Appeal granted: Duty on power purchase qualifies for Cenvat credit

The Tribunal allowed the appeal, ruling that an amount equal to duty should be considered as duty for availing Cenvat credit on power purchase for generating electricity sold within the same legal entity. The Tribunal emphasized that denying credit based on narrow interpretations would contradict the law's purpose, and referred to Rule 2(g) of Cenvat Credit Rules, 2002, defining "input" to include goods used for electricity generation. Consequential relief was provided if necessary.

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Issues:
Appeal against OIO denying Cenvat credit on power purchase for generating electricity sold to appellant.

Analysis:
The appellant, a division of a 100% EOU, availed Cenvat credit on power purchase from the EOU for generating electricity. Revenue claimed the credit was irregular. The appellant argued that the amount paid was equivalent to duty as per the definition in Section 2A of the Act, supported by case laws like CC, Rajkot v Sarabhai International Ltd. The appellant contended that denying credit for an amount equal to duty is not supported by Cenvat Credit Rules, citing cases like Pushpaman Forgings and Indian Railways v. CCE. The appellant emphasized that there was no "sale" as per the notification since the power was transferred within the same legal entity. Additionally, the Circular issued by GOI supported the appellant's stance that the amount equal to duty should be considered as duty for availing Cenvat credit.

The Revenue argued that since electricity is non-excisable, Cenvat credit cannot be taken on the amount paid, claiming it does not represent duty. The Commissioner distinguished between duty of excise and an amount equal to duty, denying credit based on this distinction. However, the Tribunal found this distinction absurd and held that the amount equal to duty should be considered as duty for availing Cenvat credit. The Tribunal referred to Rule 2(g) of Cenvat Credit Rules, 2002, defining "input," which includes goods used for generation of electricity for manufacturing final products. The Tribunal noted that even though the appellant did not directly produce power for final products, they paid duty on inputs used for power generation, qualifying for Cenvat credit. The Tribunal emphasized that denying credit based on narrow interpretations would go against the law's purpose. The Tribunal referred to a letter treating the amount as duty and concluded that in situations where one unit generates power and another purchases it, the inputs used for power generation should be entitled to Modvat credit for the purchasing unit, considering an amount equal to duty as duty for Cenvat credit purposes.

In conclusion, the Tribunal allowed the appeal, holding that an amount equal to duty should be considered as duty for availing Cenvat credit, providing consequential relief if necessary.

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