2022 (6) TMI 536 - AT - Central Excise

Reversal of CENVAT Credit - input services - generation of electricity which was captively used but some part thereof was also sold by them/exempt goods - common input - Coal - Rule 6(1), 6(2), 6(3A), 6(3D) of CCR, 2004 - Whether for the electricity generated by the appellants for captive consumption, some part whereof has been sold to state electricity body, the appellants are not liable to take the credit on such amount of electricity as has been sold out? HELD THAT - In light of these admitted facts foremost it is required to adjudicate as to whether the electricity is an exempted good to cover the case of the appellants within the scope of Rule 6 of CCR, 2004. The law in this case has been settled - Hon ble High Court, Allahabad in the case of GULARIA CHINI MILLS AND OTHERS VERSUS UNION OF INDIA AND OTHERS 2013 (7) TMI 159 - ALLAHABAD HIGH COURT has held that The electrical energy generated from Bagasse is not covered under Chapter 27. Similarly, Chapter 27 does not cover electrical energy produced by solar power, hydro power, wind power or from bagasse. Therefore, we are of the view that electrical energy is not an excisable goods nor it is exempted goods as defined in Rule 2 (d) of the 2004 Rules. In the present case, Cenvat credit has been taken on the inputs used, however, suo moto proportionately reversed for the electricity which has been sold out. Further, it is observed that the Rule 6 of CCR, 2004 gives three separate options to the assessee as mentioned under sub rule (1), (2) and (3) thereof and to exercise any one of these options is the prerogative of assessee. The department cannot compel the assessee to opt for a particular option. Further, w.e.f. 01.04.2008 Rule 6 (3A) has been introduced, according to which the assessee is eligible to reverse proportionate credit on inputs and input services used in manufacture of exempted goods. Invocation of Extended period of Limitation - HELD THAT - There is no denial for the fact that similar show cause notices have already been served upon the appellants for the previous years. Suppression of facts in those circumstances cannot be alleged - it is held that invocation of extended period of limitation has also been wrongly confirmed. Once there was no suppression question of imposition of penalty does not at all arise. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellants are liable to pay an amount equal to Cenvat credit for electricity sold along with exempted goods.
2. Whether electricity generated by the appellants qualifies as excisable goods.
3. Whether the appellants are required to reverse Cenvat credit for electricity sold.
4. Whether the invocation of the extended period of limitation and penalty imposition is justified.

Issue 1: Liability for Cenvat Credit on Electricity Sold
The department alleged that the appellants must pay an amount equal to Cenvat credit for electricity sold along with exempted goods. The appellants argued that electricity does not fulfill the conditions to be considered excisable goods. They also highlighted that they had already reversed Cenvat credit for the electricity sold to the state electricity company. The Tribunal noted that the law clarifies that electricity is not an excisable good, and the appellants had already reversed the credit for the sold electricity. Therefore, the demand for Cenvat credit was not applicable.

Issue 2: Classification of Electricity as Excisable Goods
The Tribunal examined whether electricity generated by the appellants qualified as excisable goods. Referring to legal precedents, it was established that electricity generated from sources like bagasse or renewable energy does not fall under excisable goods. The Tribunal concluded that electricity, in this case, did not meet the criteria to be classified as excisable goods, as defined by the law.

Issue 3: Reversal of Cenvat Credit for Sold Electricity
The appellants had already reversed Cenvat credit for the electricity sold. The Tribunal emphasized that the appellants had followed the necessary procedures under Rule 6 of CCR, 2004. The Tribunal noted that the department's calculation sheet did not consider the reversal of input services for certain items, but the appellants had already reversed the credit for the electricity sold. Therefore, the demand for further reversal was deemed unjustified.

Issue 4: Extended Period of Limitation and Penalty Imposition
The department alleged suppression of facts and invoked the extended period of limitation for imposing a penalty. However, the Tribunal found that similar show cause notices had been served previously, indicating no suppression of facts. Citing legal precedents, the Tribunal held that when authorities were aware of relevant facts during the first notice, subsequent notices could not allege suppression. Consequently, the invocation of the extended period of limitation and penalty imposition were deemed incorrect.

In conclusion, the Tribunal set aside the order under challenge, allowing the appeal in favor of the appellants. The decision was based on the non-applicability of Cenvat credit for sold electricity, the classification of electricity as non-excisable goods, the adherence to reversal procedures, and the incorrect invocation of the extended period of limitation and penalty imposition.