By TIOL News Service

AHMEDABAD, JULY 29, 2014: THE appellant is engaged in the manufacture of excisable goods and has a sister concern (a 100% EOU)and a corporate office.

During the course of an audit of the records of the appellant by the CE officers it was observed that appellant had a captive power plant, located in its factory premises. The said noticee had used cenvatable inputs viz., furnace oil to generate electricity and also to produce steam. A part of this electricity and steam was supplied to its sister concern situated outside the factory premises. Further, it was also noticed that appellant had not reversed proportionate CENVAT Credit attributable to the furnace oil used in the production of electricity which had been supplied to its said sister concern and corporate office situated near its factory, in terms of Rule 6of the CCR, 2004 and that it had not paid 10% of the price of the steam transferred to its said sister concern, and Corporate office.

Suffice to say that the demand of Rs.2,34,40,629/- was confirmed by the CCE, Vapi against the appellant for the period 16.05.2005 to 31.12.2009 along with interest and equivalent penalty.

Before the CESTAT the appellant submitted -

+ The 100% EOU owned by the appellant is situated in an adjacent premises and is one of the units of the appellant and has no independent legal identity of its own. That the goods supplied to the 100% EOU cannot be treated as exempted goods for denying CENVAT Credit by virtue of Rule 6(6)(ii) of the CCR, 2004.

+ CENVAT Credit of inputs used for generation of electricity and steam used in appellants sister concern and corporate office has been held to be admissible in view of the decisions in Repro India 2007-TIOL-795-HC-MUM-CX, AurobindoPharma Ltd Vs 2011-TIOL-785-CESTAT-BANG, Biocon Ltd 2011-TIOL-1254-CESTAT-BANG, Sanghi Industries Ltd 2014-TIOL-996-CESTAT-AHM

+ Corporate office of the appellant is situated in the registered premises as contained in the site plan submitted to the Excise Department at the time of registration;thereforecredit cannot be denied. Reliance is inter alia placed on the decision in Solaris Chem Tech Ltd. 2008-TIOL-474-CESTAT-BANG .

The Revenue representative adverted to the decision of the Apex Court in the case of Maruti Suzuki 2009-TIOL-94-SC-CX where it is held that CENVAT Credit of fuel used for generating electricity and steam, supplied to its sister concern and the corporate office is not admissible as the same are situated outside the factory premises.

The Bench noted -

++ It is observed from the ground plan submitted by the appellant at the time of taking Central Excise Registration that the corporate office looking after the manufacturing and business activities is situated in the registered premises of the appellant.

++ The issue involved in this appeal has already been decided in favour of the assessee by this very Bench in the case of Sanghi Industries Ltd Vs CCE Rajkot (2014-TIOL-996-CESTAT-AHM ).

++ It has also been rightly contested by the appellant that supplies made to a 100% EOU cannot be considered as exempted goods. In view of the above observations and the case-laws relied upon by the appellant CENVAT Credit has been correctly availed. The issue of admissibility of such credit was under litigation and different courts have given different interpretations regarding admissibility of CENVAT Credit on inputs involved in this issue.

++ Extended period is, therefore, not invokable in the present proceedings against the appellant.

In fine, the appeal was allowed.

In passing : Thankfully, the new section 35F of the CEA, 1944 was not born earlier.

(See 2014-TIOL-1359-CESTAT-AHM)