2018 (12) TMI 1288 - AT - Central Excise

CENVAT Credit - applicability of Rule 6 of CCR - Manufacture of electricity - case of appellant is that electricity being non-excisable goods is not exempted goods and therefore the provisions of Rule 6 of CCR are not applicable - Held that - Electricity, though listed in the Tariff, but is not excisable goods - further, electricity is not an exempted goods and there is no manufacture of exempted goods in the present case and therefore the demand under Rule 6(1), (2) and (3) of CCR are not applicable. Board has also clarified the issue vide instruction dt. 23/12/2013 wherein it has been opined that in the case of manufacture of non-excisable goods, Rule 6 would not attract - also, in the case of UOI Vs. DSCL Sugar Ltd. 2015 (10) TMI 566 - SUPREME COURT , the Hon ble Supreme Court has held that Bagasse is not excisable goods, there being no manufacturing process, hence Rule 6 of CCR is not applicable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against rejection of four appeals by Commissioner (Appeals) and upholding of Orders-in-Original
- Applicability of Rule 6 of CCR, 2004 on the demand for an amount equal to the value of electricity sold
- Interpretation of electricity as excisable or exempted goods
- Compliance with maintaining separate accounts for input services
- Legal position on demand of CENVAT credit on common input services

Analysis:

The judgment pertains to four appeals challenging the common impugned order passed by the Commissioner (Appeals), rejecting the appeals and upholding the Orders-in-Original. The issue at hand revolves around the applicability of Rule 6 of the CCR, 2004 concerning the demand for an amount equal to the value of electricity sold. The appellants, engaged in manufacturing sponge iron and MS billets, utilized waste heat recovery for generating electricity, which was both consumed internally and sold to a power company. The dispute arose when the Audit Party alleged non-payment related to CENVAT credit on certain services, triggering the demand under Rule 6. The appellant contended that electricity, being non-excisable goods, did not fall under the purview of Rule 6.

During the proceedings, the appellant argued that electricity, not being excisable or exempted goods, should not attract Rule 6 provisions. Citing various precedents, the appellant supported the claim that Rule 6 did not apply to non-excisable goods. Additionally, a CBEC instruction clarified that Rule 6 did not extend to non-excisable goods used in manufacturing processes. Referring to a specific case, the appellant highlighted that a similar demand was quashed, reinforcing the argument against the applicability of Rule 6 in such scenarios.

On the contrary, the Revenue defended the demand for reversing CENVAT credit on common input services used in electricity production. However, after evaluating the submissions and legal precedents, the Tribunal held that electricity, despite being listed in the Tariff, did not qualify as excisable goods. The judgment emphasized that electricity was not exempted goods, leading to the conclusion that Rule 6 provisions were inapplicable. Drawing support from established legal positions and precedents, the Tribunal ruled in favor of the appellants, setting aside the impugned order and allowing all four appeals with consequential relief.

In essence, the judgment delves into the nuanced interpretation of Rule 6 of the CCR, 2004 in the context of electricity production and consumption, ultimately clarifying the non-applicability of Rule 6 to non-excisable goods like electricity. The decision underscores the importance of aligning legal provisions with the nature of goods involved to ensure fair and accurate application of tax regulations.