Power plant operator wins appeal on CENVAT credit reversal calculation under Rule 6(3A) of CCR 2004

CESTAT Bangalore allowed the appeal regarding CENVAT credit reversal for a power plant operator who used electricity internally and wheeled excess to other entities. The dispute concerned calculation under Rule 6(3A) of CCR 2004 for common inputs/services used in both dutiable and exempted goods. The tribunal held that the formula P in Rule 6(3A) refers only to common input services, not total credit including services exclusively for dutiable goods. This interpretation was supported by 2016 amendments and precedent from E-Connect Solutions case. The original order was set aside.

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Issues Involved:
1. Whether the cenvat credit amount reversed by the appellant is in accordance with Rule 6(3A) of the Cenvat Credit Rules 2004 for the period 2014-2015 and 2015-2016.
2. Interpretation of the term "total Cenvat credit" in the formula under Rule 6(3A).
3. Applicability of the amendment to Rule 6(3A) made by Notification No. 13/2016-C.E. (NT) dated 01.03.2016.
4. Whether the demand is barred by limitation.

Summary:

Issue 1: Compliance with Rule 6(3A) of CCR 2004
The appellant, M/s. JSW Steel Ltd, reversed cenvat credit on inputs and input services used in the generation of electricity, which was partly used within the factory and partly wheeled out. The department issued a show-cause notice alleging that the reversals were not in accordance with Rule 6(3A) of CCR 2004, confirming a demand of Rs. 24,68,32,910/- along with interest and penalty.

Issue 2: Interpretation of "Total Cenvat Credit"
The appellant argued that Rule 6(3A) applies only to inputs and input services used in the manufacture of dutiable and exempted goods, not the entire input service credit availed. The Tribunal referred to previous case laws, including *Commissioner of Central Excise vs. Reliance Industries Ltd.* and *E-Connect Solutions (P) Ltd. vs. Commissioner of C. Ex & CGST*, which clarified that "total Cenvat credit" for the formula in Rule 6(3A) should include only common input services and not those used exclusively for taxable services.

Issue 3: Applicability of Amendment
The Tribunal acknowledged the amendment to Rule 6(3A) by Notification No. 13/2016-C.E. (NT) dated 01.03.2016, which clarified that the formula refers to common inputs/input services for ascertaining the credit to be reversed on exempted products. This amendment was considered clarificatory and thus applicable retrospectively.

Issue 4: Limitation
The appellant contended that the demand was barred by limitation as all required details were provided in the ER-1 returns, and there was no suppression or intention to evade duty. The Tribunal did not specifically address this issue in the final ruling.

Conclusion:
The Tribunal set aside the impugned order, agreeing with the appellant's interpretation and application of Rule 6(3A) and the retrospective applicability of the 2016 amendment. The appeal was allowed in favor of the appellant.

Order Pronounced:
The order was pronounced in open court on 04.01.2024.

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