2019 (10) TMI 815 - AT - Central Excise

Tribunal cancels 6% electricity value demand, citing misuse of common inputs. Precedents, rules, and amendments support appeal.

Minera Steel & Power Pvt Ltd Versus Commissioner Of Central Tax, Belagavi Commissionerate

The Tribunal set aside the demand for 6% of electricity value due to alleged misuse of common input/services for manufacturing electricity. Relying on ... CENVAT Credit - common input/ input services used for manufacture of electricity which is an exempted product - non-maintenance of separate records - Rule 6 of CCR 2004 - HELD THAT:- In the present case, the electricity was generated by use of the waste products and therefore Rule 6 of the CCR is not applicable in view of the judgment of the Hon’ble Apex Court in the case of UNION OF INDIA & OTHERS VERSUS M/S. HINDUSTAN ZINC LTD. [2014 (5) TMI 253 - SUPREME COURT] - Further it is found that coal ash / Dolo char is a residual waste arising out of the burning of coal which cannot be said to be a manufacture of final product. Both the authorities have ignored the amendment introduced w.e.f. 01/04/2016 by addition of Rule 6(3AA) which permits the assessee to reverse / pay proportionate CENVAT credit relating to common input or attributable to input services and in the present case, the appellant is making use of this sub-rule and has paid the amount of ₹ 11,23,096/- along with applicable interest of ₹ 4,86,007/- vide various challans enclosed which according to me, satisfied the requirement of Rule 6(3A). Consequently, the demand of 6% of the value of electricity sold to the GESCOM is not sustainable in law. Appeal allowed - decided in favor of appellant. Issues:- Appeal against rejection of appeal by Commissioner(Appeals) regarding demand for 6% of electricity sale value due to alleged misuse of common input/services.Analysis:The appeal challenged the order of the Commissioner(Appeals) rejecting the appellant's appeal against a demand for 6% of the value of electricity sold, based on the allegation of misuse of common input/services for manufacturing electricity, an exempted product. The original authority confirmed the demand and imposed a penalty. The appellant argued that they did not avail CENVAT credit on inputs used for electricity generation and electricity, though a good, is not excisable. They contended that the waste products used for electricity generation do not fall under Rule 6 of CCR, 2004. The appellant cited precedents to support their arguments, emphasizing that the electricity generated was from waste products and the authorities ignored Rule 6(3AA) introduced in 2016, which the appellant had complied with by paying the due amount and interest.The appellant further asserted that the electricity generated using waste products does not attract Rule 6 of CCR, 2004, citing judgments like UOI Vs. Hindustan Zinc Ltd. The appellant highlighted that coal ash and residual waste from burning coal are not final products, and the authorities failed to consider the 2016 amendment allowing for the reversal/payment of proportionate CENVAT credit. The Tribunal noted that in a previous case, it held that the appellant was not liable to pay 6% of electricity value cleared to the distribution company. Relying on legal precedents and the 2016 amendment, the Tribunal found the demand for 6% of electricity value unsustainable and set aside the impugned order, allowing the appellant's appeal with consequential relief.In conclusion, the Tribunal's decision was based on the appellant's arguments regarding the nature of electricity generation from waste products, the applicability of Rule 6 of CCR, 2004, and compliance with the 2016 amendment. The Tribunal found in favor of the appellant, setting aside the demand for 6% of electricity value and providing relief accordingly.