2023 (8) TMI 1527 - AT - Central Excise

Reversal of Cenvat credit on the quantum of electricity produced in the factory of the appellant and supplied to another unit of the appellant for use of in manufacturing of the final product of such other unit - HELD THAT - The issue has been dealt by this Tribunal in the case of M/S. SHREE CEMENT LTD. VERSUS C.C.E. JAIPUR-II 2017 (6) TMI 502 - CESTAT NEW DELHI , wherein this Tribunal has observed ' Cenvat Credit on input and input services proportionate to the power transferred to sister concerns through the Central electricity grid, need not be reversed.' Thus, the appellant has correctly taken the Cenvat credit on inputs and input services, which has been used for generation of electricity. The said electricity is supplied free of cost to the appellant s sister unit for manufacturing of final product. Therefore, no demand is sustainable against the appellant as they have correctly taken the Cenvat credit. The impugned order set aside - appeal allowed.

Summary

Issues involved:
- Appeal against reversal of Cenvat credit on electricity generated and supplied to another unit for manufacturing final products.

Detailed Analysis:
The appellant, engaged in manufacturing High Carbon Ferro Chrome and Chrome Ore Briquette, appealed against orders requiring them to reverse Cenvat credit on electricity generated in their factory and supplied to another unit for final product manufacturing. The appellant availed 50% Cenvat credit on inputs and input services upon supplying surplus electricity to the other unit, with the remaining 50% availed in the subsequent month. The Revenue contended that Cenvat credit was not permissible for electricity supplied free of cost to another unit. Show cause notices were issued, leading to confirmation of demand on Cenvat credit availed for electricity generation and transfer to the other unit, along with interest. The Tribunal considered a similar case involving M/s. Shree Cement Ltd., where Cenvat credit on electricity transferred to sister concerns was upheld. The Tribunal ruled that Cenvat credit on input and input services for electricity transferred to sister concerns need not be reversed, as long as the electricity is used in manufacturing dutiable final products. The Hon'ble Rajasthan High Court affirmed this decision, establishing precedent. Consequently, the Tribunal held that the appellant rightfully availed Cenvat credit on inputs and input services used for electricity generation and supply to the sister unit, leading to the rejection of Revenue's appeals and allowance of the appellant's appeals.

In conclusion, the Tribunal set aside the impugned orders and allowed the appeals, providing consequential relief if necessary. The judgment established that Cenvat credit on inputs and input services for electricity generation and transfer to another unit for manufacturing final products was permissible, following the precedent set in a similar case and affirmed by the Hon'ble Rajasthan High Court.