2008 (3) TMI 591 - AT - Central Excise

Cenvat/Modvat credit - fuel used in the manufacture of electricity - case of Revenue is that fuel used in the manufacture of electricity would not be entitled to the benefit of Modvat credit to the extent the same is used in the manufacture of electricity, which electricity is used by them outside the factory premises like, residential premises, guest house, canteen etc - Held that - fuel used for electricity, which electricity leaves the factory premises of the appellant, would not be entitled to the benefit of credit and the fuel used for electricity, which electricity is used within factory of production would be entitled to the benefit of credit - appeal allowed in part.

Summary

Issues:
Clarification on Modvat credit for fuel used in the manufacture of electricity within factory premises and its usage outside the factory premises.

Analysis:
The appellant sought clarification on the Modvat credit for fuel used in the manufacture of electricity within the factory premises, as mentioned in Order Nos. A/3081 to 3084/WZB/AHD/2007. The Tribunal had previously held that fuel used for electricity, which is used outside the factory premises, would not be entitled to the benefit of credit. However, the appellant was concerned that the Commissioner might misinterpret this ruling. The Tribunal clarified that as per Rule 57(2k) of the Cenvat Credit Rules, 2004, fuel used for electricity within the factory premises is eligible for Modvat credit. On the other hand, fuel used for electricity that leaves the factory premises would not qualify for the credit.

The Tribunal also considered a scenario where part of the appellant's premises was rented out to other companies, and these companies were consuming electricity without reimbursement. The learned Advocate clarified that if the electricity was solely used for loading the appellant's own final product in the pipe lines within the factory premises, then the appellant would be entitled to the Modvat credit for the fuel used in generating that electricity. The Tribunal agreed with this submission and held that in such cases, where no reimbursement for electricity usage was made, the benefit of Modvat credit would apply.

Consequently, the Tribunal clarified that the order dated 18-12-2007 stands modified to reflect that fuel used for electricity within the factory premises is eligible for Modvat credit, while fuel used for electricity that exits the factory premises does not qualify for the credit. The miscellaneous application seeking clarification was disposed of based on the above analysis.