2019 (3) TMI 30 - AT - Central Excise

CENVAT Credit - exempted goods - captive consumption - electricity - reversal of proportionate credit on input and input services related to that quantity of electricity sold to outside agencies - Rule 6 of CCR - Held that - This issue is no more res integra and has been settled in favour of the assessee by this Tribunal in the case of M/s. Venkateshwara Power Project Ltd. & Ors. vs. CCE 2018 (11) TMI 913 - CESTAT BANGALORE , where it was held that in the generation of electricity from bagasse, no other input or input service is used and therefore, the electrical energy is neither excisable under Section 2(d) of Central Excise Act, 1944 nor exempted goods and hence, Rule 6 is not applicable - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against rejection of appeal and upholding of Order-in-Original by Commissioner (A)
- Eligibility of CENVAT credit for input and input services related to electricity sold to outside agencies without duty payment

Analysis:
The appeal in question challenges the order of the Commissioner (A) dated 23.3.2018, which dismissed the appellant's appeal and upheld the Order-in-Original. The appellants, engaged in sugar and molasses manufacturing, avail CENVAT credit under CENVAT Credit Rules, 2004. They also produce electricity for captive use in manufacturing excisable goods, selling excess electricity to outside agencies without duty payment due to the absence of prescribed duty rates in the Central Excise Tariff Act, 1985. The issue at hand concerns the eligibility of CENVAT credit for input and input services related to the electricity sold to outside agencies.

In the absence of representation from the appellant, the issue, being narrowly defined and favoring the assessee, is decided based on available records. The learned AR supported the impugned order. Upon reviewing the submissions, materials, and a precedent from the Tribunal, the Judicial Member notes that the issue has been previously settled in favor of the assessee. Referring to a specific case, the Member highlights that the generation of electricity from bagasse does not involve other inputs or input services, making the electrical energy neither excisable nor exempted goods under relevant laws.

Relying on the aforementioned decisions and the settled legal position, the Judicial Member concludes that the demand for 6% of the value of electricity sold to external companies is not legally sustainable. Consequently, the demand is set aside, and the appeal of the appellant is allowed. The impugned order is deemed unsustainable in law, leading to its reversal in favor of the appellant. The operative part of the order was pronounced in Open Court on 26/02/2019.