2019 (8) TMI 418 - AT - Central Excise

CENVAT credit - captive consumption - electricity used captively for manufacture of excisable goods and the excess/surplus quantity of electricity is sold to outside to power distribution companies for a consideration - Rule 6(3)(i) of the CENVAT Credit Rules, 2004 - HELD THAT - This issue is no more res integra and has been settled in favour of the assessee by this Tribunal in the case of M/S. VENKATESHWARA POWER PROJECTS LTD., M/S. THE UGAR SUGAR WORKS LTD., M/S. EID PARRY (INDIA) LTD., M/S. SRI SRIVSGAR SUGAR AGRO PRODUCTS LTD. VERSUS COMMISSIONER OF CENTRAL GOODS SERVICE TAX 2018 (11) TMI 913 - CESTAT BANGALORE where it was held that the demand of 6% of the value of electricity sold to various companies is not sustainable in law. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against rejection of appellant's appeal by Commissioner (A) regarding payment of excise duty on electricity sold to outsiders.

Analysis:
The appellant, engaged in manufacturing sugar, molasses, and ethyl alcohol, avails CENVAT credit under CCR, 2004. They also manufacture electricity used for captive purposes and sold the surplus to external power distribution companies. The Department demanded excise duty of 6% on the sale value of electricity sold to outsiders, leading to a show-cause notice. Both the original authority and Commissioner (A) upheld the demand. The appellant argued that the order ignored judicial precedents and cited favorable decisions by the Tribunal in their earlier case. The AR defended the impugned order.

Upon review, the Tribunal found the issue to be settled in favor of the appellant based on precedents like the case of M/s. Venkateshwara Power Project Ltd. & Ors. vs. CCE. The Tribunal highlighted that in cases where electricity is generated from bagasse without using any other input or input service, the electrical energy is neither excisable nor exempted goods, making Rule 6 inapplicable. Consequently, the demand of 6% on the value of electricity sold was deemed unsustainable in law. Relying on the previous decisions and the appellant's case, the Tribunal set aside the impugned order and allowed the appeal of the appellant.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demand for excise duty on electricity sold to external companies. The decision was based on established legal principles and precedents, ultimately leading to the allowance of the appeal.