2014 (2) TMI 817 - AT - Central Excise

Eligibility to CENVAT Credit - Assessee took Cenvat credit of duty paid on the capital goods used for setting up plant for generating electricity - about 87% of the electricity generated by the plant was sold to TNEB and only about 13% was used captively by the factory producing sugar and molasses - Therefore, Revenue denied CENVAT Credit - Held that - order has not considered all the submissions made by the appellant with regard to eligibility of Cenvat Credit on capital goods and input services as specified in Rule 6 (4) and Rule 6(5) of the Cenvat Credit Rules. Therefore, we set aside the impugned order and remit the matter back to the adjudicating authority for fresh consideration, keeping all issues open - Decided in favour of assessee.

Summary

Issues:
1. Application for recall of ex parte order directing pre-deposit for hearing the appeal.
2. Denial of Cenvat credit on capital goods and inputs for a co-generation plant.
3. Dispute over Cenvat credit on input services.
4. Lack of clear findings and quantification by the adjudicating Commissioner.
5. Reference to a decision of the Allahabad High Court for remand.

1. Application for Recall of Ex Parte Order:
The appellant filed an application to recall an ex parte order directing pre-deposit for hearing the appeal. The Counsel for the appellant explained that due to unavoidable circumstances, the appellant's representative could not appear on the scheduled date. After considering the submissions, the Tribunal recalled the order in the interest of justice, allowing the appellant to present their case.

2. Denial of Cenvat Credit on Capital Goods and Inputs:
The appellant, a manufacturer of sugar and molasses, faced a dispute regarding the denial of Cenvat credit on capital goods and inputs for a co-generation plant. The Revenue contended that a significant portion of the electricity generated was sold to an external entity, leading to the initiation of recovery for the credits taken. The appellant argued that as 13% of the electricity was used in manufacturing excisable products, the denial of credit on capital goods was unjustifiable under Rule 6(4) of the Cenvat Credit Rules.

3. Dispute Over Cenvat Credit on Input Services:
Regarding the credit on input services, the appellant reversed the entire credit taken on inputs and claimed that the credit on services covered by Rule 6(5) of the Cenvat Credit Rules was legally taken. The appellant emphasized that the adjudicating Commissioner failed to provide a clear finding on this issue and did not quantify the amounts attributed to different categories, making the order unsustainable.

4. Lack of Clear Findings and Quantification:
The appellant highlighted that the adjudicating Commissioner did not analyze the merits of the issue concerning Cenvat Credit Rules adequately. The absence of a detailed examination based on the rules applicable at the relevant time rendered the order unsustainable. The appellant suggested a remand to the adjudicating authority for a fresh review considering all aspects.

5. Reference to Allahabad High Court Decision:
The appellant referenced a decision of the Allahabad High Court in a similar case and proposed a remand for fresh consideration by the adjudicating authority. The Revenue opposed the remand, arguing that the circumstances in the present case differed from the precedent cited. Ultimately, the Tribunal set aside the order, remitting the matter back to the adjudicating authority for a comprehensive reevaluation, keeping all issues open for further examination.