Cenvat credit on duty-equivalent payment for surplus power upheld under the governing exemption notification

A governing notification allowing sale of surplus power to the Domestic Tariff Area on payment of an amount equal to the duty leviable on consumables and raw materials used in generation of power was treated as creating a duty-equivalent payment for Cenvat credit purposes. The court relied on the notification's wording and the Supreme Court principle that an amount expressed as equal to duty leviable is treated as duty for the relevant legal consequence. On that basis, the assessee's entitlement to Cenvat credit was upheld and the revenue's challenge failed.

---

---

Issues: Whether the respondent was entitled to Cenvat credit on the basis that the purchaser of surplus electricity paid an amount equal to the duty leviable on consumables and raw materials used in generation of the power.

Analysis: The dispute turned on the condition in the governing notification permitting sale of surplus power to the Domestic Tariff Area on payment of an amount equal to the duty leviable on consumables and raw materials used in generation of each unit of power, but for exemption from duty thereon. The Court held that this payment, though described as an amount equal to duty, was to be treated as equivalent to duty for the purpose of credit entitlement. The conclusion was supported by the notification's wording and the principle recognised in the Supreme Court decision relied upon, under which liability expressed as an amount equal to duty leviable is treated as duty for the relevant legal consequence.

Conclusion: The respondent was entitled to Cenvat credit and the revenue's challenge failed.

Final Conclusion: The appeals were found to be without merit and the assessee's credit entitlement was upheld.

Ratio Decidendi: Where a governing notification requires payment of an amount equal to the duty leviable on inputs used for generation of surplus power, that amount is treated as duty-equivalent for the purpose of Cenvat credit entitlement.

---