2018 (5) TMI 1416 - AT - Central Excise

CENVAT credit - Carbon Black Feed Stock (CBFS) - Department was of the view that the appellants are not eligible for credit on CBFS which is used for generation of electricity which is wheeled out - Held that - The process of manufacture has been explained. Undeniably CBFS is an input used for manufacture of Carbon Black. It cannot be said that appellant has procured CBFS for generation of electricity. Appellants have registered for manufacture of Carbon Black by using CBFS as input. The judgement of Hon ble Allahabad High Court in the case of Hi-Tech Carbon 2018 (2) TMI 819 - ALLAHABAD HIGH COURT would be applicable to the present case where it was held that the demand of cenvat credit on CBFS cannot sustain alleging that lean gas emerged is used for generation of steam. Demand cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
Applicability of cenvat credit on Carbon Black Feed Stock (CBFS) used for generation of electricity wheeled out to Electricity Board.

Analysis:
1. The appellants, engaged in the manufacture of Carbon Black, availed credit on CBFS used for generating electricity wheeled out to the Electricity Board. The Department contended that credit on CBFS used for electricity generation is not eligible. The Commissioner confirmed the demand, interest, and penalty. The appellant argued that CBFS is used solely for carbon black manufacture, not electricity generation. Legal precedents and CBEC clarification supported the appellant's stance. The appellant's case history and High Court decisions favored them, showing no suppression for time-barring the show cause notice.

2. The Department argued that CBFS is used in the entire process of electricity generation, making it ineligible for credit. Lean gases from CBFS are utilized in preheating, making CBFS the main fuel for steam generation, which is a final product. Legal precedents were cited to support this argument.

3. After considering both sides and perusing records, it was established that CBFS is used solely for carbon black manufacture, not electricity generation. Lean gases from CBFS are a by-product used for steam and electricity due to environmental concerns. Legal judgments and Commissioner's acceptance of the appellant's contention in a previous case supported the appellant's claim. The Department's acceptance of a similar decision and finality of previous judgments led to setting aside the impugned order and allowing the appeals.

Conclusion:
The judgment favored the appellant, establishing that CBFS was used exclusively for carbon black production, not electricity generation. Legal precedents, case history, and previous decisions supported the appellant's claim, leading to the setting aside of the demand for disallowed credit on CBFS used for electricity generation wheeled out to the Electricity Board.