Steel Authority of India Limited vs Commissioner of CGST & CX (CESTAT Kolkata)
CESTAT Kolkata held that Factory in terms of Section 2(e) of the Central Excise Act includes any number of inputs within the same premises irrespective of the number of Central Excise registrations. Accordingly, CENVAT of such inputs available.
Facts-
M/s Steel Authority of India Limited, Rourkela Steel Plant (RSP) is a Central Public Sector Enterprise under the Ministry of Steel, Government of India and is engaged in the manufacture of Iron and Steel products falling under Chapters 72 and 73 of the First Schedule to the Central Excise Tariff Act, 1985.
Two Show Cause Notices were issued challenging availment of credit of Rs.5,00,000/- by RSP. The said Show Cause Notices were replied to and were adjudicated vide order in Original No. dated 29.12.2005.
Thereafter, another SCN dated 19.11.2007 was issued alleging that the Appellant (RSP) had availed CENVAT Credit in October 2003, i.e., the remaining 50% unavailed credit in respect of capital goods which allegedly were not in possession and use of the manufacturer (RSP).
The said SCN was adjudicated vide Order-in-Original dated 28.04.2016 wherein the demand of duty was dropped.
Thereafter, in furtherance to an Order-in-Review of the Ld. Commissioner, the Ld. Assistant Commissioner preferred an appeal before the Ld. Commissioner (Appeals) against the said Order-in-Original dated 28.04.2016 on the grounds that the transfer of CENVAT Credit is permissible only in terms of Rule 8 of the CENVAT Credit Rules, and the Appellant’s case in not covered by the said rule, hence the Order-in-Original dated 28.04.2016 should be set aside.
Accordingly, the Ld. Commissioner (Appeals) held that both the units of the Appellant were separate manufacturing units located at two different sites and separately registered with the Central Excise Department. Therefore, Rule 8 of the CENVAT Credit Rules is not applicable to the Appellant and hence availment of CENVAT Credit of the fertilizer plant by the Appellant is in contravention of Rule 4(2)(b) and Rule 8 of the CENVAT Credit Rules. Hence the present Appeal before the Tribunal.
Conclusion-
Factory in terms of Section 2(e) of the Central Excise Act includes any number of inputs within the same premises irrespective of the number of Central Excise registrations. Thus no distinction between the Rourkela Steel Plant (RSP) and Rourkela Fertilizer Plant (RFP) can be inferred as both are one and the same factory.
Tribunal in the case of Dhampur Sugar Mills has held that the number of different plants manufacturing different excisable goods in the same premises would constitute one factory. Their separate registration under Rule 173G of Central Excise Rules, 1944 would not mean that they are different factories. Different units to be regarded as one factory if all excisable goods are manufactured in the same premises.
Held that on identical issue the Show Cause Notice has been adjudicated in favour of the Appellant and has attained finality in the absence of any challenge by the Department. The subsequent notice cannot be issued beyond limitation.
FULL TEXT OF THE CESTAT KOLKATA ORDER
M/s Steel Authority of India Limited, Rourkela Steel Plant (hereinafter referred to as ‘SAIL-RSP’/’the Appellant’/’RSP’) is a Central Public Sector Enterprise under the Ministry of Steel, Government of India and is engaged in the manufacture of Iron and Steel products falling under Chapters 72 and 73 of the First Schedule to the Central Excise Tariff Act, 1985 (CETA).
1.1 The Appellant in the course of its business operates furnaces and coke oven in its plant. The residue gas emanating from such furnace and coke oven is processed in coal chemical division which comprised of the Rourkela Fertiliser Plant (hereinafter referred to as ‘SAIL-RFP’/RFP’). The coke oven gas contains ammonia which cannot be let out in the atmosphere, being hazardous in nature. Hence, the same is processed along with sulphuric acid to obtain ammonium sulphate which is a fertiliser. The coke oven gas after extraction of ammonia is further processed to obtain other dutiable by products.
