COMMISSIONER OF C EX Vs. INDORAMA TEXTILES LTD

JUDGEMENT

(1.) In both these Appeals filed under Section 35-G(1) of the Central Excise Act, 1944, challenges are to orders passed by Respondent No. 2-Customs, Excise and Services Tax Appellate Tribunal, Mumbai, on 19-6-2007 (No. A/67/2007/EB/C-II) in Appeal No. E/3220/04-Mum. arising out of order-in-Original No. 47/2004/C dated 30-7-2004 passed by the Commissioner of Central Excise and Customs, Nagpur and on 31-1-2007 (No. A/464/2007/EB/C-I) in Appeal No. E/3701/05-Mum. arising out of order-in-Original No. 14/2005/C. dated 8-8-2005 passed by the Commissioner of Central Excise and Customs, Nagpur. The dispute is about CENVAT credit of duty paid for furnace oil meant for generation of electricity. The Appellants contend that as that furnace oil is never received in the factory of production but goes directly to job worker and as Respondent does not have any captive power plant, CENVAT credit is not available on it.

(2.) The facts are not in dispute. Yarn business i.e. part of business activity of Indorama Synthetics Ltd. (M/s. IRSL) came to be transferred to noticee, Respondent No. 1 herein. Earlier entire business was with one owner & had a captive power plant and after transfer and separation physically by putting up a wall, said captive power plant remained on side of and with M/s. IRSL. Respondent No. 1 does not have any separate captive power plant and storage tanks for storing furnace oil are also with the job worker M/s. Indorama Synthetics Ltd i.e M/s. IRSL. Furnace Oil is received in the name of M/s. IRSL and it availed of CENVAT credit. At regular intervals part of furnace oil was then transferred to separate tank in the premises of M/s. IRSL only but meant for Respondent No. 1. From this tank the furnace oil was being used for generation of electricity. According to Appellants electricity generated was by drawing oil from both tanks and was distributed in pre-decided ratio between M/s. IRSL and Respondent No. 1. M/s. IRSL issued Invoice under Rule 11 of Central Excise Rules, 2002, for quantity of furnace oil transferred to the separate tank of Respondent No. 1 and thereafter, Respondent No. 1 in turn availed CENVAT credit on its strength.

(3.) Appellants found it in contravention of Rule 2, 3, 4 and 7 of erstwhile CENVAT Credit Rules, 2002 and of 2004 for the period from 1-4-2003 -- 3-12-2004. After hearing, credit of duty amounting to Rs. 1,17,02,115/- was found to be ineligible and a penalty of Rs. 15,00,000/- was also imposed vide order dated 30-7-2004. In other matter, for the period from 1-1-2004 -- 30-9-2004 credit of Rs. 1,13,17,607/- was found to be wrongly availed and penalty amount of Rs. 15,00,000/- was also imposed vide order dated 8-8-2005. The amounts were to be recovered along with interest. Both these orders of Commissioner of Central Excise and Customs were then assailed in appeals before CESTAT, who set aside the same. Thereafter present Appeals have been filed.