2017 (1) TMI 413 - AT - Central Excise

Reversal of CENVAT credit - Rule 6 (3)(i) of the CENVAT Credit Rules, 2004 - the electricity produced was supplied to UP Power Corpn. Ltd. For the production of the electricity, the baggase, the waste, which is generated during the manufacture of sugar, is further used - Held that - An identical issue has come up in the case of DSM Sugar Mills Ltd., 2014 (7) TMI 531 - CESTAT NEW DELHI , where the Tribunal has held that electricity is not an excisable good and hence, in respect of the sale of the electricity to U.P. Power Corporation Ltd., the provisions of Rule 6(3) of the Cenvat Credit Rules would not be applicable - demand not sustainable. CENVAT credit - premium on various insurance policies regarding stock, money, transit, workmen compensation, etc - Held that - the assessee has purchased the insurance policies for its workers. So, the premium paid is the input service. So, the assessee is entitled for cenvat credit as observed in the impugned order. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Duty on electricity sold outside factory premises.
2. Admissibility of credit on service tax paid on insurance premiums.

Analysis:

Issue 1: Duty on electricity sold outside factory premises
The case involves an appeal by the assessee and the Department against an order concerning the duty on electricity sold outside the factory premises. The assessee, engaged in sugar manufacturing, utilized waste Bagasse for electricity generation, part of which was sold outside. The Department imposed duty under Rule 6(3)(i) of the CENVAT Credit Rules, 2004. The Tribunal referred to a similar case of DSM Sugar Mills Ltd., where the Allahabad High Court ruled that electricity is not excisable goods. Following this precedent, the Tribunal set aside the impugned order, allowing the appeal of the assessee.

Issue 2: Admissibility of credit on service tax paid on insurance premiums
In the cross-appeal by the Department, the issue revolved around the admissibility of credit on service tax paid on insurance premiums for various policies. The counsel argued that the premiums were paid for insurance policies for workers, making them input services eligible for cenvat credit. The Tribunal, after considering the facts and circumstances, upheld the impugned order, stating that the premiums for insurance policies of employees were reasonable. Consequently, the appeal of the assessee was allowed with consequential relief, while the Department's appeal was dismissed.

In conclusion, the Tribunal ruled in favor of the assessee regarding the duty on electricity sold outside the factory premises, following the precedent set by the Allahabad High Court. Additionally, the Tribunal upheld the admissibility of credit on service tax paid on insurance premiums for policies related to workers, leading to the allowance of the assessee's appeal and the dismissal of the Department's appeal.