CESTAT, NEW DELHI BENCH
Hindalco Industries Ltd.
Commissioner of Central Excise, Allahabad
FINAL ORDER NO. A/561/2011-EX (BR)
STAY ORDER NO. 791/2012-EX(BR)
stay application no. 45 of 2012
CENTRAL EXCISE APPEAL NO. 44 OF 2012
MAY 7, 2012
Ajit Bharihoke, President
The appellant M/s Hindalco Industries Ltd., Renukoot is engaged in the manufacture of aluminium and product thereof which are subject to excise duty. Undisputedly, the appellant has a power plant namely Renusagar power plant located at some distance from the main unit of the appellant. The entire power production from the said power plant is supplied to the appellant company. The appellant during the period August 2009 to February 2010 had availed cenvat credit of service tax of Rs.35 lakhs on the premium paid to M/s New India Assurance Company Ltd. on various insurance policies covering up the power plant such as, mega risk insurance policy and terrorism insurance policy. The appellant had utilized the aforesaid credit for the payment of duty on clearances of final product.Online GST Certification Course by TaxGuru & MSME- Click here to Join
2. The Department was of the view that since Renusagar Power Plant was located at different premises, it is a separate entity and it could not be termed captive power plant and therefore, the appellant had wrongly availed cenvat credit in respect of the services to be paid on the insurance policies pertaining to the power plant. Accordingly, show cause notice was served on the appellant calling upon them to show cause as to why the cenvat credit availed by him should not be disallowed and recovery with interest and also penalty should not be imposed.
3. The appellant contested the show cause notice and claimed that Renusagar Power Plant was part of M/s Hindalco Industries Ltd. and it being a captive power is being used for the production of final product, and, therefore, the appellant had rightly availed the cenvat credit in respect of service tax paid on the insurance policies.
4. The adjudicating authority was not convinced with the submission and therefore, cenvat credit availed by the appellant was disallowed and cenvat credit demand to the tune of Rs.35 lakhs was confirmed with interest and penalty of Rs.2000/- was imposed.
5. Feeling aggrieved of the order in original, the appellant preferred appeal before Commissioner (Appeals) and his appeal was dismissed on 20.9.2011.
6. Against the aforesaid dismissal of the appeal by the Commissioner (Appeals), the appellant has preferred this appeal. He has also moved an application under Section 35F of the Central Excise Act, 1944 for waiver of the condition of pre-deposit of duty, interest and penalty.
7. The case was fixed today for hearing of stay application. After some arguments, we feel that there is no dispute about facts and the issue involved in this case is purely a legal issue concerning definition of ‘captive plant’. We are therefore, of the view that appeal itself can be disposed of at this stage. Accordingly, with the consent of the parties, after waiving the condition of pre-deposit, we have heard the appeal for final disposal.
8. Learned counsel for the appellant Shri B.L. Narasimhan, Advocate has submitted that undisputedly, Renusagar Power Plant belongs to the appellant and its captive production of power is used by the appellant company. As such, the service tax on insurance policies concerning power plant falls within the category of eligible input service. Accordingly, the appellant has rightly availed the cenvat credit. Thus, the learned Counsel has urged that the appeal be accepted and the impugned order be set aside. In support of this contention, he has relied upon the judgment of the Supreme Court in the matter of State of U.P. v. Renusagar Power Co. AIR 1988 SC 1737.
