JUDGMENT :

G.A. SANAP, J.

1. This appeal filed by the Revenue was admitted on the following two substantial questions of law 31.07.2017:

(i) Whether the CESTAT was correct in holding that the respondent No. 1 is entitled to avail the credit on goods used in erection of Captive Power Plant by two other Divisions of respondent No. 1’s group especially when Rule 57Q(6) of the erstwhile Central Excise Rules, 1944 specifically stipulated that a manufacturer shall be allowed credit of specified duty paid on capital goods manufactured by him for the manufacture of the final products in his factory?

(ii) Whether the CESTAT was correct in holding that respondent No. 1 can avail Modvat Credit on duty paid inputs or any goods used in the manufacture of Captive Power Plant without filing the declaration under Rule 57G and without following the procedures required under rule 57(T)(7) and without obtaining registration certificate as required under Rule 174 (4) of the erstwhile Central Excise Rules, 1944.

2. The facts giving rise to the above substantial questions are as follows:

The Assistant Commissioner Customs and Central Excise, Chandrapur vide order dated 26.11.1999 disallowed the Modvat Credit on Capital goods availed by the respondent No. 1 and directed the recovery of the same with penalty. The Commissioner (Appeals) Central Excise and Customs, Bhopal vide order dated 05.02.2002 set aside the order passed by the Assistant Commissioner and held that the Modvat Credit availed by the respondent No. 1 was according to the law and rules. The appeal filed by the Revenue against the order of Commissioner was dismissed by the Customs, Excise and Service Tax Appellate Tribunal, West Regional Bench at Mumbai (For short ‘CESTAT’) vide order dated 27.09.2005. The appellant-Revenue is in the appeal before this Court against the order passed by the CESTAT.

3. The respondent No. 1-M/s. Larsen and Toubro Ltd. Awarpur are engaged in the manufacture of cement. The respondent No. 1 is holder of a Central Excise Registration. The respondent No. 1 for availment of Modvat Credit filed declaration with the Assistant Commissioner, Central Excise, Division Chandrapur. During the course of scrutiny of the Central Excise records for the month of October 1998, it was observed that the respondent No. 1 has availed credit on the goods used for erection of the captive power plant, as a capital goods under Rule 57-Q of the Central Excise Rules, 1944 (hereinafter referred to as “the Rules 1944”). The scrutiny revealed that the respondent No. 1 was not entitled to avail the Modvat Credit. The five show cause notices dated 30.04.1999, 02.07.1999, 19.07.1999, 29.03.2000 were therefore, issued to the respondent No. 1. It was stated in the show cause notices that the captive power plant 2 x 23 MW was erected in the premises of the noticee by the other divisions of M/s. Larsen and Toubro Ltd. Namely Group-II and LTCG. M/s. Strategic ICPP planning Division/Projects of M/s. Larsen and Toubro Ltd. had placed with Group-II of M/s. Larsen and Toubro Ltd. work order for design, engineering, manufacturing, supply, procurement, construction, erection, testing or commissioning of coal based captive power plant. For said commissioning, a work order was issued by M/s. Larsen and Toubro Ltd. Group-II. The respondent No. 1 has agreed to make available free of cost the following amenities:

(i) Land for CPP construction and ran water storage

(ii) Land for project guest house, housing colony and labour colony

(iii) Documentation/facilitation in seeking statutory clearnces

(iv) Office space for core project team

(v) Construction power

(vi) Construction water

(vii) Drinking water

It is stated that this work order does not include procurement of all material i.e. capital goods and inputs required for erection of power plant. The work order revealed that the respondent No. 1 is not manufacturer and the captive power plant was erected and commissioned by the Group-II and LTCG of M/s. Larsen and Toubro Ltd