Ultra Tech Cemco Ltd. Vs. Commissioner of Central Excise - Court Judgment

Excerpt:
s.no. appeal appellant/respondent impugned order advocate1. e/757/02 ultratech cement ltd. oia 17/2002 cce(a), v. v. cce, hyderabad dtd. 4.4.2002 hyderabad sridharan,2. e/777/02 -do- oia 18/2002 cce(a), -do-(a), b.n. ltd. v. cce, guntur 106/2004 dtd. guntur gururaj,4. e/126/05 cce, tirupathi v.zuari oia no. cce(a), m.s. cement ltd. 28/04 dtd. guntur srinivasa, 1. in all the above appeals, there is one common issue. first, we shall deal with that issue and then take up the other issues later.2. it is well known, that limestone is an important raw material for the manufacture of cement. limestone is extracted from mines. in order to extract limestone from the mines, capital goods are required.normally, the mines are situated away from the cement factories. in certain cases they are.....

Judgment:
S.No. Appeal Appellant/Respondent Impugned Order Advocate1.

E/757/02 Ultratech Cement Ltd. OIA 17/2002 CCE(A), V. v. CCE, Hyderabad dtd. 4.4.2002 Hyderabad Sridharan,2.

E/777/02 -do- OIA 18/2002 CCE(A), -do-(A), B.N. Ltd. v. CCE, Guntur 106/2004 dtd.

Guntur Gururaj,4.

E/126/05 CCE, Tirupathi v.Zuari OIA No. CCE(A), M.S. Cement Ltd. 28/04 dtd.

Guntur Srinivasa, 1. In all the above appeals, there is one common issue. First, we shall deal with that issue and then take up the other issues later.

2. It is well known, that limestone is an important raw material for the manufacture of Cement. Limestone is extracted from mines. In order to extract limestone from the mines, Capital Goods are required.

Normally, the mines are situated away from the cement factories. In certain cases they are contiguous, and connected by private/public road to the cement factory. The common issue before us is whether the capital goods used in the mines are entitled for Cenvat Credit under the relevant Rules.

3. The names of the Advocates who represented the respective parties are given above. Shri Ganesh Havanur, learned SDR represented the Revenue.

4. Shri Sridharan, learned Advocate appearing for M/s. Ultra Tech CemCo Ltd., adduced the following arguments; i. If it is accepted that the area where the mines are situated would come within the ambit of the definition of 'Factory' as per Section 2(e) of the Central Excise Act, 1944, then the parties have a strong case.

ii. The decision of the Hon'ble Apex Court in the case of Commissioner of Central Excise Jaipur v. JK Udaipur Udyog Ltd. is distinguishable on the account of the fact that the facts in the present case are different.

iii. The ratio of the above-mentioned case cannot be applied to the facts of the present case, because even one additional fact can make a lot of difference.

iv. As per Section 2(e) of the Central Excise Act, 'Factory' means "Any premises including precincts thereof, wherein or in any part of it excisable goods other than salt are manufactured or wherein or in any part of which any manufacturing process connected with the production of goods is carried on or is ordinarily carried on". The learned advocate submitted that as per this definition, the mines in respect of M/s. Ultra tech Cement Ltd., would definitely fall within the definition of 'Factory'. The definition of factory can be divided into two parts. The first part includes any place including the precincts thereof where any excisable goods are manufactured.

The second part covers the premises wherein or in any part of which any manufacturing process connected with the production of goods is being carried. The Delhi High Court, in 1978 ELT J21, DCM in para 7(4) held that the meaning of 'Factory' is not restricted to the part in which the excisable goods are manufactured, but includes the whole of the premises in the part of which the excisable goods are manufactured. The Supreme Court in 1994 (74) ELT 481 (SC) in Grouer and Weil (I) Ltd. v. CCE, in para 11 has held that premises means a piece of land including its buildings or buildings together with its grounds or appurtenances and precincts mean the areas surrounding a place. Further, the Supreme Court held that any premises including the precincts thereof is wide enough to cover all buildings with its surroundings, which form part of one unit.

v. In view of the above decisions, the expression "premises including the precincts thereof" employed in Section 2(e) of the Central Excise Act will cover not only the factory and the adjacent areas where cement is manufactured, but also the precincts i.e., surrounding place of the factory, which in the present case, will include mines also. In terms of Section 2(e), the entire premises is treated as a factory, even if the excisable goods are made in a portion or a corner of the premises.

vi. The learned Advocate referred to Para 2.2 of the CBEC's Manual of supplementary instructions, wherein there is provision for single registration in respect of separate premises under certain circumstances. Separate premises where the premises are actually part of the same factory, (where processes are inter-linked), but are segregated by public road, canal or railway-line. The fact that the two premises are part of the same factory will be decided by the Commissioner of Central Excise based on certain factors.

