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2020 Supreme(Mad) 39
IN THE HIGH COURT OF JUDICATURE AT MADRAS
VINEET KOTHARI, R. SURESH KUMAR, JJ.
The Commissioner of Central Excise, O/o. The Commissioner of Customs & Central Excise, Salem - Appellant
Versus
M/s. JSW Steel Ltd., M/s. JSW Power Ltd., Pottaneri, Mecheri - Respondent
C.M.A. Nos. 762 & 763 of 2015 & C.M.P. No. 2638 of 2018
Decided On : 13-02-2020
For the Appellant : V. Sundareswaran, Senior Standing Counsel
For the Respondent:R. Parthasarathy, Lakshmi Kumaran, Advocates
Headnote:
Civil Procedure Code,1908 - Central Excise Act, 1944 - Section 35G - Rule 2(a)(1),CENVAT Credit Rules - Claim Cenvat credit – Investigation - Appeals have been filed under Section 35G of the Central Excise Act against common order passed by Customs Excise and Service Tax Appellate Tribunal South Zonal Bench Chennai in short CESTAT by order case of Assessee Company Southern Iron and Steel Company Limited in short “SISCOL is that it an integrated Steel Plant having facilities for the production of iron steel rod/pellets etc plant of the SISCOL was started in and it was already having a Captive Power Plant for generation of electricity - SISCOL in order to expand its production capacity of final product iron and steel rod apart from capacity already available with it, required additional power therefore they decided to set up another CPP - At that time since the SISCOL was sick and also was under Restructuring Scheme CDR Corporate Debt Restructuring and also was declared as a sick company by BIFR Board for Industrial and Financial Reconstruction it had entered into an agreement with JSW Power Limited (JSWPL) –Held, Case as has been discussed above would give us an irresistible conclusion that place where CPP was set up is part and parcel of factory premises of SISCOL originally and it has never been separated as separate unit or entity as the water was supplied by SISCOL to CPP and the power being generated by CPP would be fully supplied and would be utilised by the SISCOL alone major funds for setting up CPP also was generated only from sources of SISCOL - Even before setting up of CPP permission was sought for by JSWPL from Deputy Chief Inspector of Factories Salem on pretext that SISCOL was taken over by Jindal - Further even condition of Rule as quoted above capital goods purchased for purpose of setting up CPP were fully used only in the factory premises of SISCOL and therefore said contention of Revenue by counsel that definition Clause legal as well as factual position as has been discussed above Court are of considered view that case of Revenue that Assessee original SISCOL who got merged with JSW Steel Limited and JSW Power Limited did not have authority or right take CENVAT credit during relevant point of time for capital goods used in CPP set up in factory premises or vicinity of SISCOL cannot be accepted as such stand taken by Revenue is unsustainable - For all these reasons court have no hesitation to hold that order of CESTAT which is impugned herein is fully justifiable and sustainable accordingly it does not warrant any interference from this Court – Appeal dismissed
JUDGMENT :
R. Suresh Kumar, J.
(Prayer: Appeals filed under Section 35G of the Central Excise Act, 1944, praying to set aside the Final Order No.40322-40323 of 2014, dated 23.05.2014 passed by the Hon’ble CESTAT, Chennai and to uphold the Order-in-Original No.7/07 (C.No.V/72/15/89/2006-Cx/Adj) dated 03.10.2007 passed by the Commissioner of Central Excise, Salem.)
1. These two Appeals have been filed under Section 35G of the Central Excise Act, 1944 (in short “the Act”) against the common order passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai (in short “CESTAT”), by order dated 23.05.2014.
2. The case of the Assessee Company viz., Southern Iron and Steel Company Limited (in short “SISCOL”) is that, it is an integrated Steel Plant having facilities for the production of iron, steel rod/pellets etc. The plant of the SISCOL was started in the year 1996 and it was already having a ‘Captive Power Plant’ (in short “CPP”) of 7.5 MW for generation of electricity.
3. The SISCOL, in order to expand its production capacity of the final product viz., iron and steel rod, apart from it CPP of 7.5 MW capacity already available with it, required additional power of 60 MW, therefore, they decided to set up another CPP.
4. At that time since the SISCOL was sick and also was under Restructuring Scheme under CDR (Corporate Debt Restructuring) and also was declared as a sick company by the BIFR (Board for Industrial and Financial Reconstruction), it had entered into an agreement with JSW Power Limited (JSWPL).
5. An agreement to that effect was entered into between SISCOL and JSWPL, as per which, SISCOL leased out a portion of its land to the extent of 50.14 acres to JSWPL where 2 x 30 = 60 MW CPP had to be established by JSWPL. As per the said lease deed dated 17.01.2005, a nominal lease amount of Rs.10,000/- per annum was fixed. Pursuant to the lease agreement, the land entrusted by SISCOL to JSWPL was in turn pledged by the JSWPL with UTI Bank Limited to raise funds to the tune of Rs.62 Crores. Since the entire cost of CPP project was roughly about Rs.95 Crores, the balance cost to the extent of Rs.28 Crores was invested by SISCOL in the form of shares in JSWPL.
6. Accordingly, the JSWPL using the funds it generated, as stated above, set up the CPP 2 x 30 MWs in the land leased out by SISCOL in its factory premises.
7. While setting up the CPP, the capital goods were ordered to be purchased and accordingly, on the capital goods purchased by raising invoice in the name of JSWPL - Consignee SISCOL, the Assessee availed CENVAT Credit. After having completed the CPP, it was commissioned in the year 2008. In the meanwhile, during the CDR proceedings, the SISCOL was merged with the JSW Steel Limited (JSWSL) with effect from 01.04.2007 as per the order dated 22.02.2008 of the High Court of Bombay.
8. In the meanwhile, the JSWPL as well as JSWSL got merged with effect from 01.04.2005, of course pursuant to the order of the High Court dated 14.11.2005. On 31.08.2006 even before that 60 MW Power Plant i.e., CPP was fully set up, the SISCOL terminated the lease agreement with JSWPL and took over the CPP. The loan taken from UTI was also taken over by SISCOL on 31.08.2006.
9. Even though the land to the extent of 50.14 acres was leased out by SISCOL for setting up the CPP, the ground plan of the factory of the SISCOL was never amended or modified and the said lease of land, which was given to JSWPL, was only to raise funds for establishing the CPP to get power fully generated from CPP for the manufacturing process of SISCOL. Therefore, the leased out land, where the CPP was established, also continued to be part of the factory premises of SISCOL.
10. As per the provisions of the CENVAT Credit Rules, 2004 (CENVAT Rules), CENVAT credit had to be taken in two installments of 50% each spread over for two financial years.
11. However, the Revenue, in respect of the said CENVAT credit taken by the Assessee, JSWSL had issued two show
