2007 (12) TMI 391 - AT - Central Excise

Summary

Issues:
- Waiver of pre-deposit and stay of recovery of wrongly availed credit on inputs and input services
- Eligibility of CENVAT credit for inputs used in the generation of electricity

Analysis:
1. Waiver of Pre-deposit and Stay of Recovery: The appellant sought waiver of pre-deposit and stay of recovery of an amount held to be wrongly credited on inputs and input services, along with applicable interest and a penalty. The demand was based on the contention that the appellant manufactured electricity using certain inputs and services for which credit was availed. The argument was that since electricity is exempt from excise duty, the input credit for the service and material used in its generation should not be admissible. However, the Tribunal found merit in the appellant's argument that the inputs first generated steam within the factory, which was then used for various purposes, including the generation of electricity. The Tribunal noted that the eligibility for input credit is not contingent on the disposal of electricity. Consequently, the Tribunal granted a complete waiver of pre-deposit and stayed the recovery of dues until the final disposal of the appeals.

2. Eligibility of CENVAT Credit for Electricity Generation: The key contention revolved around the eligibility of CENVAT credit for inputs used in the generation of electricity. The appellant argued that electricity is not excisable, and the inputs and services were utilized for generating steam, which was subsequently used in the production of electricity. The Tribunal agreed with the appellant's position, citing the definition of inputs under the Cenvat Credit Rules, 2004, which includes goods used as fuel for the generation of electricity or steam within the factory for various purposes. The Tribunal emphasized that the credit availed by the appellant for inputs used in the generation of steam, ultimately leading to electricity production, was correctly done. Therefore, the Tribunal found that the appellant had established a prima facie case against the demand and penalty imposed, leading to the decision to grant the waiver of pre-deposit and stay of recovery until the final disposal of the appeals.

In conclusion, the judgment by the Appellate Tribunal CESTAT, Chennai, addressed the issues of waiver of pre-deposit and the eligibility of CENVAT credit for inputs used in the generation of electricity. The Tribunal ruled in favor of the appellant, highlighting that the inputs first generated steam within the factory, making them eligible for credit, irrespective of the electricity's exempt status from excise duty. The decision underscored the importance of the initial purpose of the inputs in determining credit eligibility, leading to the grant of a complete waiver of pre-deposit and a stay on recovery until the final disposal of the appeals.