2009 (9) TMI 798 - AT - Central Excise

Summary

Issues:
- Challenge against demand under Rule 6(3)(b) of Cenvat Credit Rules, 2004 for manufacturing both dutiable and exempted final products.
- Classification of electricity as an exempted product.
- Requirement of reversal of proportionate credit on inputs used in manufacturing electricity diverted to the Grid.

Analysis:
The judgment deals with two appeals challenging demands under Rule 6(3)(b) of the Cenvat Credit Rules, 2004 for manufacturing dutiable and exempted final products. The main contention revolves around the classification of electricity as an exempted product. The Revenue argues that electricity, covered by a specific entry in the Central Excise Tariff Schedule, should be considered excisable and exempted goods due to the absence of duty levied during the disputed period. However, the definition of "exempted goods" under Rule 2(d) requires either a "Nil" rate of duty or exemption from the whole excise duty, which was not the case for electricity. Thus, the appellants were deemed to be manufacturing only dutiable products, rendering Rule 6(3)(b) inapplicable.

The judgment references the Supreme Court's decision in Commissioner of Central Excise v. Gujarat Narmada Fertilizers Co. Ltd., emphasizing the need to reverse cenvat credit on inputs used in manufacturing electricity diverted outside the factory. Although the appellants claimed a proportionate credit reversal, the absence of quantified evidence led the tribunal to direct the appellant to reverse the credit satisfactorily within four weeks, specifically for the electricity manufactured and diverted to the Maharashtra State Electricity Board Grid and Township. This condition was set for the waiver of pre-deposit and stay of recovery concerning the amounts demanded under Rule 6(3)(b).

In conclusion, the judgment clarifies the classification of electricity as an exempted product under Rule 6(3)(b) of the Cenvat Credit Rules, 2004, emphasizing the necessity of reversing proportionate credit on inputs used in manufacturing electricity diverted outside the factory. The tribunal's decision highlights the importance of complying with the reversal requirement to avoid the demand raised under the said rule.