2016 (12) TMI 778 - AT - Central Excise

Demand - CENVAT Credit availed was inadmissible as per Rule 6(4) of CENVAT Credit Rules, 2004 - Held that - It is not in dispute that the major portion of the electricity generated was used in the manufacture of dutiable goods viz. carbon black. Thus, it is clear that the capital goods installed are not exclusively used in the manufacture of finished goods which are exempted from duty. The aforesaid issue is considered by Hon ble Gujarat High Court in United Phosphorous Ltd case 2015 (7) TMI 665 - GUJARAT HIGH COURT , albeit in the erstwhile Rule 57Q of Central Excise Rules 1944, however, the same is relevant in deciding the issue in the new set of rules also. In the said judgment, the Hon ble Court, referring to the judgment of this Tribunal in the case of Kothari Sugars & Chemicals Ltd Vs Commissioner 2005 (11) TMI 124 - CESTAT, CHENNAI and the decision of Hon ble Supreme Court in the case of Solaris Chemtech Ltd 2007 (7) TMI 2 - SUPREME COURT OF INDIA , held that since the electricity generated by the Appellant was not totally sold outside but partly consumed captively, therefore, the CENVAT Credit availed on the capital goods cannot be denied. Following the aforesaid decision, I have no hesitation to hold that the Appellants are eligible to CENVAT Credit on capital goods installed in the factory for generation of electricity, which in turn, used in the manufacture of carbon black even though a part of it sold to M/s Adani Exports Ltd through Gujarat State Electricity Board - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
- Admissibility of CENVAT Credit on capital goods used for electricity generation
- Interpretation of Rule 6(4) of CENVAT Credit Rules, 2004
- Application of previous judgments in similar cases

Analysis:
1. Admissibility of CENVAT Credit on capital goods used for electricity generation:
The case involved appeals against OIAs passed by the Commissioner (Appeals) regarding the admissibility of CENVAT Credit on capital goods used for electricity generation by a company manufacturing Carbon Black. The Appellants had availed CENVAT Credit during the period 2004 to 2011, but demand notices were issued, claiming the credit was inadmissible under Rule 6(4) of CENVAT Credit Rules, 2004. The Appellants argued that the electricity generated using the capital goods was not exclusively sold but mostly consumed internally in the manufacturing process. The Tribunal found that the major portion of electricity generated was indeed used in the manufacture of dutiable goods, indicating that the capital goods were not exclusively used in the production of duty-exempted goods. Relying on previous judgments and legal interpretations, the Tribunal concluded that the Appellants were eligible for CENVAT Credit on the capital goods used for electricity generation.

2. Interpretation of Rule 6(4) of CENVAT Credit Rules, 2004:
The main contention revolved around the interpretation of Rule 6(4) of CENVAT Credit Rules, 2004. The Appellants argued that since a significant portion of the electricity generated was internally consumed in the manufacturing process, Rule 6(4) did not apply to deny them the CENVAT Credit. The Tribunal considered the precedent set by the Hon'ble Gujarat High Court in a similar case and concluded that the Appellants' situation aligned with the legal principles established in previous judgments. By analyzing the utilization of the electricity generated and its impact on the availability of CENVAT Credit, the Tribunal clarified the interpretation of Rule 6(4) in the context of the present case.

3. Application of previous judgments in similar cases:
The Tribunal extensively discussed and applied previous judgments, including the decision of the Hon'ble Gujarat High Court in a related matter and rulings by the Tribunal and the Hon'ble Supreme Court in analogous cases. By referencing these legal precedents, the Tribunal justified its decision to allow the Appellants to claim CENVAT Credit on the capital goods used for electricity generation. The Tribunal's reliance on established legal principles and consistent interpretations of the law in similar scenarios reinforced the Appellants' eligibility for the credit. Consequently, the impugned orders were set aside, and the appeals were allowed with any necessary consequential relief in accordance with the law.