Proportionate Cenvat credit reversal for wheeled-out electricity accepted; fixed percentage demand under Rule 6 was unsustainable.

Proportionate reversal of Cenvat credit on inputs and input services used to generate electricity wheeled out to the grid was treated as sufficient compliance with Rule 6 of the Cenvat Credit Rules, 2004. The Tribunal accepted the reversal, supported by a Chartered Accountant's certificate, and held that non-compliance with procedural requirements under Rule 6(3A) could not defeat the substantive benefit where the credit reversal was otherwise established. Electricity was treated as non-excisable, and the demand to pay a fixed 10%/5% of its value was held unsustainable. The impugned order was set aside.

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Issues: Whether reversal of Cenvat credit attributable to inputs and input services used in generating electricity wheeled out to the grid was sufficient compliance with Rule 6 of the Cenvat Credit Rules, 2004, or whether the assessee was liable to pay 10%/5% of the value of such electricity.

Analysis: The appellant had reversed proportionate credit on inputs and input services used for generation of electricity, and the reversal was supported by a Chartered Accountant's certificate. Rule 6(3A) of the Cenvat Credit Rules, 2004 permits proportionate reversal for exempted goods, and the Tribunal held that failure to follow the procedural requirements could not defeat the substantive benefit where the credit reversal was otherwise established. Electricity was treated as non-excisable, and the cited precedent was relied upon to hold that Rule 6 did not justify the demand of a fixed percentage of the value of electricity wheeled out.

Conclusion: The demand under Rule 6 was not sustainable and the impugned order was set aside.

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