2017 (4) TMI 786 - AT - Central Excise

Reversal of credit - Rule 57CC of CER, 1944 read with Rule 6(2) of CCR 2001/2002 & 2004 - manufacture of Carbon Black - input furnace oil used for generation of steam to run their machinery and to generate electricity and some part of the surplus steam is sold out to the adjoining industrial units - whether appellant required to reverse credit on the units cleared? - validity of SCN - Held that - the whole SCN is misconceived as it is not the case of Revenue that furnace oil is not fuel, used in the factory of the respondent-assessee - steam is not a final product of the respondent-assessee the rigours of Rule 6(2) of the Cenvat Credit Rules, 2001, 2002 & 2004 are not applicable - appeal dismissed - decided against Revenue.

Issues:
1. Interpretation of Rule 6(2) of Cenvat Credit Rules regarding reversal of amount on steam sales.
2. Applicability of Rule 57CC of Central Excise Rules on the sale of surplus steam.
3. Treatment of furnace oil as fuel for the purpose of Cenvat Credit Rules.
4. Maintenance of separate accounts for inputs used in the generation of steam.
5. Availability of extended period of limitation to Revenue for raising demands.

Analysis:
1. The appeal involved a dispute regarding the applicability of Rule 6(2) of the Cenvat Credit Rules on the respondent-assessee's sale of surplus steam generated using furnace oil. The Revenue contended that the respondent should reverse an amount on the value of steam cleared during the disputed period. The Commissioner (Appeals) held that furnace oil, being fuel, falls under an exception exempting it from the provisions of Rule 6(2). The Commissioner relied on previous tribunal decisions to support this interpretation, concluding that the demand made by the Revenue was not sustainable.

2. The issue of invoking Rule 57CC of Central Excise Rules on the sale of surplus steam by the respondent was raised. The Revenue argued that the respondent should reverse an amount based on the value of steam sold without duty payment. However, the Commissioner (Appeals) found that the rules created an exception for inputs used as fuel, such as furnace oil, which exempted the respondent from the requirement to reverse any credit on such inputs.

3. The treatment of furnace oil as fuel for the purpose of Cenvat Credit Rules was a crucial aspect of the case. The respondent argued that since furnace oil was used as fuel for generating steam and not as an input for the final product, it should be exempt from reversal under Rule 6(2). The Commissioner (Appeals) agreed with this interpretation, emphasizing that fuel used in the manufacturing process was not subject to reversal under the rules.

4. The issue of maintaining separate accounts for inputs used in the generation of steam was raised by the Revenue. The appellant did not keep separate records for furnace oil used in both the final product, Carbon Black, and the generation of steam. However, the Commissioner (Appeals) considered the nature of furnace oil as fuel and the absence of steam as a final product of the respondent, concluding that the rules did not require reversal in this scenario.

5. Regarding the availability of the extended period of limitation for raising demands, the respondent argued that proper disclosures were made in their accounts, and the Revenue had knowledge of the steam sales from the balance-sheet. The Commissioner (Appeals) found that the extended period was not applicable in this case, further supporting the dismissal of the Revenue's appeal.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals), dismissing the Revenue's appeal and entitling the respondent to any consequential benefits according to the law.

← Previous Next →