2024 (4) TMI 1009 - AT - Central Excise

Appellant wins CENVAT credit reversal case under Rule 6(3A) for free electricity supply to sister unit

Finolex Industries Ltd. Versus Commissioner of Central Tax, Pune I

CESTAT Mumbai ruled in favor of the appellant regarding CENVAT credit reversal under Rule 6(3A) of CENVAT Credit Rules, 2004. The appellant supplied ... CENVAT Credit - inputs and input services used for the generation of electricity which, later on, is cleared to its sister unit situated at Urse free of cost - reversal in terms of provisions of Rule 6(3A) of Cenvat Credit Rules, 2004 with interest and penalty - HELD THAT:- In the case in hand there is no such allegation about sale of electricity in the show cause notices but authorities below have proceeded on the premise that during this period the appellant had sold the electricity to MSEDCL also. As per records, during the period in issue the electricity was supplied only to the sister unit at Urse and that too free of cost and in an identical situation this Tribunal in appellant’s own case M/S. FINOLEX INDUSTRIES LTD. VERSUS COMMISSIONER OF CGST, KOLHAPUR [2023 (3) TMI 1478 - CESTAT MUMBAI] has held that no reversal needs to be made in respect of electricity supplied to their sister concern by the appellant. In that appeal at some point of time the electricity was also sold to MSEDCL, therefore for calculation purposes the matter was remanded back to the adjudicating authority but since in the case in hand there is no allegation of sale of electricity to MSEDCL in the show-cause notice therefore no remand is required. In yet another decision the Hon’ble Rajasthan High Court, in the matter of COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX, JAIPUR VERSUS SHREE CEMENT LIMITED [2018 (9) TMI 822 - RAJASTHAN HIGH COURT] where the facts were almost similar, while dismissing the Appeal filed by Revenue, held that the decision of the Hon’ble Supreme Court in the matter of M/S. MARUTI SUZUKI LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI-III [2009 (8) TMI 14 - SUPREME COURT] will not apply and the view taken by the Tribunal is just and proper that the cenvat credit of inputs and input services used in the power generated in the captive power plant and transferred to the sister concern is admissible to the assessee since the input and input services were ultimately used in the manufacture of dutiable final products either by the assessee or by their sister concern. The appellants are entitled to cenvat credit on inputs and input services used for production of electricity which is transferred to its sister unit at Urse free of cost - the impugned order is set aside - appeal allowed. Issues involved: Determination of admissibility of Cenvat Credit on inputs and input service used for the generation of electricity transferred to sister unit for manufacturing dutiable goods.Summary:The appeal challenged an order rejecting Cenvat Credit for inputs and input services used in generating electricity transferred to a sister unit. The appellant, engaged in manufacturing dutiable goods, transferred excess electricity to the sister unit at Urse. The dispute arose when the department issued show cause notices for improper calculation of Cenvat Credit. The Adjudicating Authority confirmed the demand for certain periods, citing non-furnishing of required information. The Commissioner partially allowed the appeal but rejected Cenvat Credit entitlement based on Rule 6(3A) provisions and a Supreme Court decision. The appellant argued against the valuation method used by the department, emphasizing no sale of electricity to MSEDCL occurred during the period in question.The Tribunal noted the appellant's prior submission regarding Cenvat Credit calculation and referenced a previous case supporting proportional reversal benefits. The main issue was the reversal of Cenvat Credit on electricity transferred to the sister unit. The Tribunal disagreed with the valuation method based on a Supreme Court decision involving sale of electricity, as no such sale occurred in this case. Citing a similar case, the Tribunal held that no reversal was required for electricity supplied to the sister unit free of cost. Referring to a Rajasthan High Court decision, the Tribunal confirmed the admissibility of Cenvat Credit for inputs used in generating electricity transferred to the sister unit for manufacturing dutiable goods. In alignment with previous decisions, the Tribunal allowed the appeal, granting Cenvat Credit on inputs and input services used for electricity production transferred to the sister unit.The Tribunal set aside the impugned order and allowed the appeal in favor of the appellants, pronouncing the decision in open court on 24.04.2024.