Full Judgment
2. Certain investigations were carried out by the department, when it was gathered that M/s IRTL was not sending the furnace oil to M/s IRSL at all. In fact M/s IRSL received entire furnace oil on their own account as an input for the manufacture of polyester product and took credit on the said input. This furnace oil is stored in their own tanks. Later on part of the furnace oil is shown to be sold to M/s IRTL under invoice by reversing the credit taken on the furnace oil and transferred to the tanks earmarked for exclusive use of IRTL. This furnace oil alongwith their own furnace oil is used in the production of electricity and the electricity so produced is then distributed in pre-decided ratio to IRSL and IRTL. This electricity is thereafter used by M/s IRTL in the manufacture of final product.
3. In view of above appellants were issued a show cause notice stating that furnace oil cannot be considered as input as according to Rule 2(g) of Cenvat Credit Rule, 2002 the furnace oil should be used for generation of electricity to be used in manufacture of final product or any other purpose within the factory of production. Since in this case furnace oil was not received in the premises of M/s IRTL but directly by M/s IRSL and electricity was also produced in premises of IRSL and not IRTL the same cannot be said to have been used within me factory of production. It was further stated that the provision of Notification 214/96 cannot be made applicable to M/s IRTL as the exemption provided under Notification 214/86 is available to those goods As specified in Column I of the table annexed to the said notification manufactured in factory as a job work and used in relation to the manufacture of final products specified in Column II of the said table to the said notification and subject to the fulfillment of conditions of para 1 and 2 of the said notification. In this case electricity was not an excisable goods and was not specified in the table annexed to the notification. Further since job work means processing or working upon raw material or semi-finished goods supplied to the worker so as to complete a part or whole of the process resulting in the manufacture or finishing of an article and since in the present case no process is carried out nor any work is done on the goods and the inputs are not received back by the unit and what is received is electricity which is not an excisable product, the same is not covered under the definition of job work. The show cause notice was adjudicated by the Commissioner.
3. During the course of adjudication proceedings appellant took a plea that the inputs were sold by M/s IRSL by paying duty of amount equal to the credit availed under Rule 3(4) of the Cenvat Credit Rules, to M/s IRTL who can take credit of the same under Rule 3(5) as there is no bar that the inputs cannot be obtained from the job worker and Since M/s IRTL had no storage facility certain tanks were earmarked for them in the premises of IRSL for M/s IRTL which has to be considered as belonging to them and thereafter it was used by them for the manufacture of electricity on job work basis under the provision of Rule 4(5) of Cenvat Credit Rules and was received back within 180 days by M/s IRTL. Since electricity is used for the manufacture of final product it has to be considered as an intermediate product and was therefore covered by the provision of Rule 4(5) and this electricity has been used in the manufacture of final product by M/s IRTL. The furnace oil has to be considered as input within the meaning of Rule 2(g) of the Cenvat Rules as it is required for generation of electricity for manufacture of final products within the factory of production. The factory of generation of electricity and the factory of production of final product may be different as has been held by the Tribunal in the case of Ballarpur Industries v. CCE SRF Ltd. v. Commissioner of Central Excise, Chennai-I 2005 (191) E.L.T. 887 (Tri.-Chennai) wherein it was held that use of electricity in production of final goods in another factory also satisfies the requirement of Rule 2(g) of the Cenvat Credit Rules, 2002. Another plea taken was that the inputs can be send directly to the premises of job worker and credit cannot be denied on this ground as has been held by the Tribunal in the case of Colts Auto Ltd. v.Commissioner of Central Excise, Delhi-IV and Goa Industrial Products v. Commissioner of Central Excise, Goa . It also referred to the CBEC Circular No.146/57/95-CX dated 12.09.1995 and F. No. 345/2/2000-TRU dated 29.08.2006 which clarify that credit cannot be denied to the supplier of inputs in a case where the goods are directly sent to the job worker and therefore credit in the instant case cannot be denied to the appellants on the ground that the furnace oil was not received by the appellants in their factory but was directly received by M/s IRSL who used the same in generation of the electricity.
4. All the above pleas were rejected by the Commissioner on the ground that since the inputs were not directly received by M/s IRTL the provision of Rule 4(5) of the Cenvat Credit Rules, 2002 were not applicable and that this rule is not applicable to fuel and that since electricity was not produced in the premises of M/s IRSL and not in the factory of M/s IRTL it cannot be said to have been used in the factory of production and therefore it will not satisfy the definition of input under Rule 2(g) of the Cenvat Credit Rules.
6. We have considered the submissions. We find that the provision of Rule 4(5) of the Cenvat Credit Rules provide that Cenvat Credit shall be allowed even if any input or capital goods as such or after being partial processed are sent to job worker for further processing, testing, repair, re-conditioning or any other purpose and it is established from the records...documents produced by the assessee...taking the Cenvat, credit that the goods are received back in the factory within 180 days of their being sent to the job worker.
In this case it is an admitted fact that the furnace oil has been sent to M/s IRSL who have used it for generation of electricity which was supplied to the appellants within 180 days of the receipt of furnace oil. The use of the word "for any other purpose" would include processing of inputs for manufacture of electricity which in turn has been used in the manufacture of final product. The condition of Rule 4(5) are therefore squarely fulfilled and its immaterial whether the electricity is an excisable product or not as this is not a condition laid down under the rule. The only flaw pointed out by the department is that the inputs were never received in the premises of the appellant. However, as per the Tribunal decision in the case of Colts Auto Ltd., Goa Industrial Products (cited supra) and the Board's clarification referred to by the appellants this shall not result in denial of the credit when other conditions are satisfied. Even Rule 4(5) does not suggest that inputs should be first received by the principal manufacturer & thereafter should be send to job worker.
Further a view can be taken that since tanks are earmarked for exclusive use of M/s IRTL, they belong to them and accordingly receipt in the tanks of IRTL will amount of receipt by M/s IRTL. There is no evidence from revenue that no payment was being made for hiring tanks by M/s IRTL. In that view of the matter it can be considered that the inputs were received by M/s IRTL only. We further find that the CBEC vide its Circular No. 637/28/02-CX dated 08.05.2002 in para 3 has clarified that the Cenvat credit is admissible only when inputs or capital goods are used by the manufacture within the factory premises (except when inputs or capital goods are used/sent for job work outside factory). Since in this case the inputs have been sent outside for job work, the present case is squarely covered by this clarification and therefore the furnace oil satisfy the definition inputs under Rule 2(g). Further furnace oil used as fuel is covered by the main definition of inputs under Rule 2(g) which says 'inputs means all goods except high speed diesel oil...used in or in relation to the manufacture of final product whether directly or indirectly or whether contained in the final product or not....' The rule does not say 'inputs means all goods except goods used as fuel' and therefore no exception can be made in respect of fuel as long as it has been used in or in relation to the manufacture of final products. In view of the same, we hold that the appellants have correctly availed of the credit and accordingly the Commissioner's order is set aside. Appeal is allowed.