2014 (7) TMI 531 - AT - Central Excise

CENVAT Credit - Credit in respect of generation of electricity - appellant have availed the cenvat credit in respect of various input services used in or in relation to the generation of electricity and also in respect of inputs such as lubricants, grease, chemicals, etc. used in or in relation to the generation of electricity and since separate account and inventory of the inputs/input services meant for dutiable final products and exempted final products have not been maintained - Held that - electricity is not an excisable good and hence, in respect of the sale of the electricity to U.P. Power Corporation Ltd., the provisions of Rule 6(3) of the Cenvat Credit Rules would not be applicable. In view of judgment of the Gularia Chini Mils, Gularia & Ors. Vs. Union of India 2013 (7) TMI 159 - ALLAHABAD HIGH COURT , the impugned order demanding the amount under Rule 6(3) of the Cenvat Credit Rules, 2004 would not be sustainable. There may have been a case for denial of proportionate credit in respect of the cenvated inputs or input services to the extent the same have been used in or in relation to the generation of power sold to U.P. Power Corporation Ltd., but the show cause notice is silent on this point. It does not even mention as to which common input or input service were being used and if so, how much is the cenvat credit taken - appellant, therefore, have strong prima facie case in their favour. The requirement of pre-deposit of cenvat credit demand under Rule 6(3) of the Cenvat Credit Rules, 2004, interest thereon and penalty is, therefore, waived for hearing of their appeal and recovery thereof is stayed - Stay granted.

Summary

Issues:
Interpretation of Rule 6(3) of the Cenvat Credit Rules, 2004 regarding the treatment of electricity as an excisable good and applicability of the rule in case of sale of electricity to U.P. Power Corporation Ltd.

Analysis:
The appeal was filed by the Revenue challenging the demand raised on the appellant for payment related to the sale of electricity to U.P. Power Corporation Ltd. The department contended that since the appellant had not maintained separate accounts for inputs used in the manufacture of dutiable and exempted final products, they were liable to pay an amount under Rule 6(3) of the Cenvat Credit Rules, 2004. The Commissioner upheld this demand, considering electricity as an excisable good exempted from duty, leading to the confirmation of the demand along with interest and penalty. The appellant argued that the rule is not applicable when one of the products manufactured is non-excisable, citing the definition of 'excisable goods' under the Rules. They also referenced a judgment by the Allahabad High Court stating that electricity is not an excisable good, thereby challenging the department's interpretation of the rule.

The appellant's counsel contended that Rule 6(3) of the Cenvat Credit Rules, 2004 should not apply when one of the products manufactured is non-excisable, as per the definition of 'excisable goods' under the Rules. They referred to a judgment by the Allahabad High Court which held that electricity is not an excisable good, supporting their argument against the applicability of the rule in the case of electricity sold to U.P. Power Corporation Ltd. The counsel emphasized that the appellant had a strong prima facie case in their favor based on this interpretation and requested a waiver of the pre-deposit requirement for hearing the appeal.

After considering the submissions from both sides and examining the records, the Tribunal found merit in the appellant's argument. The Tribunal noted that the Allahabad High Court's judgment on the issue of electricity not being an excisable good was crucial in determining the applicability of Rule 6(3) of the Cenvat Credit Rules, 2004. As a result, the impugned order demanding payment under the rule was deemed unsustainable. While acknowledging that there might be a case for denying proportionate credit for inputs used in generating power sold to U.P. Power Corporation Ltd., the Tribunal highlighted the absence of specific details in the show cause notice regarding the common inputs or input services used. Consequently, the Tribunal ruled in favor of the appellant, waiving the pre-deposit requirement for the appeal and staying the recovery of the demanded amount under Rule 6(3) of the Cenvat Credit Rules, 2004.