1.2 The referred SAIL-RSP and SAIL-RFP units were simply two of the many divisions of the Appellant and were not different manufacturing plants, and the same are present in the same premise and in close proximity to each other. Also, there is a single legal entity when reference is made either to SAIL-RSP or SAIL-RFP. Undisputedly, both units are under the same management and have a common PAN, i.e., AAACS7062F.
1.3 Initially, the Appellant was granted one excise registration for the entire plant which included both SAIL-RSP and SAIL-RFP. However, on account on internal reorganization of excise divisions in Rourkela, the Excise Department suo moto granted separate registrations to SAIL-RFP (being AAACS7062FXM004) for its own administrative convenience, though it continued to remain part of the SAIL-RSP’s registration as well.
1.4 During 2002-03, RFP received capital goods in the nature of spares, components and accessories involving Central Excise Duty of Rs.32,58,646/- and RFP availed 50% of the total CENVAT Credit i.e., Rs. 16,29,323/- during the year 2002-03. The remaining credit of Rs.16,29,323/- was availed by RSP in October 2003. However, the operation of RFP was stopped w.e.f 02.11.2002 and no production has been undertaken since then. RSP vide letters dated 25.08.2004 and 02.11.2004 also intimated the jurisdictional Commissioner, Rourkela regarding availment of RFP’s credit by RSP so that the same could be utilized.
1.5 In furtherance to Appellant’s letter dated 02.11.2004 two Show Cause Notices were issued challenging availment of credit of Rs.5,00,000/- by RSP. The said Show Cause Notices were replied to and were adjudicated vide order in Original No. dated 29.12.2005. The said Order-in-Original specifically recorded in its findings that RSP and RFP are one and the same for the purpose of CENVAT Credit Rules. That only due to the convenience of Central Excise department, RSP and RFP were kept under two different Range Offices and were issued two separate registrations. In view thereof, intra transfer of credit cannot be denied as per the judgment of K.M. Sugar Mills Ltd., Vs. CCE, Allahabad [2001 (133) E.L.T. 567 (Tri.-Del.)]
1.6 Thereafter, another SCN dated 19.11.2007 was issued alleging that the Appellant (RSP) had availed CENVAT Credit amounting to Rs. 16,29,323/- in October 2003, i.e., remaining 50% unavailed credit in respect of capital goods which allegedly were not in possession and use of the manufacturer (RSP) since the RFP had stopped production at the time of availment of such CENVAT Credit. Such availment of credit was alleged to be violative of Rule 4(2)(b) of the CENVAT Credit Rules.
1.7 The said SCN was adjudicated vide Order-in-Original dated 28.04.2016 wherein the demand of duty was dropped. The Ld. Additional Commissioner held that the capital goods were in the nature of components, spares and accessories, thus, the condition of possession and use under Rule 4(2) of the CENVAT Credit Rules is not applicable. Further, it was also held that RFP has always been under the administrative management of RSP and both these units are one and the same, although for administrative convenience of the Central Excise Department, RFP was granted separate registration. In view of such facts, it was held that CENVAT Credit is allowable to the Appellant. Detailed reasons for dropping such demand are recorded in the referred Order-in-Original dated 28.04.2016.
1.8 Thereafter, in furtherance to an Order-in-Review of the Ld. Commissioner, Rourkela, the Ld. Assistant Commissioner preferred an appeal before the Ld. Commissioner (Appeals), Bhubaneswar against the said Order-in-Original dated 28.04.2016 on the grounds that the transfer of CENVAT Credit is permissible only in terms of Rule 8 of the CENVAT Credit Rules, and the Appellant’s case in not covered by the said rule, hence the Order-in-Original dated 28.04.2016 should be set aside.
1.9 In the above background, the Ld. Commissioner (Appeals) passed the impugned Order-in-Appeal dated 19.03.2018 setting aside the Order-in-Original dated 28.04.2016 and consequently allowed the Department’s appeal. The Ld. Commissioner (Appeals) held that both the units of the Appellant were separate manufacturing units located at two different sites and separately registered with the Central Excise Department. Therefore, Rule 8 of the CENVAT Credit Rules is not applicable to the Appellant and hence availment of CENVAT Credit of the fertilizer plant by the Appellant is in contravention of Rule 4(2)(b) and Rule 8 of the CENVAT Credit Rules.
