2018 (6) TMI 1138 - AT - Central Excise

CENVAT credit - duty paid on Naphtha and Furnace Oil which are used in generation of electricity - credit denied on the ground that furnace oil and Naphtha used in generation of electricity was wheeled outside the factory - Held that - Tribunal in similar circumstances in the appellant s own case considering all aspects of the case ULTRATECH CEMENT LTD VERSUS C.C.E S.T., BHAVNAGAR 2018 (2) TMI 564 - CESTAT AHMEDABAD held that the Appellants are not eligible to the credit on Naphtha used for generation of electricity wheeled outside the factory and due to conflicting views on the issue, imposition of penalty is uncalled for. Credit rightly denied - penalty set aside - appeal allowed in part.

Summary

Issues:
Appeal against OIA passed by Commissioner (Appeals-III) Central Excise Ahmedabad regarding admissibility of CENVAT credit on Naphtha and Furnace Oil used in electricity generation and wheeled outside the factory.

Analysis:
The appellant, engaged in clinker and cement manufacturing, availed CENVAT credit on Naphtha and Furnace Oil used in electricity generation. The generated electricity was partially supplied outside the factory. Subsequently, SCNs were issued to recover the credit availed on fuel used for electricity wheeled outside the factory. The demand was confirmed with interest and penalty. The appeal was filed before the Ld. Commissioner (Appeals), who rejected it, leading to the current appeal.

The appellant's advocate argued that the excess electricity generated is a technological necessity, drawing parallels to a Supreme Court judgment in Hindustan Zinc Ltd.'s case. The advocate highlighted that the by-product of electricity generation should be considered admissible for credit, similar to the ruling on sulphuric acid in the Hindustan Zinc Ltd. case.

The Revenue's representative countered by stating that the Tribunal had already considered the Hindustan Zinc Ltd. judgment in a previous order related to the applicability of Rule 57CC of the Central Excise Rules, 1944.

Upon hearing both sides and reviewing the records, the Tribunal found that the issue of CENVAT credit on Naphtha used for electricity generation and wheeled outside the factory was previously addressed in the appellant's case. The Tribunal cited the judgment in Maruti Suzuki Ltd.'s case, concluding that the appellant was not eligible for credit on Naphtha used for electricity generation wheeled outside the factory. However, the Tribunal agreed with the appellant's advocate regarding the imposition of a penalty, following the Supreme Court's observation on conflicting views leading to the setting aside of the penalty.

In conclusion, the Tribunal upheld its previous decision, modifying the impugned order to set aside the penalty while partially allowing the appeal to that extent.