Brahmaputra Cracker And Polymer LTD. vs. The Commissioner Central Goods And Service Tax And Central Excise

Facts

Brahmaputra Cracker & Polymer Limited (the appellant) is aggrieved by the Tribunal's decision upholding the Commissioner's order, which denied CENVAT credit on capital goods installed at its Duliajan unit. The appellant's main manufacturing unit is at Lepetkata, Dibrugarh, Assam. The Duliajan unit compresses and dehydrates natural gas purchased from OIL India Limited, then transfers it via pipeline to the Lepetkata unit for polymer manufacturing. The appellant sought a single Central Excise registration for both units to claim CENVAT credit on capital goods and input services at Duliajan. The Superintendent, Central Excise, refused this, a decision upheld by the Commissioner and subsequently the Tribunal, which held that Duliajan was not a manufacturing unit and thus not eligible for CENVAT credit.

Held

The Court held that the substantial question of law should be answered in the affirmative. The Court found that the Circular No.875/13/2008-CX dated 16.10.2008, relied upon by the Revenue, was misplaced as it pertained only to CNG manufacturers and dealt with the transportation of final products, not the transfer of raw material to a main unit by an ancillary unit. The Court reasoned that the Duliajan unit's activity of compressing and dehydrating gas, which is then transferred as raw material to the Lepetkata unit for manufacturing the final product, makes it an integral part of the manufacturing process. Therefore, the appellant Company is entitled to avail CENVAT Credit on capital goods installed at the Duliajan Unit. The appeal is disposed of accordingly.

Key Issues

1. Whether the gas plant located at Duliajan, belonging to the appellant, forms part of the manufacturing unit at Lepetkata so as to enable the appellant to claim CENVAT Credit on capital goods installed at Duliajan? (Question of law). The appellant argued that the Duliajan unit is a captive unit, integral to the Lepetkata plant, supplying raw material (compressed and dehydrated gas) essential for manufacturing the final product. They contended that the Commissioner and Tribunal erred in treating the units as separate. They relied on Supreme Court decisions in Birla Corporation Limited, Manikgarh Cement Limited, Vikram Cement, and Madras Cements Limited, and a Madras High Court decision in Habasit Iakoka (P) Ltd., asserting that material supplied for manufacturing, even from a separate plant, should be treated as part of the manufacturing unit. The Revenue did not record specific arguments against this, but the Tribunal's decision implies they argued Duliajan was not a registered manufacturing unit.