2016 (5) TMI 1117 - AT - Central Excise

Reversal of attributable credit on inputs and input services consumed for generation of electricity used in colony, guest house, bank, canteen etc. for non-manufacturing activity or pay an amount equal to 10% of sale price of such electricity sold to U.P.Power Corporation Ltd. - Held that - as the appellant has already reversed the Cenvat Credit on input/input services attributable to generation of electricity sold to M/s U.P.Power Corporation Ltd. is sufficient in compliance to provisions of Rule 6 of the Cenvat Credit Rules, 2004, therefore, the appellant is not required to pay 10% of the value of electricity - the issue is no longer res-integra and the same is covered by the decision of SMB Bench of this Tribunal in the case of Bajaj Hindustan Ltd. Versus Commissioner of C. Ex. & S.T., Meerut-I 2015 (6) TMI 1011 - CESTAT NEW DELHI . Therefore, by relying on the same, the impugned order is set aside. - Decided in favour of appellant

Summary

Issues Involved:
1. Non-payment of 10% of the sale price of exempted final product (electricity).
2. Reversal of proportionate Cenvat credit on inputs and input services used for generating electricity.
3. Maintenance of separate accounts for inputs and input services.
4. Classification of electricity as exempted goods.
5. Applicability of Rule 6 of the Cenvat Credit Rules, 2004.

Detailed Analysis:

Issue 1: Non-payment of 10% of the Sale Price of Exempted Final Product (Electricity)
The appellant, engaged in the manufacture of sugar and molasses, was found not to have paid 10% of the amount of the sale price of electricity sold to U.P. Power Corporation Ltd., as required by Rule 6(3) of the Cenvat Credit Rules, 2004. The revenue argued that electricity, being a non-excisable item, necessitated such payment.

Issue 2: Reversal of Proportionate Cenvat Credit on Inputs and Input Services Used for Generating Electricity
The audit revealed that the appellant had not reversed the proportionate Cenvat credit availed on inputs and input services used in the generation of electricity, which was sold to U.P. Power Corporation Ltd. and used in non-manufacturing activities like residential colonies and guest houses. The revenue issued a show cause notice proposing the recovery of Rs. 1,97,96,236/- under Rule 14 of CCR 2004, read with Section 11A of the Central Excise Act, 1944, along with interest and penalties.

Issue 3: Maintenance of Separate Accounts for Inputs and Input Services
The appellant did not maintain separate accounts for the receipt, consumption, and inventory of inputs and input services meant for the manufacture of dutiable final products and exempted goods or non-manufacturing activities. The revenue contended that this failure necessitated the reversal of Cenvat credit or payment of 10% of the sale price of electricity.

Issue 4: Classification of Electricity as Exempted Goods
The appellant argued that electricity is primarily generated for captive consumption and not for sale, and thus should not be considered an exempted final product under Rule 6. They contended that electricity, though included in the Central Excise Tariff (CET) from 28/2/05, had no specified duty rate, making it neither taxable nor exempted. The Tribunal referenced the Allahabad High Court ruling in Gularia Chini Mills, which held that electricity generated from bagasse is not excisable goods under Chapter 27 of the Central Excise Tariff Act.

Issue 5: Applicability of Rule 6 of the Cenvat Credit Rules, 2004
The Tribunal considered whether Rule 6(3) of the Cenvat Credit Rules, 2004, applied to the appellant's case. The appellant cited precedents where similar demands were quashed, arguing that electricity generated from bagasse does not qualify as excisable goods. The Tribunal agreed, noting that the appellant had already reversed the Cenvat credit attributable to inputs and input services used in generating electricity sold to U.P. Power Corporation Ltd., fulfilling the requirements of Rule 6.

Conclusion:
The Tribunal found the issue to be covered by previous decisions, including those in the appellant's own case, and ruled in favor of the appellant. The impugned order was set aside, and the appeal was allowed with consequential relief. The Tribunal held that the appellant was not required to pay 10% of the value of electricity sold, as they had already reversed the necessary Cenvat credit.