2022 (7) TMI 1176 - AT - Central Excise

Demand of Central Excise duty - electricity so used in a manner other than production of the goods in their factory - captive consumption - benefit of N/N. 67/1995-CE dated 16.03.1995 - HELD THAT - The electricity generated by the Appellant in the captive power plant is used for both production of the finished goods within the refinery and for other purposes including the electricity wheeled out. In such circumstances, it is found that Hon ble Supreme Court and Hon ble Punjab Haryana High Court referred to by Ld.Authorized Representative have clearly held that in respect of electricity wheeled out, the benefit would not be available. In the case of Maruti Suzuki Ltd. v. Commissioner 2017 (5) TMI 697 - PUNJAB AND HARYANA HIGH COURT , the Hon ble Supreme Court has held 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). They are not entitled to CENVAT credit to the extent of the excess electricity cleared at the contractual rates in favour of joint ventures, vendors etc., which is sold at a price. T he matter needs to be remanded back to the original authority for re-consideration and re-quantification - appeal allowed by way of remand.

Summary

Issues involved:
1. Interpretation of exemption notifications for demand raised in show cause notices.
2. Determining the eligibility of exemption for electricity generated and used for purposes other than production within the factory premises.
3. Comparison of relevant legal precedents in similar cases.
4. Re-examination of the case in light of applicable legal principles.

Issue 1: Interpretation of exemption notifications:
The appeal was filed by the Revenue against an Order-in-Original dated 08.03.2007, where the Commissioner dropped the demand raised in show cause notices based on a decision of the Hon'ble Apex Court. The Revenue contended that the decision cited by the Commissioner was distinguishable as it pertained to a different notification. The issue revolved around the applicability of Notification No. 75/84 in contrast to Notification No. 67/1995-CE.

Issue 2: Eligibility of exemption for electricity usage:
The Respondent had a captive power plant generating electricity within the refinery, using various oils. Part of the electricity generated was used for general facilities and supplied externally. The Revenue argued that the exemption under Notification No. 75/84 should not apply to electricity not used in the manufacturing process within the refinery. The case involved determining the eligibility of exemption for electricity used outside the production process.

Issue 3: Comparison with legal precedents:
The Authorized Representative for the Revenue cited legal precedents, including a decision of the Hon'ble Supreme Court and the Punjab & Haryana High Court, to support their argument. These precedents highlighted the importance of direct or indirect use of input services by the manufacturer claiming benefits. The Tribunal's decision in a related case was also referenced to strengthen the Revenue's position.

Issue 4: Re-examination and remand:
After considering the arguments and legal precedents, the Tribunal found that the electricity generated was used for various purposes, including external supply. Citing the Hon'ble Supreme Court's decision in a similar case, the Tribunal concluded that the matter needed re-examination. Consequently, the case was remanded to the original authority for reconsideration and re-quantification, with a directive to decide within three months due to the case's age.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by both parties, relevant legal precedents, and the final decision of the Tribunal, providing a comprehensive understanding of the case.