2023 (9) TMI 232 - AT - Central Excise

Recovery of (6% of the value of the clearance of finished goods under Rule 6(3) of CCR, 2004) CENVAT Credit - electricity generated out of waste heat emerges during the course of manufacture of sponge iron - inputs and input services were used for manufacture of both dutiable as well as exempted products - HELD THAT - The said issue was examined by the Tribunal in the case of M/S TRIMULA INDUSTRIES LIMITED VERSUS THE COMMISSIONER CENTRAL GOODS, SERVICE TAX CENTRAL EXCISE AND CUSTOMS, BHOPAL 2019 (4) TMI 2119 - CESTAT NEW DELHI where it was held that We fail to accept that the heat entrapped in flue gases which emerge during the process as waste or by-product can be regarded as a final product which is beneficially used by the appellant for manufacture of electricity. It is not the case where the appellant has deliberately used some inputs by adopting a process to manufacture electricity. The demand confirmed in the impugned orders cannot be sustained. Consequently, the impugned orders are set aside - Appeal allowed.

Summary

Issues:
The appeal involves the issue of whether electricity generated from waste heat during the manufacture of sponge iron can be subjected to Rule 6(2) of CCR, 2004.

Facts:
The appellants are involved in manufacturing sponge iron under Chapter 72 of the CETA, 1985. Waste heat generated during this process is used to generate electricity, some of which is consumed internally and some is cleared outside the factory. Show-cause notices were issued alleging violation of Rule 6(1) of CCR, 2004, leading to demands being confirmed by lower authorities. Appeals were filed challenging these orders.

Contentions:
The appellant argued that the issue is settled as per a previous Tribunal judgment and a Supreme Court case, highlighting that waste heat used to generate electricity should not be subjected to Rule 6(2) of CCR, 2004. The Revenue reiterated the findings of the lower authorities.

Judgment:
After hearing both sides and examining the records, the Tribunal referred to a previous case and agreed with its findings. It emphasized that the legislation intends to include only inputs/services used in the manufacture of "final products," not waste or by-products. The Tribunal ruled that waste heat utilized for electricity generation should not be considered a final product, as it is not intentionally manufactured for that purpose. Citing a Supreme Court judgment, the Tribunal concluded that the demands confirmed in the impugned orders cannot be upheld. Therefore, the impugned orders were set aside, and the appeals were allowed.

Note: Separate judgment was not delivered by the judges in this case.