2019 (3) TMI 31 - 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 the impugned order dated 9.8.2018 and 22/12/2017 passed by the Commissioner (A) rejecting the appeals of the appellant and upholding the Order-in-Original.
- Applicability of CENVAT credit under CENVAT Credit Rules, 2004 (CCR) for the manufacture of electricity used captively and sold to outside companies.
- Revenue raising demand of 6% of the sale value of electricity as a dutiable product.

Analysis:
The appellants, engaged in the manufacture of sugar, molasses, and ethyl alcohol, also produce electricity classified as electric energy under the Central Excise Tariff Act, 1985. They avail CENVAT credit under CCR and use the electricity captively for manufacturing excisable goods, selling the surplus to external power distribution companies. The Revenue demanded 6% of the sale value of electricity as a dutiable product.

During the hearing, the appellant's counsel argued that the impugned order lacked legal sustainability as it disregarded binding judicial precedents from the Tribunal and High Courts. Referring to previous cases, the counsel contended that the issue had been settled in favor of the assessee. In response, the learned AR supported the impugned order.

Upon evaluating the arguments and previous decisions, the Tribunal found that the issue was no longer res integra and had been resolved in favor of the appellant in earlier cases. Citing specific judgments and precedents, the Tribunal concluded that the demand for 6% of the value of electricity sold was not legally sustainable. Therefore, the Tribunal set aside the demand and allowed the appeals of the appellants, as the issue was decisively in their favor.

In the operative part of the Order pronounced on 26/02/2019, the Tribunal held that the impugned order was not legally sustainable and consequently set it aside, allowing both appeals of the appellants. This decision was based on the established legal principles and precedents cited during the proceedings, affirming the appellant's position regarding the demand raised by the Revenue for the sale of electricity.