Hence the present Appeal before the Tribunal.
2. Ld.Advocate, appearing on behalf of the Appellant submitted as under :-
2.1 Finding of the impugned order that RFP and RSP are two separate units, located at two different sites and separately registered with Central Excise Department is factually incorrect. The Appellant submits that RFP is only a part/ unit of the RSP and that both are parts of the same legal entity, i.e., Steel Authority of India Limited, Rourkela Steel Plant having the same PAN and located within the same premises. The Appellant submits that RSP is an integrated steel plant comprising various divisions/ plants such as Steel melting Shop, captive Power Plant, Coke Oven Plant, Fertiliser Plant, Hot Strip Mill, Cold Rolling Mill, etc. All the divisions/ plants are located within the boundary of RSP having inter-connected processes and all the units together comprise of the Steel Plant.
2.2 As submitted in the facts and as also recorded in the Order-in-Original dated 29.12.2005[pages 102-108 of the appeal paper book], RSP and RFP had the same excise registration and only when the Rourkela Division was fragmented, RFP and RSP, though within the same premises, were put under the control of different Range superintendents. Thus, for Department’s administrative convenience and without the Appellant’s request, on suo moto basis, RFP and RSP were given separate Central Excise Registrations. Accordingly, the said OIO dated 29.12.2005, allowed the availment of Rs.5,00,000/- of credit pertaining to RFP by RSP.
2.3 All these internal arrangements of the Department leading to grant of separate registration to the RFP did not change the ground reality, wherein RFP continued to be on the land and premises of RSP and had no independent existence from RSP.
2.4 Also, in another Order-in-Original dated 26.11.2001 (pages 86101 of the appeal paper book), the CENVAT Credit on Naphtha which was procured by RFP under Chapter X procedure but used in RSP, was allowed to be availed and utilized by RFP on the basis of TR-6 challans through which the duty was paid by RFP itself. This also lends credence to the understanding of the Department at all times that RFP and RSP are one and the same (and not distinct) units. Both these OIOs have attained finality and thus, the department cannot take stand to the contrary in the present proceedings.
2.5 Further, in terms of the definition of ‘factory’ in Section 2(e) of the Central Excise Act, 1944, units located in the same premises shall be considered to be ‘a factory’ and in terms of Rule 4 of CENVAT Credit Rules, 2002, Credit is available on receipt of goods at the ‘factory of the manufacturer’. In support of such submission, the Appellant relies upon the following judgments:-
a. Dhampur Sugar Mills Ltd. Vs. CCE Meerut [2001(129) ELT 73 (Tri-Delhi)]
b. CCE, Meerut Vs. Dhampur Sugar Mills Ltd., [2007 (216) ELT A23(SC)]
2.6 Appellant submits that no separate books of accounts were prepared for the fertiliser plant even when the fertiliser plant was in operation. The Profit and Loss Account, Balance Sheet and all other relevant accounts of the fertiliser plant were shown under the respective accounts of RSP. Even the assets, liabilities income, expenditure, profit/ loss, etc. of the fertiliser plant were recorded together with the assets, liabilities, income, expenditure, profit/loss of RSP and were having common management, control and administration. Thus, it is impossible to state that RFP and RSP were two sperateassessees. In support of such submission the Appellant relies upon the following judgments:-
a. M. Sugar Mills Ltd. Vs. CCE, Allahabad [2001 (133)ELT 567 (Tri.-Del.)]
b. Commissiner of Central Excise, Madurai Vs. Rajshree sugars & Chemicals Ltd., [2014 (299) ELT 277 (Mad)]
c. Inox India Ltd., Vs. CCE,[ 2001 (133) ELT, 487 (Tri.-Mum.)]
2.7 Even the relevant audit para number 2 of IR No. 30/2004-05 on the basis of which the present issue was raised has been dropped by AG (Odisha), as held in the present OIO (Para5.9 at Page 63]. Intimation by department to the Appellant regarding dropping of the said para forms part of the appeal paper book as Annexure-13 (pages 111-112 of the appeal paper book).
