The Commissioner Of Cent5Ral ... vs Alkem Laboratories Ltd
2017 Latest Caselaw 5710 Bom

                                                         14-CEXA-154-2015.DOC




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       IN THE HIGH COURT OF JUDICATURE AT BOMBAY
            ORDINARY ORIGINAL CIVIL JURISDICTION

           CENTRAL EXCISE APPEAL NO. 154 OF 2015
                                        WITH
           CENTRAL EXCISE APPEAL NO. 210 OF 2016
                                        WITH
           CENTRAL EXCISE APPEAL NO. 211 OF 2016
                                        WITH
           CENTRAL EXCISE APPEAL NO. 212 OF 2016

 The Commissioner of Central Excise,
 Customs & Service Tax, Daman
 3rd Floor, Adarshdham Building, Opp. Vapi
 Town Police Station, Vapi-Daman Road,
 Vapi - 396 191                                                ...Appellant

         Versus

 Alkem Laboratories Ltd.
 167/2, Mahatma Gandhi Udyog Nagar,
 Dabhel, Daman                                            ...Respondent


 Ms. P.S. Cardoza, with Ms. Riya Thakkar, for Appellant in
       CEXA No. 154 of 2015.
 Mr. Swapnil Bangur with Ms. Shalaka Gujjar for Appellant in
       CEXA No. 210 of 2016, 211/2016 & 212/2016.
 Mr. V. Sridharan, Senior Advocate, with Mr. Prakash Shah, for
       Respondents in all the above matters.

                               CORAM:     A.S. OKA AND
                                          RIYAZ I. CHAGLA, JJ.

                               DATED:     7th August 2017






                                                               14-CEXA-154-2015.DOC

O R A L J U D G M E N T :- (Per Riyaz I. Chagla J.)

1. We are disposing of the Appeals by this common order

as the parties and issues are the same. We are referring to

the facts in Appeal No. 154 of 2015, wherein the impugned

order of the Customs, Excise and Service Tax Appellate

Tribunal ("CESTAT") dated 28th August 2014 has been

challenged.

2. The Respondent is engaged in manufacturing of

pharmaceutical products. A boiler was installed by the

Respondent in the main unit for production of steam. The

main unit was using Furnace Oil as fuel for production of

steam in the boiler. The steam so produced is consumed

captively by the main unit. The steam was also supplied by

the Respondent to their adjoining sister concern, namely, M/s.

Alkem Laboratories through pipelines. The main unit was

taking CENVAT credit of duty on the entire quantity of furnace

oil which is used as fuel for production of steam. The

Respondent had been issued a show cause notice by the

Appellant which had alleged that Respondents had

14-CEXA-154-2015.DOC

contravened the provisions of Rule 2(k) (i) of the CENVAT

Credit Rules, 2004, by wrongly taking CENVAT credit amount

of Rs.27,64,669/- during the period of November 2006 to May

2007 and failing to reverse the said CENVAT credit and

thereby contravening provisions of Rule 14 of the said Rules.

A demand-cum-show cause notice had called upon the

Respondent to show cause why the acts of contravention

should not make the Respondents liable for penal action

under Rule 15 of the said Rules read with Section 11 (C) of

the Central Excise Act, 1944. An order dated 29th November

2007 was passed by the Additional Commissioner, Central

Excise, Customs, Daman confirming the duty demanded

equivalent to the CENVAT credit attributable to the furnace oil

used in the production of steam and supplied by the

Respondent to its sister concern unit. Applicable interest and

penalty was imposed and confirmed under the Rules. The

Respondent filed Appeal before the Commissioner (Appeals),

Daman. By an order dated 28th March 2008, the

Commissioner (Appeals) Daman, rejected the Appeal. The

Respondent being aggrieved by the order passed by the

14-CEXA-154-2015.DOC

Commissioner (Appeals) filed Appeal before CESTAT,

CESTAT in the impugned order has held in paragraph 5 that :

"On perusal of the case records it is observed that this aspect of payment of duty by the sister concern, can be verified by the jurisdictional field formations and in case it is found that end products of the sister concern are cleared on payment of duty then the credit cannot be denied to the Appellant group of companies by simply on the grounds that procedures prescribed under Rule 4 of the CENVAT Credit Rules, 2004 are not followed as there is no allegation of diversion of inputs / steam for a consideration or sale.

CESTAT in view of the observations made in paragraph 5 has

remanded the Appeal to the adjudicating authority for

necessary verification.

3. The Appellant has challenged the impugned order of

CESTAT on the questions of law which are set out in

paragraph 4 of the Appeal and reads thus:-

"Whether the CESTAT is right in law in holding that demand of amount for non- reversal of proportionate CENVAT Credit taken on inputs viz"furnace Oil" for generation of Steam and also passing the

14-CEXA-154-2015.DOC

same to outer unit / sister concern is not in accordance with the law?"

4. Ms. Cardoza, learned counsel for the Appellant has placed reliance upon Rule 2 (k) (i) of the CENVAT Credit Rules, 2004 ("the Rules") which read thus :

"all goods, except light diesel oil, high speed diesel oil and motorspirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used in or in relation to manufacture of final products or for any other purpose, within the factory of production,"

5. Ms. Cardoza has contended that CESTAT ought to

have dismissed the Appeal preferred by the

Respondent on the ground that the Respondent had availed

of CENVAT Credit despite the steam / inputs not being

used within the registered factory of production. Ms. Cardoza

has submitted that the steam generated in the factory of the

Respondent had been diverted to the sister concern and

that the two factories were independent of each other

and hence Rule 2 (k) (i) of the said Rules was not

14-CEXA-154-2015.DOC

application. Ms. Cardoza accordingly contended that the

Respondent is not eligible for CENVAT Credit and this finding

should have been arrived at by CESTAT instead of

remanding the matter back to the adjudicating authority.

6. Mr. Sridharan, learned senior counsel appearing for the

Respondent has supported the impugned judgement of

CESTAT.

7. We are of the considered view that the Appellant can in

no way be aggrieved by the impugned order of CESTAT since

CESTAT has merely remanded the matter back upon the

contention of the revenue that it was not known whether the

sister concern of the Respondent had cleared the final

product in which steam was generated on payment of duty or

not. CESTAT has directed verification of the payment of duty

by the sister concern by the adjudicating authority and only

upon verification, it would be determined whether the end

products of the sister concern are cleared on payment of duty

and if that is answered in the affirmative, then CENVAT credit

cannot be denied to the Respondent. Hence, we are not

14-CEXA-154-2015.DOC

inclined to admit the Appeal on the above questions of law.

The Appeal is accordingly dismissed.

8. In the light of the above reasons, Appeal Nos. 154 of

2015, 210 of 2016 and 211 of 2016 and 212 of 2016,

containing identical challenges to the respective impugned

orders are also dismissed. There shall be no order as to

costs.

       ( RIYAZ I. CHAGLA J. )             ( A.S. OKA, J. )