2019 (2) TMI 552 - AT - Central Excise

Tribunal rules in favor of appellant, no CENVAT credit reversal for electricity sold outside

M/s. Shri Prabhulingeshwar Sugars and Chemicals Ltd. Versus Commissioner Of Central Tax And Central Excise, Belgaum

M/s. Shri Prabhulingeshwar Sugars and Chemicals Ltd. Versus Commissioner Of Central Tax And Central Excise, Belgaum - TMI Issues:Appeal against rejection of appellant's appeal by Commissioner (A) regarding CENVAT credit on electricity sold to outside agencies.Analysis:The appellant, engaged in sugar and molasses manufacture, also generates electricity for captive use and sale to outside agencies. The dispute arose over the eligibility of CENVAT credit on electricity sold outside. The Additional Commissioner confirmed a demand for 6% of the value of electricity sold, which the appellant contested before the Commissioner (A). The appellant argued that the input, bagasse, used for generating electricity is not excisable or exempted, hence Rule 6 of CENVAT Credit Rules, 2004 doesn't apply. The appellant also cited precedents where similar issues were decided in their favor.The appellant contended that the proportionate credit reversal for electricity sold outside was already done, and no credit was availed on inputs or input services as alleged by the Department. The appellant highlighted the failure of the Department to identify specific input services used in electricity generation. The appellant also referenced specific cases where the issue of Rule 6 applicability to electricity generated from bagasse was settled in their favor.On the other hand, the Department relied on a Mumbai Tribunal decision holding that credit on inputs used in electricity generation for sale must be reversed. However, after considering arguments from both sides and examining the legal precedents, the Tribunal found the issue to be settled law. The Tribunal referenced the decision of the Allahabad High Court and the Supreme Court's approval in a related case, concluding that electricity generated from bagasse does not attract excise duty and Rule 6 is inapplicable. Consequently, the Tribunal set aside the demand for 6% of the value of electricity sold, allowing the appeal and providing consequential relief to the appellant.In conclusion, the Tribunal's judgment favored the appellant, ruling that the demand for CENVAT credit reversal on electricity sold to outside agencies was not sustainable in law. The decision was based on settled legal principles and precedents, ultimately setting aside the impugned order and providing relief to the appellant.