Per C.N.B. Nair : The Steel Authority of India and SAIL Power Co. Ltd. are in appeal challenging the confiscation of rotor valued over Rs. 10 crores, demand of duty of over Rs. 2 crores and imposition of penalty of Rs. 2 crores under the impugned order.

2. The facts leading to the passing of impugned order are that Steel Authority of India has a steel plant at Raurkela. That plant was having a captive power plant also. In 1999, the steel mills received a rotor for use in its captive power plant and took Modvat (Capital goods) Credit. Subsequently, in 2001, the power plant was spun off as a separate identity (subsidiary). In the subsidiary steel authority continued to have 98% shareholding and remaining 2% went to NTPC.

3. On 17.9.02, a show cause notice was issued by Central Excise authorities alleging that the separation of power plant into a new company amounted to sale of the rotor in question to a new entity and in view of this, the credit of about Rs. 2 crores taken on the rotor was required to be returned. The appellant contested the proposition but failed. In the order under challenge before us, Commissioner, Central Excise held that there was sale of the rotor to SAIL Power Company Ltd. and this sale had the effect of removal of the rotor on which capital goods credit was taken and upon removal of a particular capital goods from the factory, modvat (capital goods) credit was required to be returned. The present appeals challenge this finding.

4. When these appeals came before a Division Bench of this Tribunal, it was noticed that there were contrary decisions on the issue involved and therefore, the matter was referred to a Larger Bench. Before the Larger Bench, it was contended by the appellants that in the facts of the case, there is no sale of the capital goods (rotor) and reference had been made by the Division Bench without taking this fact into account. The Larger Bench thereupon returned the case to the Division Bench. These appeals have come before us thus.

5. The learned Counsel for the appellants has taken up us through the agreement (Deed of transfer and assignment of business dated 7.3.01) to show that the deed was executed for business restructuring with intent to strengthening SAIL's core business activity and it was not a case of sale as normally understood. It is also the contention of the learned Counsel that in this case corporate veil was required to be lifted so as to arrive at the reality of the transaction and reach appropriate conclusion. He has relied on the judgment of the Hon'ble Supreme Court in the case of State of U.P. Vs. V. Renusagar Power Co. and others reported in 1988 (4) SCC 59 in support of the contention that this is an appropriate case for lifting of corporate veil. It is being explained that the case of Renusagar Co. was one where a dedicated power generation plant was set up to support the aluminium manufacturing activity of Hindustan Aluminium Corpn. Ltd. (Hindalco) and after going into all the relevant aspects, the Hon'ble Supreme Court ruled that since the power plant was set up and run as a dedicated power plant for the manufacturing factory, the power generated by the power plant should be treated as power generated from Hindalco's own source of generation. This conclusion was reached by the Hon'ble Supreme Court after lifting the corporate veil and finding that the power plant (utility) was created and existed solely to support the aluminium company and that the power utility and its management and finances were all owned by the aluminium company.

6. In the present case, initially the power plant was also part of the steel mill and was also owned by Steel Authority of India Ltd. The deed of March, 2001, whereby power supply company was hived off into a new company through transfer of a certain business, was part of a restructuring exercise only. This is clear from clauses A, B, C and D of the deed. Other clauses in the deed also make clear that what is involved is not sale