2017 (5) TMI 952 - AT - Central Excise

Captive consumption - clearance of goods to captive power plant - Pitch Creosote Mixture (PCM) - demand on the ground that the power generating unit is a separate legal entity - Held that - goods used as fuel or for generation of electricity, used for manufacture of final products or for any other purpose, within the factory of production is eligible to be called as input. Further, PCM is used within the factory premises of the appellant is also an admitted fact. The said PCM is used in the generation of electricity which in turn used in the manufacture of final products by the appellant - the legal identity of the manufacturer of electricity cannot be a reason for denial of the concession available to the appellant, for the product used within the factory premises in the generation of electricity, which is captively used in the manufacture of final product - appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Liability of the appellant to pay Central Excise duty on Pitch Creosote Mixture (PCM) cleared to the captive power plant.
2. Interpretation of the term "input" under Cenvat Credit Rules, 2002.
3. Applicability of duty liability on goods used for generation of electricity within the factory premises.

Analysis:

Issue 1:
The dispute in the present appeal revolves around the liability of the appellant to pay Central Excise duty on PCM cleared to the captive power plant located within their factory premises. The Revenue contended that the power plant is a separate legal entity, not covered under captive consumption, and thus, the provisions of Cenvat Credit Rules were deemed inapplicable. The Commissioner confirmed the duty liability on PCM cleared to the power plant, imposing a penalty as well. The appellant argued that since the PCM was used in generating electricity for manufacturing excisable goods, no duty should be payable. The Tribunal analyzed the situation and found that the PCM was indeed used within the factory premises for electricity generation, making it eligible for the concession available to goods used in the manufacture of final products.

Issue 2:
The Tribunal delved into the definition of "input" under Rule 2 (g) of the Cenvat Credit Rules, 2002, which includes goods used for generation of electricity within the factory of production. The Tribunal emphasized that PCM, being used within the factory premises for electricity generation, qualifies as an input under the said definition. The legal identity of the electricity manufacturer was deemed irrelevant for denying the concession to the appellant, as the product was captively used in the manufacturing process.

Issue 3:
In analyzing previous decisions, the Tribunal referred to cases where inputs transferred to power plants for electricity generation, used captively in the manufacturing process, were eligible for concessions. The Tribunal cited precedents such as Reliance Industries Ltd. vs. CCE, Dalmia Cements (Bharat) Ltd. vs. CCE, and Haldia Petrochemicals Ltd. vs. CCE to support the appellant's argument. Additionally, the Tribunal acknowledged the appellant's plea regarding the applicability of Rule 4 (5) (a) of the Cenvat Credit Rules, 2002. Ultimately, the Tribunal found the impugned order lacking merit and allowed the appeal, setting aside the duty liability on PCM cleared to the captive power plant.

In conclusion, the Tribunal's detailed analysis and interpretation of the legal provisions, along with the precedents cited, led to the setting aside of the duty liability imposed on the appellant for the PCM cleared to the captive power plant within their factory premises.