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TMI Blog2016 (1) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... at Credit Rules 2004. Here the service tax is paid on the inward transportation of gas used for power generation and there is no physical separation of supply lines or accounts to show which quantum of service tax is attributable to that gas used for electricity sold outside. Hence, it follows that proportionate to service tax attributable to the transportation of gas used for production of electricity sold outside has to be reversed - This is clearly in terms of provisions of Cenvat Credit Rules 2004 interpreted and decided by the Hon'ble Supreme Court in the appellants own case (2009 (8) TMI 14 - SUPREME COURT ). In the present case the proceedings have been initiated only after the decision by the Hon'ble Supreme Court in appellants case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icity sold outside. Aggrieved by the order the appellants are before us. 2. In the course of appeal the appellant contended that the judgment of the Hon'ble Supreme Court in their own case reported in 2009 (240) ELT 641 SC is not applicable to the facts of the present case. The Hon'ble Supreme Court was dealing with inputs and reversal of proportionate credit availed on inputs in connection with electricity sold outside. The eligibility of service tax credit itself is not in dispute. It is only question of reversal of proportionate credit of service tax attributable to electricity sold outside. The appellants contended that principle for treatment of credit availed on inputs cannot be applied to the credit availed on input services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. 4. We have heard both the sides and perused the appeal records. 5. The point for decision is whether or not the appellant are liable to reverse proportionate credit on service tax attributable to generation of electricity which is sold outside by the appellant. Maintainability of demand for longer period and penalty also is to be decided. The appellants are procuring LNG and the supplier is paying service tax on the services of transport of gas through pipeline to the appellants. Such service tax is being availed as credit by the appellant. The LNG procured is used for generation of electricity by the appellants. Some portion of said power is sold outside for consideration. The Revenue's view is that the service tax credit on tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint ventures, vendors, and that too for a price (sale) the "process and the use test" fails. In such a case, the nexus between the process and the use gets disconnected. In such a case, it cannot be said that electricity generated is "used in or in relation to the manufacture of final product, within the factory". Therefore, to the extent of the clearance of excess electricity outside the factory to the joint ventures, vendors, grid etc. would not be admissible for CENVAT credit as such wheeled out electricity, cleared for a price, would not fall within the definition of "input" in Rule 2(g) of the CENVAT Credit Rules, 2002. This view is also expressed in para 9 of the judgment of this Court in the case of Col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VAT credit. In short, assessee is entitled to credit on the eligible inputs utilized in the generation of electricity to the extent to which they are using the produced electricity within their factory (for captive consumption). They are not entitled to CENVAT credit to the extent of the excess electricity cleared at the contractual rates in favour of joint ventures, vendors etc., which is sold at a price." 6. We find that the appellants are striving hard to make a distinction to the effect that the above decision of the Hon'ble Supreme Court will not apply to input services. We fail to appreciate such distinction. The service tax paid on transportation of gas to the power plant is allowed as credit subject to fulfillment of certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puts' and 'input services' which are used in the production of such electricity sold outside will not be eligible for credit as they fall outside the ambit of 'input and input services' as defined by Cenvat Credit Rules 2004. Here the service tax is paid on the inward transportation of gas used for power generation and there is no physical separation of supply lines or accounts to show which quantum of service tax is attributable to that gas used for electricity sold outside. Hence, it follows that proportionate to service tax attributable to the transportation of gas used for production of electricity sold outside has to be reversed. This is clearly in terms of provisions of Cenvat Credit Rules 2004 interpreted and deci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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