The Division Bench of the Bombay High Court consisting of Justices A. S. Chandurkar and G. A. Sanap dismissed a Central Excise Appeal against M/s. Larsen & Toubro Ltd and CESTAT (Custom Excise and Service Tax Appellate Tribunal).
Facts and Procedural History
This appeal filed by the Revenue was admitted on the following two substantial questions of law:
- Whether the CESTAT was correct in holding that the respondent No.1 is entitled to avail the credit on goods used in erection of Captive Power Plant by two other Divisions of respondent No.1’s group especially when “Rule 57Q(6) of the erstwhile Central Excise Rules, 1944 specifically stipulated that, “a manufacturer shall be allowed credit of specified duty paid on capital goods manufactured by him for the manufacture of the final products in his factory ?
- Whether the CESTAT was correct in holding that respondent No.1 can avail Modvat Credit on duty paid inputs or any goods used in the manufacture of Captive Power Plant without filing the declaration under Rule 57G and without following the procedures required under rule 57(T)(7) and without obtaining registration certificate as required under Rule 174 (4) of the erstwhile Central Excise Rules, 1944.
Contentions made
Appellant: The respondent No.1 has not obtained registration in respect of the goods manufactured by the Divisions of the respondent No.1. M/s. Larsen & Toubro Ltd. had not erected the captive power plant and therefore, was not entitled to get the credit on the goods/inputs used for the construction of the captive power plant. The captive power plant does not fall under any of the category of the goods prescribed as a ‘excisable goods. Therefore, the duty paid for erection of the power plant cannot be claimed as ‘Modvat Credit’. The erection of the captive power plant does not amount to manufacture. Reliance was placed on Gajra Gears Ltd. vs Commissioner of Customs & Central Excise and Saraswati Sugar Mills vs Commissioner of C. Ex., Delhi-III.
Respondent: The respondent No.1 has single Central Excise registration for the entire factory and for manufacture of excisable goods. The registered ground plan of the respondent No.1/factory covers the area where the power plant has been erected. Other Divisions of the respondent No.1 i.e. Group-II and LTCG have erected captive power plant as a part of the respondent No.1’s legal entity. These divisions are not separate legal entity. As per Rule 57-Q(1) of the Rules 1944 the respondent No.1 is entitled for Modvat Credit in respect of the specified goods used in the factory of the manufacturer. The goods were received within the factory of the manufacturer and therefore, the respondent No.1 has correctly availed Modvat Credit. Relying upon Rule 57-Q(6) of the Rules 1944 it was submitted that the respondent No.1 was entitled to avail the credit of a specified duty paid on capital goods manufactured by him for the manufacture of final products in his factory. Reliance was placed on Commissioner of Central Excise, Mumbai-III vs N.R.C. Ltd., Gujrat Ambuja Cement Ltd. vs Commissioner of C. Ex. Chandigarh, Commissioner of Central Excise, Raipur vs H.E.G. Ltd. and Kothari Sugars and Chemicals Ltd. vs Commissioner of C.Ex., Trichy. The credit cannot be denied for want of observance of the proper procedure provided under Rule 57-G and Rule 57-T of the Rules 1944.
Observations of the Court
The Bench observed that:
“On perusal of the record and the law laid down in the decisions, we are of the opinion that there is no substance in the appeal. The substantial question No.1 will have to be answered in favour of the respondent No.1. The perusal of record would show that the Divisions of the respondent No.1 namely Group-II and LTCG have no independent existence. These Divisions are functioning as a part of respondent No.1 itself. The respondent No.1, therefore, availed the Modvat Credit being duty paid on the capital goods used for the erection of the captive power plant. We are, therefore, of the opinion that the CESTAT was right in rejecting the appeal filed by the Revenue and uphelding the order passed by the Commissioner (Appeals).”
“As far as the question No.2 is concerned in view of answer to a question No.1 it has become purely academic. Besides, the Commissioner (Appeals) has recorded a concrete finding that the procedural lapse on the part of the respondent No.1 would not be a ground to deny the Modvat credit, which the respondent No.1 is otherwise entitled. The CESTAT Mumbai has confirmed this order of the Commissioner. The reliance has been placed on Board circular No. 441/7/99-CX dt. 23.02.1999. In our view, therefore, this question is also required to be answered in favour of the respondent No.1.”
Judgment
The Central Excise Appeal was dismissed.
Case Name: Commissioner of Central Excise vs M/s. Larsen & Toubro Ltd., & Anr
Citation: CENTRAL EXCISE APPEAL NO. 16 OF 2006
Bench: Justice A. S. Chandurkar, Justice G. A. Sanap
Decided on: 14th January 2022
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