2015 (4) TMI 1019 - AT - Central Excise

Denial of Cenvat credit - credit on pet coke which was used for generation of electricity by the sister unit of the respondent which in turn sent the electricity to the respondent which was ultimately used in the manufacture of final product - whether the respondent is entitled to take Cenvat credit on pet coke which has been used in generation of electricity outside the factory and said electricity has been used by the respondent in manufacturing of their final product or not - Held that - Admittedly electricity so generated has not been used in the manufacture of final product. Further in the said case the Hon ble Apex Court analyzed how the Cenvat credit can be availed on inputs which have been sent to the job worker and ultimately used in the manufacture of final product - in the case of Haldia Petrochemicals Ltd. (2005 (1) TMI 306 - CESTAT, NEW DELHI), the identical issue was before this Tribunal wherein this Tribunal has held that naphtha, as such or after being partially processed, sent to power plant and raw material used by the power plant for generation of electricity; said electricity is sent to the principal manufacturer. On such inputs sent to the job worker, the assessee is entitled to take Cenvat credit. Similarly, in the case of pet coke which has been sent by the respondent to their sister unit for manufacturing of electricity which ultimately has been used by the respondent for manufacturing of their final product, i.e. cement. Therefore, the respondent has qualified for entitlement of Cenvat credit as per Rule 2 (k) of the CCR, 2004. Consequently, I do not find any infirmity in the impugned order, the same is upheld. - Decided in favour of assessee.

Summary

Issues:
1. Entitlement to Cenvat credit on pet coke used for electricity generation outside the factory premises.
2. Interpretation of Rule 2(k) of CCR, 2004 regarding inputs for manufacturing final products.
3. Application of legal precedents regarding electricity generation and Cenvat credit eligibility.
4. Nexus between electricity generation, usage in manufacturing, and Cenvat credit entitlement.

Analysis:
Issue 1: The appeal concerns the denial of Cenvat credit on pet coke used for electricity generation by a sister unit and subsequently utilized in the manufacturing process of the final product. The Revenue argued that since pet coke was used outside the factory premises for electricity generation, Cenvat credit should be disallowed. The Commissioner (Appeals) allowed the credit based on the decision in the case of M/s. Haldia Petrochemicals Ltd. vs. CCE [2006 197) ELT 97 (Tri-Del)]. The key contention was whether the respondent could claim Cenvat credit under these circumstances.

Issue 2: The learned AR contended that pet coke did not qualify as an input for manufacturing cement as per Rule 2(k) of the CCR, 2004 since it was used for electricity generation outside the factory. Reference was made to the decision in Maruti Suzuki Ltd. vs. CCE [2009 (240) ELT 641 (SC)], emphasizing the lack of one-to-one correlation in the usage of inputs. The argument focused on the definition of inputs and the requirement for usage within the factory for final product manufacturing.

Issue 3: The respondent's counsel relied on legal precedents, including the decision in Maruti Suzuki Ltd. case, which highlighted that electricity generated outside the factory could still be used in manufacturing the final product to claim Cenvat credit. The Tribunal's decision in Haldia Petrochemicals Ltd. case was cited to support the contention that input sent for electricity generation, even outside the factory, could qualify for Cenvat credit if used in the manufacturing process.

Issue 4: The Tribunal analyzed the nexus between electricity generation, usage in manufacturing, and Cenvat credit entitlement. Citing the decision in Haldia Petrochemicals Ltd. case, it was established that inputs like pet coke sent for electricity generation by a sister unit, and subsequently used in the manufacturing of the final product, qualified for Cenvat credit under Rule 2(k) of the CCR, 2004. The judgment upheld the entitlement of the respondent to claim Cenvat credit in this scenario, dismissing the Revenue's appeal.

In conclusion, the judgment clarified the eligibility of Cenvat credit on inputs used for electricity generation outside the factory premises but subsequently utilized in the manufacturing process. Legal precedents and the interpretation of relevant rules were crucial in determining the entitlement to Cenvat credit, ultimately leading to the dismissal of the Revenue's appeal.