2017 (6) TMI 502 - AT - Central Excise

CENVAT credit - electricity - captive consumption - power generated but transferred to sister concerns - Department was of the view that the CENVAT Credit availed on inputs and input services proportionate to the electricity wheeled out to the sister units is required to be reversed by the units where CPPs are located - Held that - in an identical issue, in respect of very same assessee, but situated at Chittorgarh, Rajasthan, this bench in the case of M/s Hindustan Zinc Limited Versus CCE & ST, Jaipur - II 2016 (6) TMI 402 - CESTAT NEW DELHI held that Considering that the electricity has been used in the manufacture of dutiable final products and also the fact that all units belong to the appellant the denial of credit is not justifiable in the present case - CENVAT Credit on inputs and input services proportionate to the power transferred to sister concerns through the Central electricity grid, need not be reversed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Reversal of Cenvat Credit on power generated and transferred to sister units.

Analysis:
The case involved M/s. Shree Cement, a cement manufacturer availing Cenvat credit on inputs, capital goods, and input services under the Cenvat Credit Rules 2004. The dispute centered around the Department's contention that Cenvat Credit on inputs and input services related to electricity transferred to sister units from captive power plants needed to be reversed. The Revenue issued show cause notices proposing recovery of Cenvat Credits with interest and penalties for certain periods. The key question was whether the Cenvat Credit on power transferred to sister units through the Central electric grid should be reversed by the units with captive power plants. Appeals were filed by both the Revenue and the assessee against the orders where the benefit was allowed or disallowed, respectively. The Tribunal consolidated these appeals due to the common issue.

The appellant argued that Cenvat Credit on inputs and input services used in power generation and transferred to sister concerns should be allowed as they were ultimately used in manufacturing dutiable final products. The appellant cited precedents where similar issues were decided in their favor. On the other hand, the Department contended that the issue should be decided in favor of the Revenue.

After considering the arguments and records, the Tribunal found that the issue revolved around the reversal of Cenvat Credit linked to power generated and transferred to sister concerns. The Revenue claimed that inputs and input services were not used for the power generated and consumed internally. However, the Tribunal referenced a previous case involving the same appellant situated in Rajasthan, where it was held that Cenvat Credit on input services used in power generation was eligible as long as the electricity was used in manufacturing dutiable final products, whether captively or outside the generation unit by the same manufacturer. The Tribunal concluded that the denial of credit was unjustifiable, following the precedent and holding that Cenvat Credit on inputs and input services related to power transferred to sister concerns did not need to be reversed.

Consequently, the appeals filed by the Revenue were rejected, while the appeals filed by the assessee were allowed. The Tribunal pronounced the order in the open court, settling the matter in favor of the assessee.