vii. The learned Advocate further submitted that in the present case, the mines are to be treated as a single factory for the following reasons; a. Limestone is mined and crushed in the mines. The limestone is the basic raw material for the manufacturer of cement; b. The mines and factory are situated adjacent to each other, and on a continuous stretch of land; c. There is no public road, canal, railway line etc. separate the factory from the mines; e. The labour, workers, staff employed in the mines are employees of the appellants and are in the pay-roll of the appellants. Such staff/workers are treated at par with other staff/workers employed.

viii. Further it was submitted that the department itself considered the mines as part of the factory as the Additional Commissioner directed the appellants to file a revised ground plan after including the mines area.

5. Shri B.N. Gururaj, the learned Advocate appeared on behalf of M/s.

Chakra Cements and submitted that in this case, explosives were used in the limestone mine. The lower authorities denied the Cenvat credit. The learned Advocate produced the ground plan of the factory and mine and said that the limestone mine is contiguous to the factory. He said that in this case factory includes premises and precincts. The precinct is a vast area, which comprised the limestone mines. Since the limestone mines are part of the factory, he said that the explosives are used in the factory and they are rightly entitled for Cenvat credit. In other words, according to the learned advocate, the limestone mine also comes within the meaning of 'Factory' as per Section 2(e) of the Central Excise Act, 1944.

6. In the case of M/s. Zuari Cements, the Commissioner (Appeals) allowed Cenvat Credit on explosives, lubricants and other capital goods used in the mining area for the period from 1.4.2002 to 28.8.2002, on the ground that the department approved the ground plan of the factory including the area of the mines. Only on 28.8.2002, that ground plan was revoked and the area of the mines was excluded from the ground plan. On that ground the appellate authority allowed the Cenvat credit upto 28.8.2002. However, the Revenue has come in appeal against the order of the Commissioner (Appeals) on the ground that it would be wrong to treat mines, which are located at a distance of 1.5 kms from the factory as part and parcel of the factory. The provisions of the Mines Act, 1948 cannot be incorporated for the purposes of Central Excise Act. In the judgment of Chennai Tribunal, Final Order No.2295/99 dated 6.9.99, it was held that mines are excluded from the definition of factory as appearing under Section 2(e) of the Central Excise Act, while deciding the eligibility of Credit to excavators and dumpers in mines. It is also seen that the product obtained in the mines is limestone which is classifiable under chapter heading 2505.00 of CETA and the same is an exempted product and does not require registration with CE department.

7. The learned SDR reiterated the grounds of appeal. Shri M.S.Srinivasa, learned advocate said that the mines are adjacent to the factory and they should be treated as part of factory under Section 2(e) of the CE Act, 1944.

8. We have gone through the records of the case carefully. The learned Advocates in all these cases, before us want to make a point that the mines are part of the factory as per the definition in Section 2(e) of the Central Excise Act, 1944. In the case of M/s. Ultra Tech Cemco Ltd., the mines are connected to the factory by a private road. In the other two cases, the mining area is contiguous. The parties have also submitted that the mining area also has been registered by the Central Excise department alongwith the registration of the factory. The instructions in the departmental manual has also been relied on, where more than one premises have been given a single registration. We have considered all the submissions very carefully. In this connection, we find that whether the mines should be treated as part of the cement factory has been examined indepth by the Hon'ble Supreme Court in the case of CCE v. JK Udaipur Udyog Ltd. We would like to reproduce para 10 of the order; "10. Shri Lakshmikumaran, learned counsel for the assessee has submitted that the limestone is brought from the mines to the factory by a ropeway and, therefore, the mining area is an extension of the factory area. It is difficult to accept the submission made.

Ropeway is merely a device or mechanism for transporting limestone.

