Tribunal rules electricity not excisable, grants waiver of pre-deposit

The Tribunal ruled in favor of the appellant, finding that electricity sold to U.P. Power Corporation Ltd. does not fall under the definition of excisable goods, as per a judgment by the Allahabad High Court. The demand for payment under Rule 6(3) of the Cenvat Credit Rules, 2004 was deemed unsustainable, and the appellant was granted a waiver of the pre-deposit requirement for the appeal, with recovery of the demanded amount stayed.

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Issues:
Interpretation of Rule 6(3) of the Cenvat Credit Rules, 2004 regarding the treatment of electricity as an excisable good and applicability of the rule in case of sale of electricity to U.P. Power Corporation Ltd.

Analysis:
The appeal was filed by the Revenue challenging the demand raised on the appellant for payment related to the sale of electricity to U.P. Power Corporation Ltd. The department contended that since the appellant had not maintained separate accounts for inputs used in the manufacture of dutiable and exempted final products, they were liable to pay an amount under Rule 6(3) of the Cenvat Credit Rules, 2004. The Commissioner upheld this demand, considering electricity as an excisable good exempted from duty, leading to the confirmation of the demand along with interest and penalty. The appellant argued that the rule is not applicable when one of the products manufactured is non-excisable, citing the definition of 'excisable goods' under the Rules. They also referenced a judgment by the Allahabad High Court stating that electricity is not an excisable good, thereby challenging the department's interpretation of the rule.

The appellant's counsel contended that Rule 6(3) of the Cenvat Credit Rules, 2004 should not apply when one of the products manufactured is non-excisable, as per the definition of 'excisable goods' under the Rules. They referred to a judgment by the Allahabad High Court which held that electricity is not an excisable good, supporting their argument against the applicability of the rule in the case of electricity sold to U.P. Power Corporation Ltd. The counsel emphasized that the appellant had a strong prima facie case in their favor based on this interpretation and requested a waiver of the pre-deposit requirement for hearing the appeal.

After considering the submissions from both sides and examining the records, the Tribunal found merit in the appellant's argument. The Tribunal noted that the Allahabad High Court's judgment on the issue of electricity not being an excisable good was crucial in determining the applicability of Rule 6(3) of the Cenvat Credit Rules, 2004. As a result, the impugned order demanding payment under the rule was deemed unsustainable. While acknowledging that there might be a case for denying proportionate credit for inputs used in generating power sold to U.P. Power Corporation Ltd., the Tribunal highlighted the absence of specific details in the show cause notice regarding the common inputs or input services used. Consequently, the Tribunal ruled in favor of the appellant, waiving the pre-deposit requirement for the appeal and staying the recovery of the demanded amount under Rule 6(3) of the Cenvat Credit Rules, 2004.

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