impugned order, a clear finding to this effect is not found and it requires reading between the lines and effort to come to the conclusion that such finding has been recorded.

Reasoning of Judgment:-Heard submission from both parties and perused the record, we find that water treatment plant is located in the southern side of M/s. Gayathri Agro plant, which can be easily separated by a wall or a compound. Needless to say the matter requires more detailed consideration especially in view of the fact that it involved consideration of definition of ‘factory’, the ground plan of the factory submitted by the appellant, statutory provisions relating to availment of CENVAT credit on capital goods which can be done at the time of final hearing. Since the appellants have made out a prima facie case in their favour on merits as well as the appellants, have also pleaded financial difficulty, there shall be waiver of pre-deposit and stay against during the pendency of the appeal.

Decision:-Stay granted.

Comment:-The stay application was allowed by considering fact that the capital goods were located in sister concern’s factory adjacent to the factory of the appellant and moreover, financial difficulty was also pleaded. However, as the issue involved deeper examination of the facts and provisions, complete stay was granted.

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PJ/Case Law/2013-14/2053

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