2020 (4) TMI 443 - AT - Central Excise

CENVAT Credit - common input services availed for taxable as well as exempt services - availment of common input services such as professional services, tour operator service, chartered accountant service, telephone service, security service etc., in the factory of manufacture of the excisable goods as well as in the premises of generation of electricity - credit disallowed on the ground that the requirement of sub-rule (3) of Rule 6 of the Cenvat Credit Rules, 2004 have not been complied - HELD THAT - The electrical energy cannot be considered Nil rated goods. Further, the Central Government in exercising of the powers conferred under Section 5A of the Central Excise Act, 1944 has not specifically issued any notification, in exempting electrical energy from payment of Central Excise duty. Hence, electrical energy in my considered view cannot be categorized as exempted goods in terms Section 2(d) of the Act. Rule 6 ibid was amended w.e.f. 01.03.2015, which was to the effected that Explanation-1 was inserted vide Notification No. 6/2015-CE (NT) dated 01.03.2015. The said Explanation reads as for the purpose of this rule, exempted goods or final products as defined in clauses (d) (h) of Rule 2 ibid shall include non-excisable goods cleared for a consideration from the factory . Though, part of the disputed period in this case falls under the scope of the amended provisions of Rule 6 ibid, but there will be no material change or such amendment in the case of the appellant in as much as the factory duly registered for manufacture of excisable goods have not dealt with any non-excisable goods, which were cleared from such registered factory. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Availment of Cenvat Credit on common input services used in the factory and electricity generation site.
- Interpretation of Rule 6 of the Cenvat Credit Rules, 2004 regarding exempted goods.
- Applicability of Rule 6 post-amendment w.e.f. 01.03.2015.

Analysis:
1. The appellant availed Cenvat Credit on common input services used both in the factory manufacturing excisable goods and at the electricity generation site. The department disallowed the credit, citing non-compliance with Rule 6 of the Cenvat Credit Rules, 2004. The appellant appealed the decision, arguing that electricity generated at the site should not be considered an excisable product under Rule 6. The appellant contended that the electricity is neither excisable nor exempted goods, thus the Rule's requirements do not apply. The appellant calculated and reversed proportionate Cenvat Credit for input services used at the electricity generation site.

2. The Revenue argued that post-amendment to Rule 6 in 2015, electricity cleared from the Windmill Plants should be considered excisable goods, bringing the appellant under the purview of Rule 6. However, the Tribunal analyzed the provisions of Rule 6, emphasizing that it applies when both dutiable and exempted goods are manufactured. Electrical energy, despite being listed in the Tariff Act, does not have a corresponding rate of duty, making it not "Nil" rated goods. The Tribunal referenced a High Court case to support that only goods subject to excise duty are considered excisable goods. Additionally, a previous Tribunal decision and Supreme Court dismissal supported the view that electricity is not excisable goods, further weakening the Revenue's argument.

3. The Tribunal concluded that the impugned order could not be sustained as electricity cannot be categorized as exempted goods. The amendment to Rule 6 in 2015 did not materially affect the appellant's case since the factory did not deal with non-excisable goods. Therefore, the Tribunal found no merit in the Ld. Commissioner (Appeals)'s order and allowed the appeal in favor of the appellant.

This detailed analysis of the judgment highlights the arguments presented by both sides regarding the interpretation of Rule 6 and the applicability of Cenvat Credit on common input services used in different manufacturing locations.