2016 (11) TMI 1218 - AT - Central Excise

CENVAT credit - electricity generated used captively as well as sold outside - Held that - any services used by a manufacturer whether directly or indirectly in or in relation to the manufacture of final products and clearance of final products upto the place of removal would be eligible for credit. The input services used for setting up of captive power plant, of which the electricity generated is not exclusively used for manufacture of final products cannot be said to be covered by the definition - The appellants in the instant case had availed credit of entire service tax on input services without maintaining separate accounts, though the electricity generated from the power plant was sold and supplied outside, and therefore, were eligible to take only proportionate credit. In view thereof, on merits, the issue stands answered in favour of the revenue. Period of limitation - Held that - The appellants have filed E.R 1 returns regularly disclosing the credit availed by them. When all details relating to the availment of credit are available with the department, the allegation that full facts were not furnished in the documents and that respondent suppressed facts is factually incorrect. In a number of decisions, the Tribunal and courts has held that there should be conscious or deliberate withholding of information with intention to evade payment of duty to saddle the manufacturer with liability beyond the period of one year. Under the circumstances, the allegation that appellant has wilfully suppressed facts with intent to evade payment of duty is not tenable and the demand invoking the extended period is not sustainable. In view thereof, the issue of limitation is answered in favour of the respondents. Appeal dismissed.

Summary

Issues:
Irregular availment of Cenvat credit on input services for setting up a captive power plant and selling electricity outside, eligibility for full credit, reliance on case laws, suppression of facts, limitation period for demand.

Analysis:

Irregular Availment of Cenvat Credit:
The case involved the irregular availment of Cenvat credit on input services for setting up a captive power plant and selling electricity outside. The department alleged that the manufacturer was not eligible for the entire credit on input services as a major portion of the electricity generated was sold outside. The definition of input service under the Cenvat Credit Rules was crucial in determining the eligibility for credit. The Tribunal noted that services used for setting up a captive power plant, where the electricity generated is not exclusively used for manufacturing final products, may not be covered under the definition of input services eligible for credit.

Eligibility for Full Credit:
The appellant contended that they were eligible for full credit and cited relevant case laws to support their argument. However, the Tribunal emphasized that the appellant had availed credit of the entire service tax on input services without maintaining separate accounts, even though the electricity generated was sold outside. The Tribunal held that the appellant should have only availed proportionate credit based on the electricity used for captive consumption in the production of dutiable goods.

Reliance on Case Laws:
Both parties relied on various case laws to support their respective arguments. The department referred to specific cases to highlight the ineligibility for full credit on input services used for generating electricity sold outside. On the other hand, the appellant cited cases to justify their claim for full credit. The Tribunal analyzed these precedents to determine their applicability to the present case and concluded based on the specific circumstances.

Suppression of Facts:
The department alleged that the appellant had suppressed facts regarding the irregular availment of credit on input services, which came to light only through scrutiny by department officers. However, the appellant argued that they had disclosed necessary details through filing ER 1 returns, indicating compliance with reporting requirements. The Tribunal examined the facts presented by both sides to determine whether there was deliberate suppression of information to evade duty payment.

Limitation Period for Demand:
Regarding the limitation period for the demand, the Commissioner(Appeals) had discussed a previous show cause notice issued to the appellant that could cover the period in question. The Tribunal considered whether the appellant had willfully suppressed facts with the intent to evade duty payment, which would impact the sustainability of the demand invoking the extended period. The decision on the issue of limitation was crucial in determining the validity of the demand raised by the department.

In conclusion, the Tribunal dismissed the appeal filed by the department, ruling in favor of the respondents based on the analysis of the issues related to irregular Cenvat credit availment, eligibility for full credit, reliance on case laws, suppression of facts, and the limitation period for the demand. The judgment provided clarity on the interpretation of the Cenvat Credit Rules and the application of relevant precedents in determining the eligibility for credit on input services used for a captive power plant.