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2018 (11) TMI 913 - AT - Central ExciseCENVAT Credit - part of electricity used for captive consumption - demand equal to 6% of the sale value of the electricity sold during the period from March 2015 to December 2015 - Held that - The issue is no more res integra and has been settled by the decision of the Allahabad High Court in the case of Gularia Chini Mills 2013 (7) TMI 159 - ALLAHABAD HIGH COURT , wherein it has been held that there cannot be a demand of 6% of the value of exempted electricity sold outside the factory in terms of Rule 6(3) (i) of CCR simply on the ground that the appellant has failed to maintain separate account on receipt of input or input services used in the manufacture of dutiable goods, namely, Sugar and exempted goods, namely, electricity. The demand of 6% of the value of electricity sold to various companies is not sustainable in law - appeal allowed - decided in favor of appellant.
Issues:
Appeals against rejection of appeals by Commissioner (A) - Demand for 6% of value of electricity sold under Rule 14 of CENVAT Credit Rules, 2004 - Applicability of Rule 6(1) - Use of common inputs or input services - Judicial precedents on similar issues. Analysis: 1. Identical Issue in Appeals: The four appeals were filed against the rejection of appeals by the Commissioner (A). The issue in all four appeals was the demand for 6% of the value of electricity sold under Rule 14 of CENVAT Credit Rules, 2004. As the issue was identical in all appeals, they were disposed of by a common order. 2. Facts of the Case: The appellants, engaged in the manufacture of sugar and molasses, also operated a cogeneration plant to generate electricity. The electricity generated was partly consumed internally and the surplus was sold. A show-cause notice demanded payment under Rule 14 of CENVAT Credit Rules, 2004. The Joint Commissioner confirmed the demand, leading to appeals before the Commissioner (A) and subsequently to the present appeals. 3. Appellant's Arguments: The counsel for the appellants argued that the impugned order was contrary to statutory provisions and judicial precedents. They contended that the demand was based on the incorrect application of Rule 6(1) without evidence of common inputs or services. They cited various decisions supporting their position, including Jakarya Sugars Ltd. vs. CCE and Gularia Chini Mills vs. UOI. 4. Judicial Precedents: The counsel relied on precedents like Gularia Chini Mills, DSCL Sugars Ltd., Simbhaoli Sugar Ltd., and Triveni Engineering & Industries Ltd. to support their argument that the amended Rule 6 did not apply to bagasse. They also cited Ganga Kishan Sahakari Chini Mills Ltd. vs. CCE to emphasize the need for evidence of common inputs for Rule 6 to be applicable. 5. Department's Defense: The Assistant Commissioner defended the order, citing the decision in Sharad S.S.K. Ltd. vs. CCE, Kolhapur, to argue for the reversal of credits on inputs used in electricity generation. 6. Decision: After considering the submissions and precedents, the Tribunal found the issue to be settled by the Allahabad High Court's decision in Gularia Chini Mills, affirmed by the Supreme Court. Following this precedent and the decision in Jakarya Sugars Ltd., the Tribunal held that Rule 6 did not apply to electricity generated from bagasse. Consequently, the demand for 6% of the electricity value was set aside in three appeals. In the fourth appeal, where the appellant had reversed the proportionate credit, the Tribunal found compliance with the law and upheld the reversal. 7. Final Order: The impugned orders were set aside, and the appeals of the appellants were allowed with consequential relief, if any. This detailed analysis of the judgment highlights the key arguments, judicial precedents, and the Tribunal's decision on the issues raised in the appeals.
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