2015 (4) TMI 215 - AT - Central Excise

Denial of CENVAT Credit - Non maintenance of separate accounts - Held that - Only bagasse, a byproduct, on which no duty is payable, is used in generation of electricity as fuel. Bagasse is put into the boiler and steam generates and by the pressure of steam, turbine generates electricity but no steam is being used in manufacture of electricity. - Facts of the case of Gularia Chini Mills (2013 (7) TMI 159 - ALLAHABAD HIGH COURT) are relevant to the facts of this case, wherein the Hon'ble High Court has held that the electrical energy generated from bagasse is not covered under Chapter 27. Therefore, electrical energy is not an excisable goods nor is it exempted as defined in Section 2(d) of the Act. It was further held that the electricity is not an excisable goods under section 2(d) of the Act, hence Rule 6 of the Cenvat Credit Rules is not applicable as held by the Hon'ble Supreme Court in the case of Solaris Chemtech Ltd. Therefore, relying on the decision of the Hon'ble Allahabad High Court, we hold that the respondents are not required to reverse an amount of 10% of the value of electricity sold by the respondents to MSEDCL. Therefore, we do not find any infirmity in the impugned order and the same is upheld - Decided against Revenue.

Summary

Issues:
1. Whether the respondents are liable to pay 10% of the amount of electricity cleared by them as duty under Rule 6(3) of the Cenvat Credit Rules.

Detailed Analysis:

Issue 1: Liability to Pay Duty on Electricity Cleared:
The Revenue appealed against the dropping of demands by the learned Commissioner (Appeals) regarding the respondents availing cenvat credit without maintaining separate accounts for dutiable and exempted goods. The Revenue contended that since electricity cleared by the respondents to MSEDCL without payment of duty is considered exempted goods, they are required to pay 10% of the amount of electricity cleared as per Rule 6(3) of the Cenvat Credit Rules. The Revenue relied on previous tribunal decisions to support their argument.

Analysis: The respondents argued that the generation of electricity involved using bagasse as fuel in the boiler, which does not attract duty. They emphasized that no steam was directly used in the manufacture of electricity, making the dutiable inputs and input services argument irrelevant. They cited tribunal decisions and a High Court case to support their stance that electricity generated from bagasse is not excisable goods, thus exempt from Rule 6 of the Cenvat Credit Rules. The Tribunal agreed with the respondents, stating that the facts of the case did not align with the previous cases cited by the Revenue. Referring to the High Court decision, the Tribunal concluded that electricity generated from bagasse is not excisable goods and, therefore, Rule 6 of the Cenvat Credit Rules does not apply. Consequently, the Tribunal upheld the impugned order, dismissing the appeals filed by the Revenue.

This comprehensive analysis highlights the core issue of the liability to pay duty on electricity cleared by the respondents under Rule 6(3) of the Cenvat Credit Rules, providing a detailed examination of the arguments presented by both parties and the Tribunal's reasoning in reaching its decision.