Reversal of input credit for electricity sold outside factory was sufficient; no further amount under Rule 6(3) was payable.

Reversal of the full credit attributable to inputs and input services used to generate electricity sold outside the factory was held sufficient compliance under Rule 6(3) of the Central Excise Rules, 2004. The Tribunal noted that the electricity was generated partly for captive use and partly for sale, but once the entire attributable credit had been reversed, no further payment of an amount equal to 8/10% of the value of the electricity was payable. The demand was therefore unsustainable.

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Issues: Whether reversal of the full amount of input and input services used in generation of electricity sold outside the factory was sufficient, or whether the appellant was additionally required to pay an amount equal to 8/10% of the value of such electricity under Rule 6(3) of the Central Excise Rules, 2004.

Analysis: The electricity generated from the inputs and input services was partly used in the appellant's induction furnace and partly sold in the market. The Revenue treated the electricity sold outside as an exempted item and sought recovery of 8/10% of its value under Rule 6(3). The Tribunal noted that the issue had already been resolved in earlier decisions holding that where the credit attributable to the inputs and input services used in generation of electricity sold outside has been reversed, such reversal is sufficient compliance and no further amount equivalent to 8/10% of the value of the electricity is payable. Since the appellant had admittedly reversed the entire amount attributable to the inputs and input services used for generation of electricity, the demand under Rule 6(3) was not sustainable.

Conclusion: The appellant was not required to pay any amount equivalent to 8/10% of the value of electricity sold outside, and the demand was unsustainable.

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