2009 (10) TMI 571 - HC - Central Excise

Cenvat/Modvat electricity being intermediate goods used in manufacture of final product - dispute is about CENVAT credit of duty paid for furnace oil meant for generation of electricity - furnace oil is never received in the factory of production but goes directly to job worker and as Respondent does not have any captive power plant, CENVAT credit is not available on it Held that - inputs or raw material can be directly forwarded to job worker for production of intermediate goods - No substantial question of law Appeal dismissed

Summary

Issues:
- Challenge to orders passed by the Customs, Excise and Services Tax Appellate Tribunal regarding CENVAT credit for furnace oil used for electricity generation.
- Interpretation of CENVAT Credit Rules and applicability to the case at hand.

Analysis:

Issue 1: Challenge to Tribunal Orders
The Appeals were filed challenging the orders passed by the Customs, Excise and Services Tax Appellate Tribunal regarding the CENVAT credit of duty paid for furnace oil used for electricity generation. The Appellants argued that as the furnace oil was not received in the factory of production but went directly to a job worker, and the Respondent did not have a captive power plant, CENVAT credit should not be available on it. The Tribunal set aside the orders of the Commissioner of Central Excise and Customs, leading to the filing of the present Appeals.

Issue 2: Interpretation of CENVAT Credit Rules
The main contention revolved around whether the furnace oil used as fuel qualified as an input under Rule 2(g) of the CENVAT Credit Rules. The Appellants argued that since the Respondent did not generate electricity and did not have a captive power plant, the furnace oil should not be considered an input. On the other hand, the Respondent argued that the purchase of the business and furnace oil, separate storage tanks, and receipt of electricity from the job worker within 180 days supported their claim for CENVAT credit. Reference was made to a judgment by the Hon'ble Apex Court to support the argument that the use of furnace oil need not be within the factory of production.

Judicial Precedent
The judgment in Vikram Cement v. Commissioner of Central Excise, Indore was cited to emphasize that inputs need not be used within the factory of production for CENVAT credit eligibility. The interpretation of Rule 57-B highlighted that inputs used for the generation of electricity or steam, even if not within the factory, could qualify as intermediate products. The judgment clarified that inputs or raw materials can be directly forwarded to a job worker for the production of intermediate goods, supporting the Respondent's position in the present case.

Conclusion
The High Court dismissed both Central Excise Appeals, stating that no substantial question of law arose in the present facts. The Court found that the issue regarding the eligibility of CENVAT credit for furnace oil used in electricity generation was settled by the precedent cited, and there was no change in the law. The understanding and agreement between the parties, along with the applicability of CENVAT Credit Rules, were upheld based on the interpretation provided by the Hon'ble Apex Court.

This comprehensive analysis of the judgment highlights the key issues, arguments presented, legal interpretations, and the final decision rendered by the High Court.