9. Shri I. Baig, learned A.R. for Revenue refuting the contention of the learned Counsel for the appellant has submitted that the Commissioner (Appeals) was right in affirming the impugned order. He has drawn our attention to para 7 of the order in appeal wherein the Commissioner (Appeals) has given reasoning for disallowing the cenvat credit to the appellant. For the sake of convenience, the aforesaid paragraph of the impugned order is reproduced:
“7. To examine the 1st issue, first of all, I shall examine the requirement of registration of Renusagar Power Plant we as well as Mines. In this regard, the relevant portion of the Notification No.35/2001-CE(NT), dated 26.6.2001, under Rule 9 of the Central Excise Rules, 2002 is reproduced below:
(1) Application for registration: Every person specified under sub-rule (1) of rule 9, unless exempted from doing so by the Board under sub-rule (2) of rule 9, shall get himself registered with the jurisdictional Superintendent of Central Excise by applying in the form specified in Annexure-I;
(2) Registration of different premises of the same registered person: If the person has more than one premises requiring registration, separate registration certificate shall be obtained for each of such premises.
The above Notification stipulates that each and every manufacturer of excisable goods on which excise duty is leviable, are required to get them registered with the jurisdictional Central Excise Department and separate registration is required in respect of separate premises, Rule 9 of the Central Excise Rules, 2002 also provides that in case where two or more premises are actually part of the same factory but are segregated by public road, canal or Railway line single registration may be obtained but in such cases, the fact that the two premises are part of the same factory, will be decided by the Commissioner, Central Excise.”
10. Learned A.R. has further submitted that admittedly, Renusagar Power Plant is located at 50 kms. away from the manufacturing plant of the appellant company and, therefore, it cannot be termed as captive power plant, particularly, it has neither been registered as part of Hindalco Industries Ltd. nor it has been separately registered under Central Excise Act, 1944. It is further contended that insurance policies are for the purpose of protecting power plant from various risks including terrorism and therefore, the nature of the services do not fall within the eligible input service.
11. We have considered the rival contentions and perused the record. There is no dispute of fact between the parties. Undisputedly, Renusagar Power Plant is supplying the entire power production to the appellant company. Undisputedly, the insurance policies cover only loss to the plant and none of the employees.
12. From the above submissions made on behalf of the respective parties, it is obvious that the main dispute in this case whether or not Renusagar Power Plant is captive plant of appellant company. Captive plant has not been defined in the Act or Rules. However, by the terminology used, it obviously means power generation plant supply only to the parent company. ‘Captive generating plant’ is defined under Section 2(8) of Electricity Act, 2003 which reads:
“Captive generating plant” means a power plant set up by any person to generate electricity primarily for its own use and includes a power plant set up by any co-operative society or association of persons for generating electricity primarily for use of members of such co-operative society or association.
This definition also states ‘that captive generating plant means a power plant set up by any person or company to generate electricity for his own use. In the instant case, there is no dispute between the parties because power generated by Renusagar Power Plant was exclusively supplied to the appellant company, and, therefore, in our consider view, the power plant is captive power plant of the appellant. As such, the input service used in the power plant would entitle the appellant to claim cenvat credit because power generated in the power plant is essential for the concerned final product. In our aforesaid view, we are supported by the judgment of Hon’ble Supreme Court in the matter of Vikram Cement v. C.C.E., Indore –  197 ELT 145 (SC)/ 2 STT 185 wherein while dealing with the issue of eligibility of modvat/cenvat credit on capital goods relating to captive mine, the Supreme court held thus –
“5. As regards the Modvat/Cenvat credit on capital goods, if the mines are captive mines so that they constitute one integrated unit together with the concerned cement factory, Modvat/Cenvat credit on capital goods will be available to the assessee. On the other hand, if the mines are not captive mines but they supply to various other cement companies of different assessees, Modvat/Cenvat credit on capital goods used in such mines will not be available to the concerned assessee under the appropriate Modvat/Cenvat Rules. The matters are remanded to the respective original authorities for decision only on the above issue.”
13. In this case, since as discussed above, the Renusagar Power Plant is a captive power plant of the Appellant’s manufacturing unit, the two have to be treated as one intergrated unit and therefore, the cenvat credit of service tax paid on insurance policy for the power plant would be admissible.
14. The result of the above discussion is that impugned order of Commissioner (Appeals) is not sustainable in law. Appeal is accordingly accepted and the impugned order is set aside.