Tribunal rules in favor of appellant on electricity sale tax liability

M/s Himadri Speciality Chemical Ltd. Versus CGST & Excise, Howrah

M/s Himadri Speciality Chemical Ltd. Versus CGST & Excise, Howrah - TMI Issues Involved:
1. Whether the appellant is liable to pay 6% of the sale value of electricity sold outside the factory.
2. Classification of electricity generated from waste gas/tail gas under Chapter 2716 00 00.
3. Applicability of Rule 6 of the CENVAT Credit Rules, 2004, to the electricity generated from waste gas/tail gas.
4. Reversal of proportionate CENVAT credit for the period prior to March 2015.
5. Limitation and suppression of facts by the appellant.
6. Disproportionate demand relative to the actual CENVAT credit availed.

Detailed Analysis:

1. Liability to Pay 6% on Sale Value of Electricity:
The central issue is whether the appellant must pay 6% of the sale value of electricity sold outside the factory under Rule 6(3) of the CENVAT Credit Rules. The tribunal held that since the appellant has already reversed the proportionate credit of inputs and input services attributable to the sale of electricity, they are not liable to pay the amount calculated at 6% of the sale value of electricity. The tribunal referenced the case of Jai Balaji Industries Ltd. vs. CCE, Raipur, which established that mere failure to follow the prescribed procedure should not negate the substantial benefit of proportionate reversal.

2. Classification of Electricity under Chapter 2716 00 00:
The tribunal examined whether electricity generated from waste gas/tail gas is classifiable under Chapter 2716 00 00 and can be considered 'exempted goods.' It referred to the decision of the Allahabad High Court in Gularia Chini Mills vs. UOI, which held that electricity generated from bagasse (a waste product) is not classifiable under Chapter 27 and is not excisable. The tribunal concluded that electricity generated from waste gas/tail gas is similarly not classifiable under Chapter 2716 00 00 and, therefore, is not excisable or exempted.

3. Applicability of Rule 6 of the CENVAT Credit Rules:
The tribunal noted the amendment to the definition of 'exempted goods' under the CENVAT Credit Rules, which included non-excisable goods from 1st March 2015. Therefore, for the period prior to March 2015, the appellant was not liable to reverse the credit. The tribunal emphasized that since the appellant reversed the proportionate credit during adjudication, they cannot be penalized for not following the procedure under Rule 6.

4. Reversal of Proportionate CENVAT Credit:
The tribunal highlighted that the appellant had already reversed the proportionate credit for the period 2015-16, covering the normal period of limitation. This fact was not disputed by the department, and thus, the appellant cannot be made liable to pay the amount at 6% of the sale value of electricity.

5. Limitation and Suppression of Facts:
The tribunal addressed the issue of limitation and suppression of facts. It was argued that the appellant’s production process was well within the knowledge of the department, and they were subject to regular audits and monitoring by statutory bodies. The tribunal found no evidence of wilful suppression or fraud by the appellant. The tribunal cited the case of Compark E Services Pvt Ltd vs. CCE, which held that mere non-filing of returns or non-payment of tax does not automatically imply suppression unless there is positive evidence of mala fide intent.

6. Disproportionate Demand:
The tribunal noted that the demand of Rs. 2.33 Crores was highly disproportionate to the actual CENVAT credit availed, which was Rs. 11.2 lakhs. It referenced decisions in Goyal Proteins Ltd. vs. CCE and CCE vs. Maize Products, which established that an assessee cannot be burdened with a duty demand disproportionate to the credit amount actually availed.

Conclusion:
The tribunal set aside the impugned order and allowed the appeal with consequential relief as per law, stating that the appellant had already reversed the proportionate credit and the demand was disproportionate and not legally sustainable.