Hindustan Zinc Ltd. Vs Commissioner (CESTAT Delhi)
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi, decided thirteen appeals challenging the Commissioner’s order dated 31.01.2022, which adjudicated thirteen show cause notices disallowing CENVAT credit aggregating to ₹41,10,94,874 and imposing penalties aggregating to ₹8,59,76,777. The appellant manufactures zinc ingots and lead and had availed CENVAT credit on inputs, capital goods and input services under the CENVAT Credit Rules, 2002 and 2004.
The Tribunal identified three issues: (i) whether CENVAT credit availed on inputs and capital goods transferred to the Captive Power Plant (CPP), maintained as a separate unit in the books of account for compliance with Section 80IA of the Income Tax Act, was liable to reversal under Rules 3(4)/3(5) of the CENVAT Credit Rules; (ii) whether credit of duty paid on components and parts of the Captive Power Plant installed by the contractor, Wartsila Finland Oy, was admissible; and (iii) whether credit on iron and steel structures used in erection and installation of the chimney qualified as capital goods. Only one appeal involved all three issues, while the remaining appeals related to reversal of credit on transfer of inputs and capital goods to the CPP.
The appellant had procured a Captive Power Plant comprising four DG sets for generation of electricity used in manufacturing dutiable goods. Separate agreements were executed with the contractor for procurement of components, erection, commissioning, manufacture and maintenance of the plant. The Department alleged that the contractor was the actual manufacturer of the power plant and alone could claim credit on the components, that structural steel items used for supporting the chimney were not eligible capital goods, and that maintaining the Captive Power Plant as a separate unit for Section 80IA purposes amounted to removal of inputs and capital goods requiring reversal of CENVAT credit. Thirteen show cause notices were accordingly issued.
