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2017 (7) TMI 517 - AT - Central ExciseCENVAT credit - input - fuel - Alleging that as per the definition of input under Rule 2(f) of Cenvat Credit Rules 2001, fuel is an input only when used in generation of electricity and steam, used for manufacture of final products within the factory of production, and that the credit taken on furnace oil used in the generation of steam not used within the factory but cleared to M/s. Futura Polymers is incorrect - Held that - reliance placed in the case of COMMISSIONER OF C. EX., CHENNAI Versus INDIAN ORGANIC CHEMICALS LTD. 2014 (1) TMI 1570 - MADRAS HIGH COURT , where it was held that the assessee has used furnace oil in the generation of steam and the said steam was transferred altogether to a different unit situated outside the factory premises. Therefore, the case of the assessee would come under Rule 57B(1)(iv) - demand upheld - appeal allowed - decided in favor of Revenue.
Issues:
1. Interpretation of the definition of input under Rule 2(f) of Cenvat Credit Rules 2001 regarding the eligibility of fuel as an input. 2. Analysis of the judgment in the case of CCE, Chennai Vs. Indian Organic Chemicals Ltd. regarding the qualification of naphtha as an input for availing credit. 3. Application of Rule 57B(1)(iv) and Rule 57C(1)(ii) in determining the eligibility of Modvat credit on the usage of fuel for generation of electricity and steam. 4. Review of the Tribunal's decision in 2005 (192) ELT 487 (Tri-Chennai) regarding the eligibility of naphtha as goods used as fuel for Modvat credit. Issue 1 - Interpretation of the definition of input under Rule 2(f) of Cenvat Credit Rules 2001: The case involved manufacturers of Polyester Staple Fibre availing Cenvat credit on inputs like Furnace Oil used in steam generation. The dispute arose as part of the steam generated was supplied to another entity. The Lower authority confirmed duty demands and imposed penalties, which were later set aside by the Commissioner (Appeals). The Tribunal analyzed the definition of input under Rule 2(f) and upheld the demand, emphasizing that the steam not used within the factory premises did not qualify as an input for availing credit. Issue 2 - Analysis of the judgment in the case of CCE, Chennai Vs. Indian Organic Chemicals Ltd.: The department argued that naphtha used as fuel for electricity generation should qualify as an input for availing credit, citing a judgment in a similar case where the High Court ruled in favor of the Revenue. The Tribunal referred to the decision and highlighted that the issue was decided in favor of the Revenue, supporting the department's stance on the eligibility of naphtha as an input for credit. Issue 3 - Application of Rule 57B(1)(iv) and Rule 57C(1)(ii) in determining Modvat credit eligibility: The Tribunal examined the application of Rule 57B(1)(iv) and Rule 57C(1)(ii) in the context of using fuel for electricity generation and steam production. It referenced a previous decision where naphtha was considered eligible for Modvat credit as goods used as fuel, irrespective of its use for electricity generation. The Tribunal concluded that the demand was sustainable based on these rules, without interfering with the penalty set aside by the Commissioner (Appeals). Issue 4 - Review of the Tribunal's decision in 2005 (192) ELT 487 (Tri-Chennai): The Tribunal revisited its earlier decision in 2005 regarding the eligibility of naphtha as goods used as fuel for Modvat credit. It noted that the Revenue appealed the decision, and the High Court ruled in favor of considering the usage of fuel for credit eligibility based on specific rules. The Tribunal upheld the demand in alignment with the High Court's judgment and allowed the appeal with consequential relief, if any.
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