2022 (9) TMI 267 - AT - Central Excise

Tribunal Upholds Commissioner's Order on Cenvat Credit Eligibility

Principal Commissioner, Central Goods & Service Tax & Central Excise, Raipur Versus M/s Hira Ferro Alloys Limited, Unit-II

The Tribunal rejected the Revenue's appeal, upholding the Commissioner (Appeals) order, and disposed of the miscellaneous application. The decision was ... Recovery of reducing the proportionate credit - CENVAT Credit - inputs /input services used by it for providing of electricity part of which it supplied its sister unit - HELD THAT:- The case of the appellant Revenue is that since part of the electricity is transferred to sister unit, the inputs used in generating it to that extent is an input for the sister unit as it is relatable to the goods manufactured by it and they are not inputs relatable to the final products of this respondent. Each unit is separately registered and is a separate assessee as far as central excise is concerned. To the extent the electricity is sold to outsiders, the respondent has reversed the CENVAT credit. On identical issue, High Court of Rajasthan had in COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX, JAIPUR VERSUS SHREE CEMENT LIMITED [2018 (9) TMI 822 - RAJASTHAN HIGH COURT], allowed CENVAT credit on the inputs used in production of electricity which is supplied free of cost to the assessee’s sister unit. The respondent is entitled to CENVAT credit to the extent the inputs are used for production of electricity which is transferred free of cost to its sister unit - Appeal dismissed - decided against Revenue. Issues:- Appeal against modification of order reducing proportionate credit recovery- Cenvat credit eligibility on inputs/input services for electricity supplied to sister unit- Interpretation of Cenvat Credit Rules regarding input usage for final products- Application of Supreme Court judgment on Cenvat credit entitlement- Applicability of limitation period for demand recoveryAnalysis:1. The appeal was filed by the Revenue challenging the modification of an order by the Commissioner, Central Excise (Appeals), Raipur, which reduced the proportionate credit recovery amount from the respondent. The issue revolved around the eligibility of Cenvat credit on inputs and input services used for providing electricity to a sister unit, which was transferred partially to the Chattisgarh State Power Distribution Company Limited and partially to the sister unit itself.2. The Revenue contended that Cenvat credit cannot be availed for inputs or input services used by a sister unit with a separate central excise registration. They argued that the inputs used for generating electricity supplied to the sister unit do not qualify for Cenvat credit as they are not directly related to the manufacture of final products by the appellant.3. The Authorized Representative emphasized that the Cenvat Credit Rules do not differentiate between goods sold or supplied free, stating that credit can only be availed for inputs used in the manufacture of final products by the same unit. Referring to the Supreme Court judgment in Maruti Suzuki Limited Vs. Commissioner of Central Excise, Delhi-III, they highlighted the importance of using generated electricity within the factory for captive consumption to qualify for Cenvat credit.4. The Counsel for the respondent argued that the case law cited by the Revenue did not apply as the electricity was used for internal consumption within the sister concern. They relied on various tribunal judgments supporting the entitlement to Cenvat credit for inputs used in generating electricity supplied free of cost to the sister unit.5. The Tribunal analyzed the definitions of 'inputs' under the Cenvat Credit Rules and concluded that the inputs used in producing electricity for the sister unit qualified for Cenvat credit. Citing precedent cases, including Shree Cements Ltd., the Tribunal upheld the respondent's entitlement to Cenvat credit for inputs used in generating electricity supplied to the sister unit.6. The Tribunal rejected the Revenue's appeal, upholding the Commissioner (Appeals) order, and disposed of the miscellaneous application. The decision was based on the interpretation of the Cenvat Credit Rules and the application of relevant case laws supporting the respondent's position on Cenvat credit eligibility for electricity production supplied to the sister unit.This detailed analysis of the judgment provides insights into the legal reasoning behind the decision and the application of relevant laws and precedents to determine the eligibility of Cenvat credit in the given scenario.