2016 (1) TMI 387 - HC - Central Excise

Reversal of cenvat credit on sale of electricity outside buyers - Rule 6 - assessee did not maintain separate accounts with regard to inputs used for generation of electricity meant for sale to outsiders and that for captive consumption - period October, 2001 to July, 2003 - Held that - The question urged before us for non-compliance of the statutory requirement under Rule 6(2) and the statutory presumption under Section 11A(4)(e) has not been considered by the Tribunal. We are further of the opinion that if no separate accounts were maintained, how was the separate quantification to be arrived at has also not been discussed by the Tribunal. For all the aforesaid reasons, we are satisfied that the order under appeal dated 3-11-2009 is not sustainable in its present form. It is set aside. The matter is remanded to the Tribunal for hearing the parties afresh.

Summary

Issues:
1. Liability to pay 8% of electricity value
2. Failure to maintain separate accounts
3. Representation of respondent by Counsel
4. Compliance with Rule 6(2) of Cenvat Credit Rules
5. Statutory presumption under Section 11A(4)(e)
6. Tribunal's reliance on past judgments
7. Sustainability of the order under appeal

Analysis:

1. The Tribunal found the respondent liable to pay 8% of the value of electricity sold to outside buyers for the period October, 2001 to July, 2003 due to failure in demonstrating fulfillment of eligibility conditions under Rule 6(2) of Cenvat Credit Rules, 2002 and not maintaining separate accounts for inputs. However, the Tribunal decided not to levy penalty for the normal period of liability based on a previous case and remanded the matter to the adjudicating authority for quantifying the demand for the normal period only.

2. The respondent's Counsel repeatedly failed to file Vakalatnama despite being duly represented in various hearings, leading to dismissal of a cross-appeal due to non-compliance. The Court emphasized that the respondent's lack of representation was its own fault, and it cannot claim lack of opportunity for hearing as it had entered appearance and filed cross-appeal.

3. The appellant's Counsel argued that the respondent was obligated to maintain separate accounts for inputs used in generating electricity for sale and captive consumption to avail Cenvat credit, citing Rule 6(2) of the Rules. The Counsel highlighted Section 11A(4)(e) of the Central Excise Act, creating a presumption of intent to evade duty if separate accounts were not maintained.

4. The Tribunal's decision was criticized for not considering the statutory requirements of Rule 6(2) and the presumption under Section 11A(4)(e) regarding separate accounts. The Tribunal's reliance on a past judgment related to the definition of 'input' was deemed erroneous as it did not address the current issues adequately.

5. The Court emphasized the importance of reading a judgment in its entirety and not out of context, citing a previous case. It noted that the Tribunal failed to address the compliance issues with Rule 6(2) and the statutory presumption under Section 11A(4)(e) adequately, leading to the decision being set aside and remanded for a fresh hearing within a specified timeframe.

6. In conclusion, the Court allowed the appeal, setting aside the previous order and remanding the matter to the Tribunal for a fresh decision while emphasizing the need for compliance with statutory requirements and a thorough consideration of all relevant issues.