Tribunal allows appeal, sets aside Order-in-Original due to appellant's compliance with Rule 6(3)(i).

The Tribunal set aside the Order-in-Original, allowing the appeal. It concluded that the demand under Rule 6(3)(i) was not sustainable due to the appellant's compliance with proportionate credit availing for captive electricity consumption.

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Issues Involved:
- Interpretation of Rule 6(3)(i) of the Cenvat Credit Rules, 2004 regarding the reversal of 5%/6% of the value of electricity sold outside the factory.

Detailed Analysis:

1. Background and Facts:
The appellant, engaged in manufacturing graphite electrodes, had a captive power plant selling surplus electricity to the state electricity board. The Department issued Show Cause Notices proposing recovery under Rule 6(3)(i) of Cenvat Credit Rules, 2004. The impugned order confirmed the demand, leading to the present appeal.

2. Appellant's Arguments:
The appellant argued that electricity is not an exempted good under Rule 6(3) as it is not excisable. They contended that separate records under Rule 6(2) were not required due to proportionate Cenvat credit availed. They also claimed the demand for the period beyond one year was time-barred.

3. Legal Interpretation - Exempted Goods Definition:
The judgment analyzed the definition of exempted goods under Rule 2(d) of the Credit Rules and excisable goods under the Excise Act. It concluded that as electricity was not subject to excise duty, it could not be considered an exempted good, rendering Rule 6(3) inapplicable.

4. Compliance with Rule 6(3) - Proportionate Credit Availment:
The appellant demonstrated compliance by availing Cenvat credit on inputs attributable to electricity consumed for manufacturing dutiable products. Chartered Accountant certificates supported this claim, aligning with previous tribunal decisions.

5. Rule Application and Precedents:
The judgment cited cases like Jai Balaji Industries Ltd. and IND Synergy Ltd., where proportionate credit for captive electricity consumption was deemed compliant with Rule 6(3). It highlighted that the rule's application did not extend to non-excisable goods like electricity.

6. Incorrect Premise by Commissioner:
The judgment criticized the Commissioner for not acknowledging the proportionate credit availed by the appellant, leading to an incorrect demand under Rule 6(3)(i). It emphasized that without availing credit for exempt electricity, the basis for the demand did not exist.

7. Decision and Conclusion:
Ultimately, the Tribunal set aside the Order-in-Original, allowing the appeal. It concluded that the demand under Rule 6(3)(i) was not sustainable due to the appellant's compliance with proportionate credit availing for captive electricity consumption.

In summary, the judgment clarified the inapplicability of Rule 6(3)(i) to non-excisable goods like electricity, upheld the appellant's compliance with proportionate credit availing, and deemed the demand unsustainable, leading to the appeal's success.

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