2018 (9) TMI 164 - AT - Central Excise

CENVAT Credit - common inputs used in manufacture of taxable as well as exempt goods - electricity - case of the department is that input Carbon Black Feed Stock is a common input which is used to manufacture dutiable final product namely, Carbon Black and Electricity which falls under Central Excise Tariff Heading 27160000 on which no rate of duty is prescribed - Rule 6 of CENVAT Credit Rules, 2004. Held that - Very same issue in the appellant s own case has been decided by this Tribunal in M/S PHILIPS CARBON BLACK LTD VERSUS COMMISSIONER OF CENTRAL EXCISE-RAJKOT 2015 (10) TMI 338 - CESTAT AHMEDABAD , where it was held that appellant not liable to pay the amount 8% / 10% on value of the electricity under Rule 6 of the Cenvat Credit Rules - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of CENVAT Credit Rules regarding the payment of duty on sale of electricity generated as a by-product during the manufacturing process.

Analysis:
The case involved the appellant, engaged in manufacturing 'Carbon Black' from 'Carbon Black Feed Stock' and utilizing the by-product Lean Gas for generating electricity, partly for captive use and partly for sale. The department contended that the appellant should pay duty on the sale of electricity under Rule 6 of CENVAT Credit Rules, 2004. The appellant argued that a previous Tribunal order had allowed a similar appeal and cited various judgments in support.

The Tribunal reviewed the previous order dated 09.04.2015 where a similar issue was decided in favor of the appellant. The Tribunal noted that the generation of 'off gases' as a by-product during the manufacturing process of Carbon Black did not affect the availing of Modvat credit. It was established that the off gases were burnt to generate heat for producing steam, and the use of off gases for steam generation did not imply using Modvat inputs for manufacturing an exempted product. The Tribunal referenced relevant rules and decisions to support its conclusion that Rule 57CC did not apply to the steam generated from the by-product. The Tribunal's decision was in line with previous judgments approved by the High Courts of Bombay and Gujarat.

Based on the above analysis and the precedent set by the previous Tribunal order, the impugned order was set aside, and the appeal was allowed with consequential relief. The Tribunal clarified that the issue was no longer res-integra, and the appellant was not liable to pay duty on the sale of electricity generated as a by-product during the manufacturing process.

In conclusion, the Tribunal's decision was based on the interpretation of relevant rules and previous judgments, establishing that the appellant was not required to pay duty on the sale of electricity generated as a by-product. The decision provided clarity on the application of CENVAT Credit Rules in similar cases and upheld the appellant's position in line with established legal principles and precedents.