2017 (11) TMI 88 - AT - Central Excise

CENVAT credit - input - case of the Revenue is that as the appellant has yield out the excess electricity generated by them to the power grid, therefore, the electricity which has been transferred to the power grid, the input pertaining to the part of the electricity yield to power grid, they are not entitled to avail Cenvat Credit - Held that - identical issue came up in appellants own case for the earlier period 2015 (6) TMI 404 - CESTAT NEW DELHI , where it was held that Electricity sent for synchronization to power grid, would be treated as job worker. There is no dispute that the electricity was returned back to the Appellant s factory, and there is a substantial compliance with the provisions of Rule 4(5)(a) of the Rules. The power grid charged 10% of the value of electricity for providing of synchronisation. The learned Advocate contended that the appellant was importing higher quantum of electricity other than the unit, that were being exported to the grid. So, it is not a case of sale of excess electricity generated in the captive power plant to the energy grid. The fact of the case is more clearly transpired from the order of the Tribunal in the appellant s own case JINDAL STAINLESS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, ROHTAK 2008 (8) TMI 332 - CESTAT, NEW DELHI , where it was held that the demand on the ground that the inputs were used in generation of electricity which was cleared outside the factory of production is not sustainable. Appeal dismissed - decided against Revenue.

Summary

Issues:
- Availing Cenvat Credit on electricity generated in captive power plant and transferred to power grid

Analysis:
The case involved the appellant availing Cenvat Credit on inputs, input services, and capital goods used in their power plant, where a portion of electricity was sent to the power grid. The Revenue contended that as the appellant transferred excess electricity to the grid, they were not entitled to avail Cenvat Credit for that portion. The Ld. Commissioner (Appeals) found that the appellant received more power from the grid than they yielded, justifying their entitlement to Cenvat Credit. The Tribunal referred to a previous case where a similar issue was addressed, emphasizing that the electricity sent to the grid was returned to the appellant for consumption in their final product, not sold. The Tribunal concluded that since there was no sale of electricity, the appellant could avail Cenvat Credit, upholding the impugned order and dismissing the Revenue's appeal.

In the earlier case, the Tribunal highlighted the agreement with the State Electricity Board, allowing the appellant to clear electricity generated in the captive power plant and receive an equal quantity back. This arrangement was to maintain a uniform frequency of electricity, as the power generated was fluctuating. The Tribunal ruled in favor of the appellant, stating that since the electricity cleared to the State Electricity Board was received back and used in manufacturing excisable goods, the demand to reverse credit was not sustainable. This precedent supported the appellant's position in the current case, reinforcing their entitlement to Cenvat Credit for the electricity used in their manufacturing process.

The Tribunal emphasized that in the present case, there was no actual sale of electricity to the power grid. The electricity sent to the grid was returned to the appellant for use in their final product. Citing a Supreme Court observation, the Tribunal clarified that the reversal of credit would only be necessary if electricity was wheeled out at a price for manufacture, which did not occur in this scenario. Therefore, the Tribunal found no merit in the Revenue's arguments, as the facts aligned with the appellant's entitlement to avail Cenvat Credit for the electricity generated in their captive power plant. The decision was based on established legal principles and the specific circumstances of the case, leading to the dismissal of the Revenue's appeal.