2006 (3) TMI 648 - AT - Central Excise

Summary

Issues:
1. Eligibility of credit taken by a company on inputs used for power generation.
2. Interpretation of Cenvat Credit Rules regarding the usage of fuels for power generation.
3. Appeal filed by the department regarding the eligibility of certain fuels for credit.
4. Application of Rule 6(2) of Cenvat Credit Rules on maintaining separate accounts for fuels.
5. Reference to previous judgments and their impact on the current case.
6. Definition of 'inputs' as per the Order-in-Appeal by the Commissioner.
7. Requirement of using electricity within the factory for availing credit on fuels used for power generation.
8. Division Bench decision on the availability of credit for fuels used in the manufacture of electricity.
9. Board's Circular on the admissibility of Cenvat credit based on usage within the factory.

Analysis:
1. The appeal addressed the eligibility of credit taken by a company on inputs used for power generation, specifically focusing on fuels such as 'Petroleum Coke' and 'Superior Kerosene Oil' utilized by the company for electricity generation. The dispute arose concerning the credit claimed on fuels related to power supplied outside the factory, leading to a demand for repayment by the Assistant Commissioner.

2. The advocate representing the company argued that as per Rule 6(2) of the Cenvat Credit Rules, maintaining separate accounts for fuels used in the manufacturing process was not mandatory, especially when the fuels were utilized for the production of steam within the factory, subsequently used for manufacturing aluminum and electricity. Reference was made to a Tribunal decision emphasizing the permissibility of credit on fuels used in the manufacture of steam within the factory.

3. The department contested the eligibility of certain fuels for credit based on the definition of 'inputs' provided in the Order-in-Appeal by the Commissioner. The argument revolved around the requirement of using electricity within the factory for availing credit on fuels used in electricity generation, as stipulated by the Cenvat Credit Rules.

4. Previous judgments, including the decision of the Gujarat High Court and the Tribunal, were cited to support the company's position on the availability of credit for fuels used in power generation within the factory premises. The judgments highlighted the importance of the end-use of steam generated from the fuels rather than the specific utilization of electricity.

5. The Tribunal's decision emphasized that credit should be allowed on the entire fuel if the steam generated using it is utilized within the factory for any purpose, including electricity generation. This ruling supported the company's appeal and necessitated the allowance of the appeal.

6. In conclusion, the department's appeal regarding the eligibility of certain fuels for credit was dismissed, emphasizing the distinction between different types of fuels and rejecting the argument that certain fuels were ineligible for credit. The judgment clarified that fuels used for power generation within the factory premises were eligible for credit, irrespective of the specific use of the generated electricity.