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2019 (12) TMI 519 - AT - Central ExciseReversal of Cenvat Credit - electricity generated during the course of manufacture of sugar and molasses - non-maintenance of separate account for usage of the inputs and input services used for manufacture of electricity - Rule 6(3) of the CENVAT Credit Rules, 2004 - HELD THAT - The same issue came up before the Tribunal in the case of Jakarya Sugars Ltd v. Commissioner of Central Excise, Pune II 2018 (5) TMI 1665 - CESTAT MUMBAI wherein it was held that provisions of Rule 6 of CENVAT Credit Rules, 2004 are not applicable to the facts of the case. Tribunal held that Rule 6 (3) (i) is applicable only when a common input, on which cannot availed is used in the manufacture of exempted and dutiable goods - For the generation of electricity, except the use of bagasee no any cenvatable input is used. Therefore, the Rule 6 does not come into play. The provisions of Rule 6(3) of CENVAT Credit Rules, 2004 are not applicable to the facts of the case - demand of 6% of the value of electricity on the appellant is not sustainable - Appeal allowed - decided in favor of appellant.
Issues:
1. Applicability of Rule 6(3) of CENVAT Credit Rules, 2004 on demand for electricity sold outside the factory. 2. Interpretation of Rule 6 in the context of maintaining separate accounts for inputs and input services. 3. Comparison with a previous Tribunal judgment in a similar case involving electricity generation from by-products like bagasse. 4. Consideration of whether the show cause notices were vague and the request for remand to adjudicating authority. Issue 1: Applicability of Rule 6(3) of CENVAT Credit Rules, 2004 The appellant contested the demand under Rule 6(3) concerning electricity sold outside the factory. The Revenue argued for a 6% payment based on the value of electricity due to the appellant's lack of separate account maintenance for inputs used in electricity generation. However, the Tribunal referred to a previous case involving a similar scenario and ruled that Rule 6(3) does not apply to the current case, as the electricity generation from by-products like bagasse did not involve dutiable goods or the use of cenvatable inputs. Therefore, the demand for 6% of the electricity value was deemed unsustainable. Issue 2: Interpretation of Rule 6 and Separate Account Maintenance The Tribunal emphasized the importance of the show cause notice as the foundation of the case, rejecting the request for remand to rectify any vagueness. It was clarified that Rule 6 requires the maintenance of separate accounts only when a common input used for both exempted and dutiable goods is involved. Since no cenvatable inputs were used in generating electricity from bagasse, Rule 6 was deemed inapplicable, aligning with the Supreme Court's stance on similar cases. Issue 3: Comparison with Previous Tribunal Judgment The Tribunal referenced a previous case involving Jakarya Sugars Ltd, where a similar dispute over electricity generation from bagasse was settled. The Tribunal in that case ruled that since no other inputs or input services were used in electricity generation from bagasse, Rule 6 did not apply. Following the precedent set by this judgment, the current Tribunal held that Rule 6(3) was not applicable to the appellant's case, leading to the setting aside of the demand for 6% of the electricity value. Issue 4: Show Cause Notices and Remand Request The appellant's counsel cited the vagueness of the show cause notices, while the Authorized Representative sought a remand for further clarification. However, the Tribunal dismissed this request, emphasizing that the show cause notice's clarity is crucial at the appellate stage. The Tribunal's decision was based on the settled issue regarding Rule 6(3) applicability, leading to the setting aside of the impugned order and allowing the appeal with consequential relief. This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision-making process based on legal interpretations and precedents.
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