| SooperKanoon Citation | sooperkanoon.com/41874 |
| Court | Customs Excise and Service Tax Appellate Tribunal CESTAT Mumbai |
| Decided On | Feb-20-2006 |
| Judge | K Kumar, S T Chittaranjan |
| Reported in | (2006)(106)ECC303 |
| Appellant | indorama Synthetics Ltd. |
| Respondent | Ccex |
2. At the time of consideration of the stay application, the Bench hearing the same was of the view that the appellants did not have a prima facie case in their favour and hence, they were asked to pre-deposit Rs. 20 lakhs towards duty, which has been deposited by the appellants. This appeal is now being taken up for hearing out of turn pursuant to early hearing application filed by the Revenue being allowed.
3. Shri V.S. Nankani, learned Advocate for the appellants states that the township is to be treated as part of the factory premises and hence, the appellants are entitled to take credit in respect of the furnace oil used for generation of the electric supplied to residential colony/township. He cites the following decisions to support his arguments:Ferro Alloys Corporation Ltd. v. CCE, VisakhapatnamRaymond Ltd. v. CCE, Mumbai-III The learned Advocate also pleads that in the circumstances of the case, the longer period of limitation is not applicable and he also challenges the penalty imposed and interest ordered to be paid.
4. Shri S.S. Bhagat, learned SDR supports the derision of the adjudicating commissioner and in support cites the decisions of the Tribunal in the following cases: 5. After considering the arguments from both sides including the cited case laws, we find that it is not in dispute that the appellants have used part of the electricity within the factory and partly for the township and that they have taken Modvat/Cenvet credit of duty paid on the entire furnace oil used in the generation of such electricity.
6. We find that the adjudicating Commissioner has correctly noted the provisions under the relevant rules, which allow credit of duty on furnace oil used in electricity generation provided such electricity is used for production of final products and also for other purposes so long as it is used within the factory of production. He has passed a detailed speaking order and has held that in respect of the electricity used in the residential premises/township the appellants are not eligible for the input duty credit, on the ground that such residential area is not part of the factory premises nor it can be considered to be falling within precincts of the factory premises. He has also referred to Explanation-II to the definition of 'factory' under the Factories Act, 1948, which states that the area where an Electronic Data Processing Unit is installed in any premises or part thereof, shall not be construed as a factory if no manufacturing process is carried on in such area.
7. We find that the decision in the case of Ferro Alloys (supra), allows use of electricity so long as it is so used within the premises of the factory. The decision in the case of Raymond (supra), merely emphasizes use of electricity for any other purpose and it was rendered in the context of manufacture of exerted goods within the factory premises. The decision in the case of Mother Dairy (supra), again allows credit in the context of storing and using the furnace oil within the precincts of the factory premises for generation of steam.
The decision of the Hon'ble Supreme Court in the case of Grauer & Well (supra) in the context of definition of 'factory' under the Factories Act, 1948, in our view, does not advance the case of the appellants to include the residential premises in the township under the definition of 'factory', especially in view of the Explanation-II to such definition, which has been referred to by the adjudicating Commissioner, as mentioned by us in paragraph 6 above. On the other hand, we find that the two decisions of the co-ordinate Benches in the cases of SAIL (supra), specifically disallow input duty credit in respect of electricity provided to office premises and township.
8. The learned Advocate for the appellants has also pleaded before us that the township was part of the ground plan approved by the Central Excise Superintendent, and hence, the same should be treated as part of the factory. We find that the ground plan submitted at the time of registration of the manufacturer under the Central Excise Rules is for the purpose of identifying the premises, which will be used by the manufacturer for producing excisable goods. It is not unusual for the manufacturer to submit a ground plan, which includes the factory area as well as the areas outside of the factory to specify location of the premises. Thus, by itself such a ground plan cannot support the claim of the appellants that all the areas surrounding the factory premises shown on the ground plan are to be treated as a factory' area. The expression 'factory' has been defined under the Central Excise Act, 1944(CEA). The mere fact of some excise officials signing on a ground plan while issuing a registration certificate to a manufacturer cannot alter the scope of expression factory' defined under Section 2(e) of the CEA, which reads as under: "factory" means any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt 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 carried on.
9. The above definition makes it very clear that residential colony/township cannot be considered as a part of the factory. It is undisputed that neither any manufacturing nor any process connected with the production of excisable goods is carried on in such residential premises/township. Accordingly, we are of the view that the appellants are not entitled to input duty credit on furnace oil used for generation of electricity supplied to such residential premises/township.
10. We also note that the adjudicating Commissioner has rightly recorded in his order that the appellants are not eligible for the impugned credit and yet they willfully and wrongly availed the same without any intimation to the department. Hence, we are of the view that the duty demand has been correctly confirmed by the adjudicating Commissioner applying the extended period of limitation. However, as regards the redemption fine, we are of the view that the same is not warranted in the circumstances of the case including the fact that the goods are not available for confiscation. We, therefore, set aside the redemption fine. As regards the penalty of Rs. 30 lakhs, we are of the view that the same is disproportionately high considering the amount of ineligible input duty credit involved. Hence, we reduce the penalty from Rs. 30 lakhs to Rs. 5 lakhs (rupees five lakhs) only. As regards the interest, we are of the view that the same is payable in accordance with the legal provisions in force.