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Prism Cement Ltd. V.  C.C.E. & S.T., Bhopal - (Customs, Excise and Service Tax Appellate Tribunal) (24 Mar 2017)

Immovability of goods is not a criteria for denying credit



Appellant is engaged in manufacture of cement. For manufacturing of cement, Appellant requires electricity which is used at various stages of production for conversion of raw material into final products for which Appellant entered into an agreement with Madhya Pradesh Poorva Kshetra Vidyut Vitran Company (Vidyut Company) for supply of electricity to Appellant’s manufacturing plant. Appellant also engaged Contractor for undertaking entire work of erection of dedicated Transmission line from Sitpura Sub-station to Appellant’s manufacturing factory. Appellant availed Cenvat Credit of main components of transmission line like towers or pylons made up of MS duly galvanized, aluminum conductors, insulators and was other hardware like clamp, vibration dampers, cable connectors, etc. Revenue authorities were of view that, availment of Cenvat Credit of cement, cables, etc used for erection/construction of transmission line is incorrect and coming to such conclusions, issued show cause notice for reversal of said ineligible Cenvat Credit. Adjudicating authority confirmed demand raised with interest and also imposed penalties on ground that, transmission line which is erected is immovable property and they do not appear to be capital goods or inputs used or in relation to manufacture of Appellant's final product, Vidyut Company is an independent legal entity and on construction of these transmission lines, they are property of said Vidyut Company and transmission line or parts thereof have no integral relation co-extensive with process of manufacture of Appellant final products.

It is undisputed that, transmission line which is laid is for exclusive and dedicated use of Appellant. It also cannot be disputed that, electricity is prime/essential requirement in manufacturing of cement. Items used for laying down dedicated transmission line were duty paid and duty paying documents are in name of Appellant. Adjudicating authority holding Cenvat Credit is not eligible only on ground that these goods are immovable is against law as settled by High Court of Gujarat in case of Mundra Ports and Special Economic Zone Ltd. Vs. CCE wherein it was held that, immovability of goods is not a criteria for denying the credit. In yet another case of Singhal Enterprises Pvt. Ltd. Vs. CC Raipur, this Tribunal applying ratio of user test on structural items used in fabrication of support structure allowed Cenvat Credit of duty paid on such structural items.

Adjudicating authority has also held that, transmission lines which is laid down by Appellant is bringing electricity from Sitpura which is situated 32 kms away from factory premises and is not within factory premises hence, Cenvat Credit is inadmissible. Similar issue cropped up before Tribunal in case of CCE Chennai Vs. Pepsico India Holdings Ltd. In that case, Respondent therein availed Cenvat Credit on PVC pipes which are used for drawing water from the well situated away from factory premises. Therein, Tribunal held that, since PVC pipes are used exclusively for drawing water and supplying it to factory of Respondent therein, Cenvat Credit cannot be denied. In view of facts and circumstances of present case and judicial pronouncements as relied upon, impugned order is set aside and appeal allowed.

Relevant : Mundra Ports and Special Economic Zone Ltd. Vs. CCE, Singhal Enterprises Pvt. Ltd. Vs. CC RaipurMANU/CE/0356/2016 : CCE Chennai Vs. Pepsico India Holdings Ltd. MANU/CC/0174/2000


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