2015 (9) TMI 295 - AT - Central Excise

Demand towards 10%/5% of value of exempted electricity generated and supplied in term of Rules 6(3) Cenvat Credit Rules, 2004 - Held that - Demand of 10%/5% of the value of electricity generated and supplied to M/s. MSEB was made in terms of Rule 6(3) of Cenvat Credit Rules, 2004. The undisputed fact is that the appellant is sugar/molasses manufacturing unit, electricity so generated and supplied to M/s. MSEB is manufactured out of bagasse. - issue that 10%/5% value of electricity generated from use of bagasse and sold to M/s. MSEB is applicable in terms of Rule 6(3) of Cenvat Credit Rule is settled in favour of assessee and accordingly the impugned order is not sustainable. - Decided in favour of assessee.

Summary

Issues:
1. Confirmation of demand under Section 11A(2) of the Central Excise Act, 1944.
2. Imposition of interest under Section 11AB of the Central Excise Act, 1944.
3. Penalty imposition under Rule 15(2) of the Cenvat Credit Rules 2004 read with Section 11AC of the Central Excise Act, 1944.
4. Applicability of Rule 6(3) of Cenvat Credit Rules, 2004 on the value of electricity generated and supplied.

Confirmation of Demand:
The appellant, engaged in sugar and molasses manufacturing, faced a demand confirmation of 10%/5% of the value of electricity generated and supplied to M/s. MSEB under Rule 6(3) of Cenvat Credit Rules, 2004. The appellant argued that the demand was unsustainable as the electricity was generated using bagasse and DM water, not excisable inputs. Citing legal precedents, including a judgment by the Hon'ble High Court of Allahabad, the appellant contended that the demand was incorrect and illegal. The Tribunal, considering the facts and legal position, ruled in favor of the appellant, holding that the demand was not sustainable based on settled legal principles.

Interest Imposition:
The order also imposed interest on the confirmed demand amount under Section 11AB of the Central Excise Act, 1944. However, the Tribunal's decision to set aside the demand confirmation also nullified the basis for interest imposition. Therefore, the imposition of interest was rendered invalid following the Tribunal's ruling on the demand confirmation issue.

Penalty Imposition:
A penalty of a significant amount was imposed on the appellant under Rule 15(2) of the Cenvat Credit Rules 2004 read with Section 11AC of the Central Excise Act, 1944. The appellant was given the option to reduce the penalty amount by paying the confirmed duty along with interest within a specified timeframe. The Tribunal's decision to allow the appeal and set aside the demand confirmation consequently impacted the penalty imposition. The penalty amount was linked to the confirmed duty, and with the demand being set aside, the penalty imposition was also affected.

Applicability of Rule 6(3) of Cenvat Credit Rules, 2004:
The crux of the case revolved around the applicability of Rule 6(3) of Cenvat Credit Rules, 2004 on the value of electricity generated and supplied by the appellant. Legal arguments presented by both parties centered on whether the electricity generated from bagasse fell under excisable goods, thus impacting the reversal requirement under Rule 6(3). Citing judgments from the Hon'ble High Court of Allahabad and the Tribunal, it was established that electricity generated from bagasse did not qualify as excisable goods, leading to the conclusion that the rule's application was not warranted. The Tribunal upheld the legal position favoring the appellant, thereby allowing the appeal and providing consequential relief if applicable.