Rule 6 of Cenvat Credit Rules does not apply to electricity not treated as exempted goods or nil-rated goods.

Electrical energy generated at a windmill site was treated as outside the scope of "exempted goods" for Rule 6 of the Cenvat Credit Rules, 2004 because it was not shown to be exempt by notification under Section 5A of the Central Excise Act, 1944 and was not chargeable to duty at a nil rate. On that basis, common input services used in relation to such electricity did not attract reversal under Rule 6. The 2015 Explanation extending the rule to non-excisable goods cleared for consideration did not change the position on the facts stated, as the registered factory was not clearing non-excisable goods in the relevant sense.

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Issues: Whether electricity generated at the windmill site was exempted or excisable goods so as to attract Rule 6 of the Cenvat Credit Rules, 2004, and whether the amended Explanation inserted by Notification No. 6/2015-CE (NT) dated 01.03.2015 brought such electricity within the scope of that rule.

Analysis: Rule 6 applies where common inputs or input services are used in the manufacture of both dutiable and exempted goods. The expression "exempted goods" under Section 2(d) of the Central Excise Act, 1944 covers excisable goods exempt from duty or chargeable at nil rate. Electrical energy, though mentioned in the tariff, had no corresponding rate of duty and was not shown to be exempted by any notification under Section 5A of the Central Excise Act, 1944. It was therefore not exempted goods or nil-rated goods for the purpose of Rule 6. The subsequent Explanation inserted in 2015, extending the rule to non-excisable goods cleared for consideration, did not alter the result because the registered factory was not clearing non-excisable goods in the relevant sense.

Conclusion: Rule 6 was not applicable to the common input services used in relation to electricity generated at the windmill site, and the demand confirmed on that basis could not be sustained.

Final Conclusion: The appeal succeeded and the order of the lower appellate authority was set aside.

Ratio Decidendi: Electricity not chargeable to excise duty and not exempted by notification does not constitute exempted goods for Rule 6 of the Cenvat Credit Rules, 2004, and therefore common credit reversal cannot be insisted upon on that basis.

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