2.8 The Appellant further submits that in cases where Show Cause Notices are issued on the basis on audit paras and when such audit para itself is dropped by the department, the SCNs issued on the basis of such audit para also cannot sustain. In support of its submission, the Appellant places reliance on the case of Hindustan Zinc Ltd., Vs. Commissioner of CGST, Udaipur [2019 (370) ELT 1582 (Tri.-Del.)]
2.9 In view of the aforesaid, it is submitted that the availment of credit by the Appellant (RSP) of the remaining 50% unavailed duty paid on capital goods used in the RFP was in accordance with law. The Additional Commissioner in the Order-in-Original had thus correctly held that the credit was validly taken by the Appellant. Therefore, the impugned order in appeal is liable to be set aside on this ground alone.
2.10 The Appellant submitted that the nature of capital goods on which credit was availed was ‘spares and accessories’ and that rule 4(2)(b) of the CCR casts a specific exclusion for the said goods from the condition regarding the ‘possession and use’ for availment of the remaining 50% credit such was held by the Ld. Adjudicating Authority vide OIO dated 28.04.2016 in para 5.3 of the order in the terms that” ….. I find that the condition of “possession and use of the manufacturer of final products in such subsequent years” is not applicable on goods like components, spares and accessories, refractories and refractory material etc for availaing 50% Cenvat credit in subsequent years. I further, find that the impugned goods on which denial of CENVAT Credit has been proposed in the show cause notice are spares and accessories. “Such finding recorded in the OIO has never been challenged by the department in its appeal and thus, such finding of the order has attained finality. In view thereof, denial of credit to the Appellant is bad in law and such; impugned order in appeal must be set aside.
2.11 In support of submissions made above, the Appellant also relies upon the following judgments:-
a. Owens Corning (India) Pvt. Ltd., Vs. Commissiner of C. Ex, Belapur [2015(39) STR 158]
b. Siyaram Silk Mills Ltd., Vs. Commissioner of Central Excise, Mumbai-II[2007 (8) STR 108 (Tri.-Mumbai)]
2.12 The only allegation in the SCN was that the assessee (RSP) availed the CENVAT Credit even though he unit the unit RFP was closed and thus, such availment of credit was in violation of Rule 4(2)(b) of Cenvat Credit Rules, 2002.
2.13 The Show Cause Notice nowhere alleged regarding applicability of Rule 8 of CENVAT Credit Rules 2002 and transfer of credit from RFP to RSP. However, the grounds of appeal as well as the impugned order is based on the analysis that credit is not transferable under Rule 8 of the CENVAT Credit Rules, 2002 in the present case. Therefore, the grounds of appeal as well as the impugned order have travelled beyond the scope of show cause notice and the Respondents have attempted to improve their case in the appeal proceedings. The appellant submits that it is a well settled law that if any reasoning in the appellate order is beyond the allegations of SCN, it amounts to violation of the principles of natural justice as the assessee was never given an opportunity to rebut the same at the very first instance of replying to the SCN, which is not permissible under law. In this regard, the Appellant relies on the following case laws:
a. Commissioner of Central Excise vs. Gas Authority of India Ltd. [2008 (232) ELT 7 (SC)]
b. Commissioner of Customs, Mumbai Vs. Toyo Engineering India Ltd. [2006 (201) ELT 513 (SC)]
c. Commissioner of Central Excise, Nagpur vs. Ballarpur Industries Ltd. [2007 (215) ELT 489 (SC)]
2.14 Further, in any case, there is no applicability of the referred Rule 8 of CCR in the present case for absence of any merger, amalgamation etc. or for that manner any two separate legal entities. Thus, reference to Rule 8 of the CCR is completely unfounded and not applicable.
2.15 It is therefore submitted that for the impugned order having travelled beyond the allegations in the SCN and for being an attempt to erroneously apply the provisions of law, is liable to be set aside, on this ground alone.
2.16 In absence of any fraud, suppression, etc. on part of the Appellant, extended period of limitation cannot be invoked. That the underlying SCN dated 19.11.2007 was issued beyond the limitation period, inspite of the fact that:
