Appeal Granted: Exemption from 6% Tax on Electricity Sales Upheld

The Tribunal allowed the appeal, setting aside the demand for 6% on electricity sold outside the factory. The decision favored the appellant, ruling that no inputs or input services were used in generating electricity, aligning with established legal principles and case law cited.

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Issues:
Appeal against rejection of appeal by Commissioner (A) - Availing CENVAT credit on inputs and input services for manufacturing Sugar - Demand of 6% on electricity wheeled out and Bagasse - Failure to maintain separate account - Applicability of Rule 6 of CCR.

Analysis:
The appeal challenged the impugned order by the Commissioner (A) rejecting the appellant's appeal. The appellant, engaged in Sugar manufacturing, availed CENVAT credit on various inputs and input services but did not avail credit on inputs used in generating electricity. A previous SCN proposing a 6% demand on electricity and Bagasse was dropped following a Supreme Court decision. The present SCN demanded 6% on electricity sold outside the factory under Rule 6(3)(i) of CCR due to lack of separate accounts. The appellant argued the demand was unsustainable as inputs were used only for manufacturing Sugar, not waste/bagasse or electricity generation, citing relevant case law.

The appellant contended that the impugned order misapplied Rule 6 of CCR, which allows options for manufacturers dealing with dutiable and exempted goods. They argued that the demand for 6% on electricity was unjustified as inputs were used solely for manufacturing Sugar, not waste or electricity generation. The appellant relied on precedents like Gularia Chini Mills case and other decisions to support their position. They also highlighted that even post-amendment, the legal position remained unchanged regarding demands under Rule 6(3) for non-dutiable waste/by-products.

The appellant further emphasized that inputs were used exclusively for Sugar manufacturing, not for waste/bagasse or electricity generation. They clarified that no credit was availed on lubricating oil for electricity generation during the relevant period. The appellant referenced cases like Sharad SSK Ltd. and Jawahar SSK Ltd. to support their argument for reversing proportionate credit only on input services used in Sugar manufacturing, not electricity generation.

The respondent defended the impugned order, arguing for the reversal of proportionate credit on common input services used for manufacturing excisable goods and generating electricity. However, after considering both parties' submissions and reviewing the record, the Tribunal found the issue settled by previous decisions. The Tribunal ruled in favor of the appellant, setting aside the demand for 6% on electricity sold outside the factory, as no inputs or input services were used in generating electricity, aligning with the established legal principles and case law cited.

In conclusion, the Tribunal allowed the appeal, finding the demand for 6% on electricity sales unsustainable in law due to the lack of input or input services used in electricity generation during the relevant period. The decision was based on established legal principles and precedents, ultimately favoring the appellant's position.

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