2019 (9) TMI 1520 - AT - Central Excise

CENVAT Credit - denial of credit on input and input service credit, used in the generation of electricity, which was supplied to the appellant s Damanjodi unit, for consumption in manufacture of Alumina - period March, 2005 to September, 2014 - HELD THAT - Taken into consideration the principles of law decided by the Hon ble Supreme Court in the case of M/S. MARUTI SUZUKI LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI-III 2009 (8) TMI 14 - SUPREME COURT and the decision of the Hon ble Rajasthan High Court in the case of COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX, JAIPUR VERSUS SHREE CEMENT LIMITED 2018 (9) TMI 822 - RAJASTHAN HIGH COURT . It is found that the Alumina Plant at Damanjodi, the Aluminium metal plant at Angul and the captive power plant, are integral parts of the same captive arrangement. Electricity, generated in the CPP, is captively used by both the units for manufacture of excisable goods. There is no sale of electricity by the appellant to its Damanjodi unit. Therefore, the ratio of decision of the Hon ble Supreme Court, in the case of Maruti Suzuki is not applicable to the facts of the present case. In the case of COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX, JAIPUR VERSUS SHREE CEMENT LIMITED 2018 (9) TMI 822 - RAJASTHAN HIGH COURT , the Hon ble High Court of Rajasthan, after elaborate discussions, have distinguished the case of Maruti Suzuki case and held that input, input services used in captive power plant for generation of electricity and the excess electricity cleared by the appellant in favour of their sister units, without there being any sale in view of captive arrangement, i.e. electricity generated in one unit being consumed in the other unit of the same company in addition to its being consumed in the same unit also, cenvat credit on inputs and input services is eligible in terms of Rule 2(k) and 2(l) of the Cenvat Credit Rules, 2004. The case of CCE, Jaipur Vs. Shree Cement Ltd. is squarely applicable to the present case. Accordingly, the credit of duty/taxes paid on inputs/input services used in the generation of electricity consumed at the Koraput Plant, is eligible - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
Dispute over denial of cenvat credit on input and input services used for electricity generation supplied to a separate unit within the same company.

Analysis:
The appellant, a Central Government PSU, engaged in manufacturing Aluminum, faced a dispute over cenvat credit on electricity generation for captive consumption. The appellant's Alumina plant and Smelter plant, along with a Captive Power Plant (CPP), are integral parts of a captive arrangement. The electricity generated in the CPP is used in both units for manufacturing excisable goods. The dispute arose when the Central Excise Department sought to deny cenvat credit on electricity supplied to the Damanjodi unit for Alumina production. The department argued that since the Damanjodi unit has a separate registration, the credit is not eligible. The appellant contended that the processes are interlinked and captive, thus justifying the credit for electricity consumed at Damanjodi.

The appellant cited the decision in Sanghi Industries Ltd. case, emphasizing the modern approach of having a large power plant catering to multiple units within the same group. Additionally, the appellant relied on the Rajasthan High Court's judgment in CCE Vs. Shree Cement Ltd., which settled a similar dispute by allowing cenvat credit for electricity used in captive arrangements without involving any sale. The appellant argued that the electricity generated in the CPP is not sold to the Damanjodi unit but is captively consumed for Alumina production. This distinction from cases like Maruti Suzuki Ltd. Vs. CCE was crucial in justifying the cenvat credit for the appellant's situation.

On the other hand, the Revenue contended that since the Damanjodi unit is separately registered and located over 400 km away from the CPP, the credit for electricity supplied to that unit is not admissible. The Revenue drew support from the Sintex Industries Ltd. case, highlighting the importance of separate registrations and physical distances between units for cenvat credit eligibility. However, the appellant distinguished this case by emphasizing the interlinked processes and captive arrangement between the Alumina and Aluminum manufacturing units.

After considering the arguments and legal precedents, the Tribunal ruled in favor of the appellant. The Tribunal found that the Alumina plant at Damanjodi, the Aluminum plant at Angul, and the CPP formed an integral captive arrangement. As there was no sale of electricity to the Damanjodi unit, the principles from the Maruti Suzuki case did not apply. The Tribunal relied on the Rajasthan High Court's decision in Shree Cement Ltd., which allowed cenvat credit for electricity used in captive power plants without any sale, to support its ruling. Consequently, the Tribunal allowed the appeals, holding that the credit for duty/taxes paid on inputs/input services used in electricity generation for the Koraput Plant was eligible.