2013 (6) TMI 178 - HC - Central Excise

Tribunal Denies Cenvat Credit for Electricity to Separate Division

The Tribunal affirmed the decision that the appellant was not entitled to Cenvat credit for inputs used to generate electricity supplied to its separately ... Cenvat credit on inputs used for generation of electricity - captively consumed electricity within the factory - separate central excise registration and estoppel - definition of 'factory' under the Central Excise Act - Rule 9 / Rule 174 and requirement of separate licence for separate places of businessCenvat credit on inputs used for generation of electricity - captively consumed electricity within the factory - Maruti Suzuki principle on excess electricity cleared/sold - Entitlement to Cenvat credit on furnace oil used to generate electricity to the extent electricity was supplied to the appellant's Plastic Division. - HELD THAT: - The Court applied the ratio of the Supreme Court in Maruti Suzuki Ltd. and held that Cenvat credit on inputs used for generation of electricity is available only to the extent the produced electricity is used within the factory of production for manufacture of final products or for any other purpose. The Court noted that the Maruti Suzuki decision denies credit to the extent excess electricity is cleared/supplied outside the factory (sold or cleared at agreed rates). Applying that principle, the Tribunal was justified in denying credit insofar as the electricity generated was supplied to a separately registered unit and hence not treated as consumption within the factory for which credit was claimed. [Paras 10]Cenvat credit allowed only for electricity used within the registered factory; credit disallowed for electricity supplied to the Plastic Division.Separate central excise registration and estoppel - definition of 'factory' under the Central Excise Act - Rule 9 / Rule 174 and requirement of separate licence for separate places of business - Whether the Plastic Division, though located within a common compound, could be treated as the same factory for the purposes of availing Cenvat credit. - HELD THAT: - The Court rejected the appellant's contention that common boundary and common legal entity made the Plastic Division part of the same factory. It held that the appellant had itself obtained separate central excise registration for the Plastic Division under Rule 9 (formerly Rule 174) and, by describing it as a separate place of business and securing separate registration/licence, was estopped from treating it as part of the present unit's factory. The statutory scheme and Rules require separate registration/licence for distinct places of business, and separate registration precludes treating the separately registered unit as the same factory for credit purposes. [Paras 11, 12, 13, 14]The Plastic Division is a separately registered factory and cannot be treated as the factory of the present unit; separate registration estops the appellant from claiming the electricity supplied to that division as within the factory for Cenvat credit.Final Conclusion: The Tribunal correctly applied the Maruti Suzuki principle and the rules on separate registration; the appellant is entitled to credit only for electricity used within the registered factory and not for electricity supplied to the separately registered Plastic Division. The appeals are dismissed. Issues Involved:1. Entitlement to Cenvat credit on inputs used for electricity generation supplied to another division.2. Definition and interpretation of 'factory' under Central Excise Act.3. Validity of separate registration of different units under Central Excise Rules.4. Application of the Supreme Court decision in Maruti Suzuki Ltd. v. CCE, Delhi-III.Detailed Analysis:1. Entitlement to Cenvat credit on inputs used for electricity generation supplied to another division:The appellant, a company with two divisions (Textile and Plastic), installed DG sets for uninterrupted electricity supply, using furnace oil as fuel. The appellant availed Cenvat credit on furnace oil used for generating electricity, which was partly supplied to its Plastic Division. The Central Excise authorities required the appellant to reverse the credit taken on furnace oil used for electricity supplied to the Plastic Division. The appellant reversed the credit under protest and later filed for a refund, which was rejected by the authorities. The Tribunal upheld the rejection, leading to the present appeals. The appellant argued that the electricity supplied to its Plastic Division should be considered as used within its factory, thus entitling it to Cenvat credit.2. Definition and interpretation of 'factory' under Central Excise Act:The appellant contended that both divisions, being located within a common boundary wall, should be considered a single factory under Section 2(e) of the Central Excise Act. The appellant argued that separate central excise registration does not make them separate factories. The Tribunal, however, held that the appellant's separate registration of the Plastic Division under Rule 9 of the Central Excise Rules indicated that they are distinct entities. The Tribunal concluded that the electricity supplied to the Plastic Division could not be considered as used within the same factory.3. Validity of separate registration of different units under Central Excise Rules:The Tribunal emphasized that the appellant had registered the Plastic Division separately under Rule 9 of the Central Excise Rules, 2002, which mandates separate licenses for different places of business. The appellant's separate registration of the Plastic Division estopped it from claiming that it was part of the same factory. The Tribunal noted that separate registration implies separate entities, regardless of their physical proximity within a common boundary wall.4. Application of the Supreme Court decision in Maruti Suzuki Ltd. v. CCE, Delhi-III:The Tribunal applied the Supreme Court's decision in Maruti Suzuki Ltd. v. CCE, Delhi-III, which held that inputs used for generating electricity are eligible for Cenvat credit only if the electricity is used within the factory of production. Since the appellant supplied part of the electricity to its separately registered Plastic Division, the Tribunal concluded that the appellant was not entitled to Cenvat credit for the inputs used to generate that electricity. The Tribunal found that the appellant's case was analogous to Maruti Suzuki, where excess electricity supplied outside the factory was not eligible for Cenvat credit.Conclusion:The Tribunal affirmed the authorities' decision, holding that the appellant was not entitled to Cenvat credit for inputs used to generate electricity supplied to its separately registered Plastic Division. The appeals were dismissed, upholding the interpretation that separate registration under the Central Excise Rules signifies distinct entities, and thus, the electricity supplied to the Plastic Division could not be considered as used within the same factory.