2023 (5) TMI 1338 - AT - Central Excise

Reversal of CENVAT Credit - common input services - electricity used in a residential colony and power wheeled out to RSEB or used in the residential colony - penalty under Rule 15(2) of the Cenvat Credit Rules - extended period of limitation. Extended period of limitation - HELD THAT - The issue is wholly interpretational in nature and also it is undisputed fact that the appellant have maintained proper records of the transactions and they were subject to regular inspection and audit by the Department. In this view of the matter, the extended period of limitation is not available to the Revenue. Accordingly, demand will survive only for the normal period. Reversal of CENVAT Credit - HELD THAT - The appellant is not liable for reversal of duty on the power used in the residential township, which is situated closed to the factory of the appellant and it is an industrial township maintained by the appellant, which requires necessary technicians and workmen on short call and as and when required for running the factory. Accordingly, the appellant is not required to reverse the proportionate cenvat credit for common input and input services towards the power used in the residential colony - the appellant is liable to reverse the proportionate cenvat credit attributable to power wheeled out to RSEB. The matter remanded to the Original Adjudicating Authority to recalculate the amount to be reversed only towards the power wheeled out to RSEB. The appellant shall be entitled to consequential benefit in accordance with law. Thus, the appeal is allowed by way of remand.

Summary

Issues Involved:
The issues involved in the judgment include the demand for reversal of cenvat credit on electricity used in a residential colony and wheeled out to a state electricity board, applicability of penalty under Rule 15(2) of the Cenvat Credit Rules, and interpretation of whether certain services are directly attributable to a captive power plant.

Demand for Reversal of Cenvat Credit on Electricity:
The appellant, a manufacturer of cement and clinker, availed cenvat credit for inputs and services used in its three captive power plants. The Department contended that electricity generated was exempt from central excise duty, leading to a demand for reversal of cenvat credit on common input services. The show cause notice proposed an amount for reversal, which was confirmed in the order-in-original, including the imposition of a penalty under Rule 15(2) of the Act.

Appellant's Grounds and Arguments:
The appellant contested the demand, arguing that the extended period of limitation was not applicable as proper records were maintained. It was asserted that the residential colony was an industrial township necessary for the plant's operation, citing precedents where supplying power to such townships was considered part of manufacturing activity. The appellant also contended that certain services were not directly related to the captive power plant and that the expenditure on common services formed part of the final product cost.

Decision and Findings:
The Tribunal held that the extended period of limitation was not available to the Revenue, limiting the demand to the normal period. It ruled that the appellant was not required to reverse cenvat credit for power used in the residential colony, considering it an industrial township essential for plant operations. However, the appellant was directed to reverse cenvat credit for power wheeled out to the state electricity board. The matter was remanded for recalculation of the amount to be reversed only for power wheeled out, granting the appellant consequential benefits and setting aside the imposed penalty. The appeal was allowed with consequential benefits.