2012 (11) TMI 32 - AT - Central Excise

Imposition of penalty - CENVAT Credit on LSHS attributable to electricity used elsewhere other than factory - Held that - Issue on non-availability of CENVAT Credit is finally settled in assessee s own case against them by relying on the decision of Hon ble Supreme Court reported in CCE Versus M/s. Gujarat Narmada Fertilizers Co. Ltd. (2009 (8) TMI 15 - SUPREME COURT). As decided in assesse s own case wherein in view of the fact that Hon ble High Court of Gujarat as well as the Tribunal had taken a view in their favour & when two views are possible and the Tribunal and Hon ble High Court had taken a view in assessee s favour, it would be unfair to uphold the penalty imposed on the appellant in this case - thus penalty imposed is set aside, while upholding the demand for CENVAT Credit and interest thereon - partly in favour of assessee.

Summary

Issues: Dispute over CENVAT Credit on Low Sulphur Heavy Stock (LSHS) used for electricity generation and diversion for staff colony and sale to electricity grid.

In this case, the issue revolved around the availability of CENVAT Credit on Low Sulphur Heavy Stock (LSHS) used for electricity generation and diverted for staff colony and sale to the electricity grid. The assessee, engaged in manufacturing urea and fertilizers, used LSHS as an input for generating steam for electricity production. While there was no dispute regarding CENVAT Credit for LSHS used in the factory for production, a disagreement arose concerning the credit availed on LSHS utilized for electricity diverted elsewhere. The counsel for the assessee argued that the matter had been settled in their favor by a Supreme Court decision, emphasizing that the issue was one of interpretation of statutory provisions and facts. The Revenue, however, relied on a different Supreme Court decision to support the imposition of a penalty for contravention of rules due to incorrect credit utilization.

The Tribunal, considering the arguments from both sides, noted that previous decisions by the Tribunal and the High Court had favored the assessee's eligibility for credit in similar circumstances. Given the differing interpretations of the law and facts, and the favorable rulings in the assessee's favor by the Tribunal and the High Court, the Tribunal found it unjust to uphold the penalty imposed on the appellant. Consequently, the Tribunal set aside the penalty while affirming the demand for CENVAT Credit and interest thereon, concluding that the issue at hand was primarily a matter of statutory interpretation and factual analysis, warranting a lenient approach towards the penalty imposition.