At, Customs Excise Service Tax Appellate Tribunal West Zonal Bench At Mumbai
By, THE HONOURABLE MR. S.S. KANG
By, VICE PRESIDENT & THE HONOURABLE MR. SAHAB SINGH
By, MEMBER (TECHNICAL)
For the Appellant : M.H. Patil, Advocate. For the Respondent : A.K. Prabhakar, Superintendent (A.R)).
1. Heard both sides.
2. Appellant filed this appeal against the adjudication order passed by the Commissioner of Central Excise. Revenue also filed Cross Objections.
3. The appellants are engaged in the manufacture of GP/GC sheets falling under Chapter 72 of the Central Excise Tariff Act and were availing the Cenvat credit in respect of the duty paid on inputs used in or in relation to the manufacture of final product. In the factory of the appellant, M/s Inox Air Products Ltd which is having a separate registration number set up a plant for manufacture and supply of nitrogen gas. As per the contract the appellants were to supply water and electricity. The Revenue issued a Show Cause Notice denying the benefit of Cenvat Credit in respect of the duty paid on furnace oil used in the generation of electricity in the factory of appellant which is supplied to M/s Inox Air Products Ltd on the ground that M/s Inox Air Product Ltd is a separate independent unit.
4. The adjudicating authority confirmed the demand with interest and imposed a penalty. The contention of the appellant is that in reply to the Show Cause Notice, the appellant specifically mentioned that the electricity generated by using furnace oil is captively consumed and the same has not been supplied to M/s Inox Air Products Ltd. There is no electric line which supplies electricity to M/s Inox Air Products Ltd which is generated by using a diesel generator set. In spite of the evidence product, this fact was not taken into consideration by the adjudicating authority. The demand is confirmed on the ground that in response to one audit objection the appellants stand was that the electricity generated in the factory is used within the factory and hence are entitled for the credit.
5. The appellant also relied on the definition of input as provided under Rule 57AA of the Central Excise Rules and subsequent Rule 2 of the Cenvat Credit Rules to submit that input includes all goods used in or in relation to the manufacture of the final product whether directly or indirectly and whether contained in the final product or goods used as spares or as packing material or as fuel for generation of electricity or steam used in or in relation to the manufacture of the final product or for any other purpose within the factory of production. Even in the case of electricity generated by using furnace oil is supplied to M/s Inox Air Products Ltd and M/s Inox Air Products Ltd are situated in the same factory premises and the gases produced by M/s Inox Air Products Ltd is further used in the factory of the appellant in the manufacture of final product. Therefore denial of credit is not sustainable.
6. Revenue relied upon the findings of the lower authority to submit that as M/s Inox Air Products Ltd is a separate manufacturing unit and separately registered with the Revenue, therefore, it cannot be said that M/s Inox Air Products Ltd is the part of the factory of the appellant. Hence the demand is rightly made.
7. We find that the appellant had taken a specific stand before the adjudicating authority that the electricity generated by using the diesel generator set is not supplied to M/s Inox Air Products Ltd. This contention is noted by the adjudicating authority. However, no finding is given in this regard and the same rejected only on the ground that the appellant in reply to audit objection had not mentioned this fact. The appellant only stated in reply to the audit objection that the goods manufactured by M/s Inox Air Products Ltd are used within the factory of production.
8. We find that the plea raised by the appellant that the electricity generated in the factory by using diesel generator set is not supplied to M/s In
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ox Air Products Ltd is a material fact which requires verification. Therefore, the matter requires reconsideration by the adjudicating authority. The impugned order is therefore set aside and the matter is remanded to the adjudication for de novo adjudication after taking into consideration the plea raised by the appellant and after affording an opportunity of hearing to the appellant. C.O. also disposed of in same terms.