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2019 (12) TMI 1016 - AT - Central ExciseCENVAT Credit - Furnace Oil consumed for generation of electricity a part of which was not used in or in relation to manufacture of their final product - recovery alongwith interest and penalty - HELD THAT - The appellant assessee had rightly availed Cenvat Credit on Furnace Oil used in the generation of electricity in a captive power generating machine even though a part of such generated electricity is used in factory office workers canteen etc. In terms of the definition of input as was prior to 01.04.2011 input includes goods used for generation of electricity used in or in relation to manufacture of final products or for any other purpose within the factory of production - Further the terms factory means any premises including the precincts thereof wherein or in any part of which excisable goods other than salt are manufactured or process connected to manufacturing is carried out. Oxfotd Dictionary defines the terms precincts as the area within the walls or perceived boundaries of a particular building or place . Hence the terms factory includes all the facilities including that of manufacturing process within its boundary wall. As was prior to 01.04.2011 CENVAT credit was available on goods used in generation of electricity and consumed within the boundary wall of the factory of production in or in relation to manufacture of final products or for any other purpose which may not have direct relation to manufacture - This view was also ratified by the Hon ble Supreme Court in the judgement in the case of Maruti Suzuki Ltd. Vs. Commissioner of Central Excise Delhi-III 2009 (8) TMI 14 - SUPREME COURT wherein the Hon ble Court has inter alia observed that assessee is entitled to credit on the eligible inputs utilized in the generation of electricity to the extent to which they are using the produced electricity within their factory (for captive consumption) - However with effect from 01.04.2011 with the abolition of the phrase used in or in relation to manufacture of final products from the definition of input vide Notification No.3/2011-CE(Nt) dated 01.03.2011 the scope of input has not only been more widened it has also become more inclusive. With effect from 01.04.2011 input inter alia includes all goods used for generation of electricity for captive use. It would be pertinent to mention that the Show Cause Notice alleges consumption of Furnace Oil whereas the appellants have tried to convince the authorities below that after installation of the electricity there was no occasion for them to continue with the old system and they had stopped using any Furnace Oil for generation of electricity for smooth running of their manufacturing facility - Appeal allowed - decided in favor of appellant.
Issues involved: Availment of Cenvat Credit on Furnace Oil consumed for electricity generation not used in manufacturing final product, imposition of penalty under Rule 15(1) of Cenvat Credit Rules, 2004.
Analysis: 1. The dispute centered around the availment of Cenvat Credit during March 2016 to February 2017 on Furnace Oil used for electricity generation, part of which was not related to manufacturing the final product. The Show Cause Notice sought disallowance of Cenvat Credit amounting to ?5,97,610. The adjudicating authority disallowed the credit, ordered recovery, and imposed a penalty. On appeal, the denial of credit was upheld, but the penalty was set aside due to the absence of mala fide intention. 2. The appellant argued that no Furnace Oil was consumed for electricity generation during the disputed period as evidenced by Nil consumption shown in the appeal paperbook. Reference was made to the installation of electricity connections in April and June 2015, indicating a cessation of Furnace Oil usage for electricity generation post-installation. The Tribunal noted a similar disallowance in a previous case but found that the facts were identical, leading to the allowance of the appeal. 3. The Tribunal delved into the definition of 'input' under the Cenvat Credit Rules, emphasizing the inclusion of goods used for electricity generation within the factory premises. The legislative intent post-April 2011 was highlighted, expanding the scope of 'input' to cover goods used for electricity generation for captive use. The Tribunal cited relevant case law and statutory provisions to support the appellant's position on the availment of Cenvat Credit on Furnace Oil for electricity generation. 4. Ultimately, the Tribunal concluded that the appellant rightfully availed Cenvat Credit on Furnace Oil used for electricity generation, even if a portion of the electricity was utilized outside direct manufacturing activities. The Tribunal found no reason to diverge from the previous appellate order and allowed the appeal with consequential benefits.
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