Merely because a ropeway connects the factory with the mines, the mine itself will not become a part of the factory where cement is produced. On that logic, even if the mine is situate hundreds of miles away but is connected with the factory by a railway line for transporting mineral or raw material the said mine will become a part of the factory of production. 'Factory' has been defined in Section 2(e) of the Central Excise Act, 1944 and it reads as under: "factory" means any premises, including the precincts thereof, wherein or in any part of which excisable goods other than shall are manufactured, or wherein or in any part of which any manufacturing process connected with the production of these goods is being carried on or is ordinarily earned on." In view of this definition, a mine from where the raw material is extracted and is situated at some distance, but no manufacturing process is carried on, cannot qualify to be a factory." 9. The above observations of the Apex Court would squarely be applicable to the present case. Just because, a road connects the cement factory to mines and also the fact that a single registration is given covering the factory and the mines we cannot hold that the mine is a part of the factory coming within the ambit of Section 2(e) of the CE Act, 1944 as contended by the learned Advocates. Even if the mines are contiguous to the factory they cannot be held to be the precincts of the factory. This bench has already relied on the decision of the Hon'ble Apex Court cited above, in the case of India Cements Ltd. v.CCE, Hyderabad, which is reported in 2005 (180) ELT 247 (T). The fact that no excisable product is produced in the mines is also a relevant factor to hold that mines are not part of the Cement factory. In fact the mines area belong to State Government and the Cement factories have only taken them on lease for extraction of lime stone. Hence, in our view the Capital goods/inputs used in the mines are not entitled for Cenvat Credit, as mines cannot come within the definition of 'Factory' as per Section 2(e) of Central Excise Act, 1944, even if they are contiguous and given Central Excise Registration alongwith the factory.

In other words, mines cannot be considered as part of the Factory.

10. The following other issue have been raised in the Appeal of M/s.

Ultra Tech CemCo Ltd. Even though these points were not argued before us during the hearing, as written submissions were filed in this case, the same are considered and decided on merits.

11. The Appellant submitted that the capital goods classified under Heading 98.01 of the Customs Tariff were received into the factory during the year 1996 itself. But the provisions of Rule 57Q(3), which restricted the credit to 75% were effective only from 1.3.1997. Hence, for the Capital Goods received prior to 1.3.97, the restriction cannot be applied. He relied on the following case laws.(B) Binani Cement Ltd. v. CCE, We find that the appellant's contention is correct. The fact that the goods were received in 1996 is not under dispute. Since the restriction came only with effect from 1.3.97, the same cannot be made applicable to these goods. Following the ratio of the decision of the Tribunal in CCE, Jaipur v. Raj Cement, 2003 (159) ELT 302 (T), we hold that the restriction is not applicable. We set aside the finding and decision of the Commissioner (Appeals) on this point and allow the contention of the appellants.

12. The appellants contention is that the all goods imported under Customs Tariff Heading 98.01, are entitled for Modvat Credit. After going through the Commissioner's finding, we find that he has taken a conscious decision not to allow credit on account of the nature of the goods. We are not agreeable to the proposition mat all goods imported under Customs Tariff Heading 98.01 are entitled for Modvat as Capital Goods. Therefore, the Commissioner's finding on this point is upheld.13. In respect of goods involving credit to the tune of Rs. 4,75,302 the Commissioner (Appeals) has disallowed the credit on the ground of non-production of duty paying document. The appellants have produced the documents before the Tribunal only. Therefore, on this point, we remand the matter to the original authority to examine the issue and take decision as per law.

14. As regards Cables used outside the factory and Technological Structures and GC sheets, we find that they are not entitled for credit, as they are not used within the factory. Hence, the Commissioner (Appeals)'s order on this point is upheld.15. As regards the credit for calcium silicate in blocks it is seen that the issue is covered by the Hon'ble High Court's Judgment in the case of Escorts Ltd. v. CCE, 2000 (120) ELT 75 (Kar.) which is upheld by the Hon'ble Apex Court, reported in 2003 (154) ELT 322. Respectfully following the ratio of these judgments, we allow the credit on this aspect after setting aside the finding and decision of the Commissioner (Appeals) on the point.

16. In respect of the goods for which the declaration filed was beyond 3 months under Rule 57T, we find that the issue is covered in favour of the appellants by the decision of the Tribunal in the case of JBM Tools Ltd. v. CCE, 2002(144) ELT 561. We therefore set aside the order of the Commissioner (Appeals) and allow the credit on this point.

17. As regards credit taken on Xerox/original copy of duty paying documents, we find that the issue is against the appellants in view of the Larger Bench decision in the case of Avis Electronics Ltd., 2000 (117) ELT 571, wherein it is held that "a manufacturer could take credit only on the basis of duplicate copy of the invoice and where the duplicate copy has been lost in transit, he could take credit on the basis of the original copy of the invoice provided he satisfies the Assistant Collector about the loss of the duplicate copy". Therefore, respectfully following the same, we uphold the order of the Commissioner (Appeals) on this point.

1. We hold that "mines" do not form part of "cement factories" even if they are contiguous. Hence, Cenvat credit on inputs/capital Goods used in mines is not admissible.

2. Other points raised in Appeals E/757/02 & E/777/02 are disposed of in the light of the decisions as per para 11 to 16 supra. The issue in para 12 is remanded to the Original authority.

3. Departmental Appeals E/8/05 & E/126/05 are allowed.

Order-in-Appeal No. 106/2004 and Order-in-Appeal No. 28/04 are set aside.