CESTAT remands CENVAT credit reversal case for fresh consideration of proportionate credit calculations

CESTAT Chandigarh remanded a case involving CENVAT credit reversal on electricity generation to Commissioner (Appeals) for fresh consideration. The appellant had reversed entire credit of Rs. 14,20,586 on input services (manpower supply and insurance) used for electricity generation, but contended only proportionate credit reversal was required. The tribunal found that authorities failed to consider appellant's main defense regarding non-applicability of Rule 6 of CCR 2004 and ignored proportionate credit calculations submitted by appellant. The case was remanded for proper examination of all grounds raised by the appellant regarding the period April 2006 to February 2009.

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Issues:
The judgment involves the applicability of Rule 6 of the Cenvat Credit Rules and the treatment of electricity as an excisable good.

Applicability of Rule 6 of the Cenvat Credit Rules:
The appellant, engaged in the manufacture of Acrylic Fibre, Tow & Tops, had a captive power plant generating electricity from Biomass/Agricultural waste. A show cause notice was issued seeking recovery of an amount equal to 10% of the electricity sold to Punjab State Electricity Board (PSEB) and used in the residential colony. The appellant initially reversed a portion of the credit but the notice demanded a larger sum. The appellant argued that since electricity is not excisable, Rule 6 does not apply. The original authority dropped the demand but imposed interest. The appellant's appeal was rejected by the Ld. Commissioner (Appeals).

Treatment of Electricity as an Excisable Good:
The appellant contended that as electricity is not specified with a rate of duty in the Central Excise Tariff Act, it is not excisable and cannot be considered exempted goods. They argued that Rule 6, applicable to common inputs for dutiable and exempted products, does not apply to electricity. The appellant sought a refund of the excess amount reversed and challenged the imposition of interest. The Tribunal found that the appellant had reversed the entire credit amount but argued they were only required to reverse proportionate credit. The Tribunal noted that the appellant's plea regarding the non-applicability of Rule 6 was not addressed in the impugned order.

Conclusion:
The Tribunal remanded the case to the Ld. Commissioner (Appeals) for a fresh decision, directing consideration of all grounds raised by the appellant. The impugned order was set aside, and the appeal was allowed by way of remand. The Ld. Commissioner (Appeals) was instructed to issue a new order within three months from the receipt of the Tribunal's order.

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