2009 (11) TMI 792 - AT - Central Excise

Reversal of CENVAT credit - Rule 6(2) of the CCR 2002 - non-maintenance of separate books of accounts - Held that - Ld. Commissioner has categorically observed that there was no evidence to show conspicuously as to the inputs used for aforesaid two purposes distinctly. Ld. Commissioner came to conclusion that there was no evidence for demarcation. This is suffice on our part to hold that the appellant is not eligible to CENVAT credit in respect of inputs used for generation of electricity sold to outsiders - the appellant not having maintained the records separately to show the quantum of inputs used for generation of electricity for its captive consumption and sale to outsiders the appellant has rightly been called upon to pay 8% of the value of the electricity supplied to outside. The matter calls for remitting back the same to the ld. Adjudicating Authority to work-out the quantum of demand attributable to the direction aforesaid in respect of the normal period - demand is confirmed to normal period of limitation - penalty is set aside - appeal allowed by way of remand.

Summary

Issues:
1. Applicability of Rule 6(2) of the Cenvat Credit Rules, 2002.
2. Requirement of maintaining separate accounts for inputs.
3. Eligibility for Cenvat credit for electricity sold to outsiders.
4. Recovery of 8% of the value of electricity sold.
5. Time bar for proceedings and imposition of penalty.

Analysis:

1. The appellant challenged the order passed by the ld. Commissioner regarding Rule 6(2) of the Cenvat Credit Rules, 2002. The Commissioner found that the appellant did not fulfill the eligibility conditions and directed them to pay 8% of the total price of electricity sold to outside buyers for a specific period. The Commissioner noted the lack of separate accounts for inputs used in generating electricity sold to outsiders, making it difficult to ascertain the correct Cenvat credit amount.

2. The appellant's counsel argued that even if the appellant was ineligible for Cenvat credit for electricity sold to outsiders, there should not be a recovery of 8% of the electricity's value. The counsel cited a Supreme Court judgment and emphasized the distinction between inputs used for captive consumption and those sold outside. The appellant's failure to maintain separate records for these purposes was highlighted.

3. The Revenue contended that the appellant, lacking evidence of the quantum of inputs used for generating electricity sold to outsiders, was not eligible for any credit. The Revenue supported the Commissioner's decision to demand 8% of the value of electricity sold to fulfill legal requirements.

4. The Tribunal acknowledged the Supreme Court's ruling on the definition of "input" and its application to captive consumption. However, the Tribunal held that the appellant was not entitled to Cenvat credit for inputs used in generating electricity sold to outsiders due to the absence of distinct records. The Tribunal upheld the requirement for the appellant to pay 8% of the value of electricity supplied to outsiders.

5. Considering the debatable nature of the matter and the lack of intention to evade duty liability, the Tribunal ruled that the liability to pay 8% of the electricity value arose only for the normal period. No penalty was imposed on the appellant for this normal period, aligning with the Supreme Court's precedent. The Tribunal remitted the matter back to the Adjudicating Authority for quantifying the demand attributable to the recovery direction for the normal period, confirming the demand within the normal limitation period and setting aside the penalty.