2020 (11) TMI 663 - AT - Central Excise

CENVAT credit - electricity - captive consumption - common Cenvat availed inputs and input services in the generation of electricity without maintenance of separate records - Rule 6(3)(i) of the CCR - extended period of limitation - interest - penalty - HELD THAT - The self-same issue had fallen for consideration of the Hon ble Allahabad High Court in the GULARIA CHINI MILLS AND OTHERS VERSUS UNION OF INDIA AND OTHERS 2013 (7) TMI 159 - ALLAHABAD HIGH COURT wherein the Hon ble Court observed that electrical energy generated from Bagasse is not covered under Chapter 27 of the CETA and is therefore, non-excisable thereby not attracting the provisions of Rule 6 at all as observed from para 22, 26 32 thereof. The said decision has also been upheld by the Hon ble Supreme Court in the UNION OF INDIA VERSUS DSCL SUGAR LTD. 2015 (10) TMI 566 - SUPREME COURT . Even after the insertion of the Explanation 1 Rule 6 of the CCR with effect from 1 March 2015 equating non-excisable goods with exempted goods for the purpose of Rule 6 of the CCR, the factual position remains that no Cenvat availed inputs were used by the Appellant in the generation of electricity from Bagasse. Bagasse remains non-excisable and the question of availing any credit thereon does not arise. That the Appellant had maintained separate records and refrained from availing any credit on the other indirect inputs is also evidenced from the CA Certificate dated 22 February 2017 which has been sought to be refuted by the Adjudicating Authority on the ground that the same is limited to non-availment of credit on few inputs only. However, the adjudicating authority has not referred to any other inputs over and above, those mentioned in the CA Certificate. Therefore, the Certificate of the expert could not have been discarded without any specific and cogent evidence concerning the disputed period. Time Limitation - HELD THAT - The Adjudicating Authority himself has accepted that a Notice for the prior period was issued on the self-same issue for the period 2013-14 and the demand covering of 6% under Rule 6(3) was dropped by the Adjudicating Authority therein. Under these circumstances, the subsequent Notice could not have been issued invoking the extended period of limitation. Appeal is allowed on merits as well as limitation

Summary

Issues:
Applicability of Rule 6 of the Cenvat Credit Rules on electricity generated from Bagasse; Merits and limitation of the Order-in-Original dated 16 February 2018.

Analysis:
1. The case involved a composite sugar factory engaged in the manufacture and clearance of excisable goods, including sugar, molasses, and industrial spirits, operating under the Cenvat Scheme. The factory had a Cogeneration Power Plant using Bagasse as fuel to generate electricity, which was used internally and surplus power was sold to the Bihar State Electricity Board. The Commissioner, through the Order-in-Original, demanded recovery under Rule 6(3)(i) of the CCR for allegedly using common Cenvat availed inputs in electricity generation without separate records.

2. The Appellant challenged the Order on grounds including the non-applicability of Rule 6 to non-excisable goods like electricity generated from Bagasse, citing relevant judicial precedents. The Appellant argued that no Cenvat availed inputs were used in electricity generation, maintaining separate records for indirect inputs and reversing credits for common input services, thus complying with the law.

3. The Tribunal analyzed the applicability of Rule 6 on electricity generated from Bagasse, referring to the Gularia Chini Mills case where it was held that such electricity is non-excisable, supported by the DSCL Sugar case. The Tribunal rejected the distinction made by the adjudicating authority, emphasizing the uniformity in technology across sugar factories and the impossibility of not using other indirect items in electricity generation from Bagasse.

4. The Tribunal further discussed the maintenance of separate records for indirect inputs and the reversal of credits for common input services, concluding that no Cenvat availed inputs were used in electricity generation. The Tribunal also noted the limitation aspect, highlighting that a prior notice on the same issue for the period 2013-14 had resulted in dropping the demand, rendering the subsequent notice for the extended period invalid.

5. Ultimately, the Tribunal set aside the Order-in-Original, allowing the appeal on both merits and limitation, providing consequential relief. The decision was based on the non-applicability of Rule 6 to electricity generated from Bagasse, the absence of Cenvat availed inputs in electricity generation, and the limitation issue regarding the extended period notice.

This detailed analysis of the judgment showcases the thorough consideration of legal arguments, precedents, and factual circumstances leading to the Tribunal's decision to overturn the original order.