2009 (8) TMI 464 - AT - Central Excise

Cenvat- Input- The Revenue filed this appeal against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals) whereby the credit in respect of inputs used as fuel for generation of electricity which is further used in the canteen and office building is allowed. In the light of the decision of Indo Rama Synthetics (India) Ltd. v. Commissioner of Central Excise, Nagpur, held that- Hence, the ratio of the said decision is fully applicable on the facts of the present case and the credit in respect of duty paid on the goods or fuel used for generation of electricity which is further used in canteen or office building is not available to the respondent. The impugned order in this regard is set aside. But there is no malafide intention of the respondent thus no penalty can be imposed.

Summary

Issues:
Whether the credit in respect of duty paid on inputs used as fuel for electricity generation, further used in canteen and office building, is available to the manufacturer or not.

Analysis:
The Revenue appealed against the Order-in-Appeal allowing credit for inputs used as fuel for electricity generation in the canteen and office building. The Revenue argued that the definition of input under Cenvat Credit Rules limits credit to goods used within the factory of production. They cited a Bombay High Court decision where credit was allowed only if electricity was used for manufacturing final products or related purposes. On the other hand, the respondents contended that the canteen and office are part of the factory, essential under the Factory Act, so credit cannot be denied. They also mentioned previous show cause notices where credit denial was dropped. The Tribunal's decision in Lampack Paper Products case was cited, emphasizing that settled issues cannot be reopened by the Revenue.

The respondents argued that electricity usage within the factory premises makes them eligible for credit as per the input definition. They highlighted the Factory Act's definition of factory, including canteen as an integral part. Referring to the Bombay High Court's interpretation of Rule 57B(iv), they emphasized that credit is available for inputs used for electricity generation within the factory premises for any purpose connected to or related to manufacturing final products. The Tribunal's decision in Indo Rama Synthetics case was cited, where credit was allowed for electricity used in the workshop within the factory.

The Tribunal referred to the Bombay High Court's interpretation of Rule 57B(iv) in the Indo Rama Synthetics case, stating that credit is available only if electricity usage is connected or related to final product manufacturing. The Supreme Court's dismissal of Indo Rama Synthetics' appeal reinforced this interpretation. The Tribunal also noted the Supreme Court's stance that the Revenue can appeal in cases where appeals were not filed earlier. Considering these precedents, the Tribunal ruled in favor of the Revenue, denying credit for duty paid on fuel used for electricity generation in the canteen and office building. However, no penalty was imposed due to the lack of mala fide intent by the respondents.

In conclusion, the Tribunal upheld the Revenue's appeal, citing the Bombay High Court's interpretation and the Supreme Court's dismissal of the appeal in the Indo Rama Synthetics case. The Tribunal emphasized the need for electricity usage to be connected to or related to manufacturing final products to avail credit. Despite denying the credit, no penalty was imposed due to the circumstances of the case.