2012 (7) TMI 849 - HC - Central Excise

CENVAT Credit - Whether in the facts and circumstances of the case the Tribunal is justified in holding that the duty paid on fuel is sufficient to satisfy the requirement of Rule 6(1) of Cenvat Credit Rules 2004 even though such fuel is used in the generation of electricity which in turn is being used in the factory for activities which are non-excisable - Held that - It is not disputed by the appellant that electricity has been used in the factory premises by the appellant. No material has been brought on record by the learned counsel for the appellant to establish that electricity generated by the respondent is being used for township - Held that - The question raised is with regard to electricity used within the factory premises of the respondent. The learned counsel for the respondent has placed reliance on the decision of the Apex Court in the case of Commissioner of Central Excise Vadodara v. Gujarat State Fertilizers and Chemicals Ltd. - 2008 (7) TMI 61 - SUPREME COURT wherein the Apex Court has held that admissibility on inputs used for generation of electricity or steam used for manufacture of final products or for any other purpose within the factory of production credit was available. It is not disputed by the appellant that electricity has been used in the factory premises by the appellant. No material has been brought on record by the learned counsel for the appellant to establish that electricity generated by the respondent is being used for township - Decided against Revenue.

Summary

Issues:
1. Interpretation of Rule 6(1) of Cenvat Credit Rules, 2004 regarding duty paid on fuel used for generating electricity.
2. Application of the decision in Commissioner of Central Excise, Vadodara v. Gujarat State Fertilizers and Chemicals Ltd. on admissibility of credit for inputs used for electricity generation within the factory premises.

Analysis:

Issue 1: Interpretation of Rule 6(1) of Cenvat Credit Rules, 2004
The first substantial question of law in the tax appeal revolves around whether the duty paid on fuel used for generating electricity, which is further utilized within the factory for non-excisable activities, satisfies the requirement of Rule 6(1) of Cenvat Credit Rules, 2004. The appellant argued that a certain amount of credit attributed towards exempted goods was not paid by the respondent, contending that this amount should have been reversed as per Rule 6(1). The respondent, on the other hand, claimed to have reversed the credit for exempted products but at a lower rate than what was deemed necessary by the Commissioner. The appellant did not challenge the quantification of the amount in their appeal. The court, considering the facts and arguments presented, ruled in favor of the respondent, citing the absence of an appeal from the Department and the lack of evidence to support the appellant's claims.

Issue 2: Application of Commissioner of Central Excise, Vadodara v. Gujarat State Fertilizers and Chemicals Ltd.
The second substantial question of law pertains to the application of the decision in Commissioner of Central Excise, Vadodara v. Gujarat State Fertilizers and Chemicals Ltd., which established the admissibility of credit for inputs used for electricity or steam generation within the factory premises for manufacturing final products or other purposes. The respondent in the present case relied on this decision, emphasizing that the electricity generated within the factory premises was being used for production activities. The appellant did not provide any evidence to contradict this claim or to prove that the electricity was diverted for external purposes. Considering the precedents set by the Division Bench of the Court and the Apex Court, the judges concluded that the first question was decided in favor of the assessee and against the Department. Consequently, the second substantial question of law was deemed irrelevant and did not require further consideration.

In conclusion, the judgment analyzed and resolved the issues surrounding the interpretation of Rule 6(1) of Cenvat Credit Rules, 2004 and the application of relevant legal precedents on admissibility of credit for inputs used for electricity generation within factory premises comprehensively, ultimately ruling in favor of the respondent based on the presented evidence and legal arguments.