2016 (2) TMI 863 - AT - Central Excise

Duty liability - assessee liable to pay 8% or 10% of the value of electricity cleared outside in terms of Rule 6 of Cenvat Credit Rules - proportionate reversal of credit - Held that - The Tribunal in the case of Standards Intl. Precision Engineers P. Ltd. vs. CCE, Bangalore - II (2010 (6) TMI 395 - CESTAT, BANGALORE ) held that when the credit attributable to inputs or input services used in or in relation to manufactured of exempted goods is reversed the same should be considered as sufficient compliance of the provisions of Rule 6 (4). The Hon ble Supreme Court in the case of Maruti Suzuki Ltd. vs. CCE, Delhi - III (2009 (8) TMI 14 - SUPREME COURT) held that the Cenvat credit could not be admissible for the inputs attributable to the generation of electricity wheeled out. As such, we find that the respondents have not taken any undue benefit and they have reversed the credit attributable to the electricity cleared outside. There is no cause for initiating action for recovery of 8% or 10% of the value of such electricity. - Decided against revenue

Summary

Issues:
1. Liability of the respondent to pay 8%/10% of the value of electricity cleared outside in terms of Rule 6 of Cenvat Credit Rules.

Analysis:
The appeal by Revenue challenges the order of the Commissioner (Appeals-I) dated 19/12/2006, which set aside the demand of &8377; 87,15,500/- with interest and a penalty of &8377; 20 lakhs imposed on the respondent. The case revolves around the respondent's generation of electricity for captive use, with some portion being cleared to outside parties during 2002-2005. The Revenue argued that as the respondent failed to maintain separate accounts for the electricity sold outside, they were liable to pay 8%/10% of its value as per Rule 6. However, the respondent contended that they had already debited the Cenvat credit attributable to the electricity cleared outside, rendering the notice issued for recovery unsustainable.

The Tribunal examined whether the respondent was indeed liable to pay the specified percentage of the electricity value cleared outside. It was noted that the respondent had debited the credits attributed to such electricity even before the notice was issued. Referring to precedents, the Tribunal highlighted the importance of reversing credits attributable to exempted goods' manufacture. The Supreme Court's decision in Maruti Suzuki Ltd. vs. CCE was cited to emphasize that Cenvat credit could not be claimed for inputs related to electricity generation for external use. Ultimately, the Tribunal found that the respondent had not gained any undue benefit and had complied by reversing the credit, thus dismissing the Department's appeal as lacking merit.

While acknowledging that the reasoning in the impugned order regarding electricity as a non-excisable commodity was unsustainable based on higher court decisions, the Tribunal upheld the order's final outcome. The appeal by Revenue was consequently dismissed, affirming the Commissioner (Appeals-I)'s decision in favor of the respondent.

This detailed analysis of the judgment showcases the legal intricacies surrounding the liability of the respondent under Rule 6 of the Cenvat Credit Rules concerning the clearance of electricity to external parties. The Tribunal's thorough examination of the facts, legal precedents, and compliance by the respondent culminated in the dismissal of the Revenue's appeal, underscoring the importance of adhering to regulatory requirements and established legal principles in taxation matters.