2015 (6) TMI 1011 - AT - Central Excise

Appellant exempt from 10% electricity payment for bagasse; Cenvat credit reversal suffices

The Tribunal held that the appellant is not obligated to pay 10% of the value of electricity sold, as electricity generated from bagasse is not excisable ... Requirement to pay 10% of the value of electrical energy produced from bagasse which is sold to M/s. UP Power Corporation Ltd. - Held that:- The facts of the case in hand are similar to the facts of the case of Gularia Chini Mills (2013 (7) TMI 159 - ALLAHABAD HIGH COURT ) wherein held that electricity generated from bagasse is not an excisable goods and does not qualify as tariff item as per Chapter 27 of the Central Excise Act, 1984. In these circumstances, the issue is answered in favour of the appellant that appellant is not required to pay 10% of the value of the electricity sold to M/s. UP Power Corporation Ltd. Further, also find that appellant has already reversed the Cenvat credit attributable to input/input services used in generation of electricity sold to M/s. UP Power Corporation Ltd. which is an essential requirement of Rule 6(3) of the Cenvat Credit Rules, 2004 and same has not been dealt by both the lower authorities. In these circumstances, hold that as the appellant has already reversed the Cenvat credit on input/input services attributable to generation of electricity sold to M/s. UP Power Corporation Ltd. is sufficient in compliance to provisions of Rule 6 of the Cenvat Credit Rules, 2004, therefore, the appellant is not required to pay 10% of the value of electricity sold to M/s. UP Power Corporation Ltd.- Decided in favour of assessee Issues Involved:1. Whether the appellant is required to pay 10% of the value of electrical energy produced from bagasse sold to M/s. UP Power Corporation Ltd.2. Whether electricity generated from bagasse is excisable goods under Section 2(d) of the Central Excise Act.3. Whether Rule 6 of the Cenvat Credit Rules, 2004 applies to the electricity generated from bagasse.4. Whether the appellant has complied with the requirements of Rule 6 of the Cenvat Credit Rules, 2004 by reversing the Cenvat credit attributable to the input/input services used in the generation of electricity sold.Issue-wise Detailed Analysis:1. Requirement to Pay 10% of the Value of Electrical Energy:The core issue is whether the appellant needs to pay 10% of the value of electrical energy produced from bagasse and sold to M/s. UP Power Corporation Ltd. The Revenue's contention is based on the premise that electricity is excisable and exempted from duty, thereby invoking Rule 6(3) of the Cenvat Credit Rules, 2004. However, it was argued that electricity generated from bagasse is not covered under Chapter 27 of the Central Excise Tariff Act, which pertains to electrical energy generated from mineral fuels and not from bagasse.2. Excisability of Electricity Generated from Bagasse:The Tribunal referred to the case of Gularia Chini Mills v. UOI, where it was held that bagasse is not a manufactured product but a waste product during sugar production. Consequently, electricity generated from bagasse is not considered excisable goods under Section 2(d) of the Central Excise Act. This was further supported by decisions in Jawahar SSK Ltd. and Sharad SSK Ltd. cases, which established that electricity generated from bagasse is not excisable and thus not subject to Rule 6 of the Cenvat Credit Rules, 2004.3. Applicability of Rule 6 of the Cenvat Credit Rules, 2004:The Tribunal analyzed that Rule 6 applies to both dutiable and exempted goods. Since electricity generated from bagasse is not excisable, Rule 6 does not apply. The Tribunal emphasized that the Revenue failed to demonstrate that electricity generated from bagasse falls under Chapter 27 of the Central Excise Tariff Act.4. Compliance with Rule 6 of the Cenvat Credit Rules, 2004:The Tribunal noted that the appellant had already reversed the Cenvat credit attributable to the input/input services used in the generation of electricity sold to M/s. UP Power Corporation Ltd. This reversal was deemed sufficient compliance with Rule 6 of the Cenvat Credit Rules, 2004. The Tribunal found that the lower authorities did not appropriately address this reversal.Conclusion:The Tribunal concluded that the appellant is not required to pay 10% of the value of the electricity sold to M/s. UP Power Corporation Ltd. It was held that the appellant had sufficiently complied with the provisions of Rule 6 by reversing the Cenvat credit attributable to the input/input services used in generating the electricity sold. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief.Pronouncement:The judgment was pronounced in the open court on 8-6-2015.