2024 (12) TMI 1235 - AT - Central Excise

CENVAT credit reversal liability under Rule 6(3)(i) eliminated for common inputs used in electricity generation

Ultratech Cement Limited Versus C.C.E. & S.T. -Bhavnagar (Vice-Versa)

CESTAT Ahmedabad allowed the appeal regarding CENVAT credit reversal liability under Rule 6(3)(i) of CENVAT Credit Rules, 2004. The case involved common ... Reversal of CENVAT Credit - liability to pay an amount equal to 6% of the value of exempted goods (electricity) under Rule 6(3)(i) of the CENVAT Credit Rules, 2004 - common inputs used for generation of electricity and supply of the same to their sister concerns - electricity falls under the category of exempted goods or not - extended period of limitation. HELD THAT:- Hon’ble Karnataka High Court in case of Commissioner Central Excise and Service Tax, Banglore Vs. Bill Force Pvt Ltd [2011 (4) TMI 969 - KARNATAKA HIGH COURT] has held that the once the CENVAT Credit has been reversed by the assesse, it amounts to not taking of the CENVAT Credit on inputs. The learned Adjudicating Authority has not quantified the amount of the duty which is to be recovered from the appellant and therefore, same is not sustainable on the merit The appellant was entitled for CENVAT Credit of common inputs used for generation of electricity and supply of the same to their sister concerns. The impugned Order-In-Original is not sustainable on the merits on this issue and therefore the same is set aside - appeal allowed. Issues Involved:1. Whether the appellant is liable to pay an amount equal to 6% of the value of exempted goods (electricity) under Rule 6(3)(i) of the CENVAT Credit Rules, 2004.2. Whether the appellant is entitled to CENVAT Credit for inputs and input services used in the generation of electricity supplied to sister concerns.3. Whether the reversal of CENVAT Credit by the appellant suffices for electricity wheeled out to sister concerns and residential colonies.4. Whether the electricity supplied to sister concerns qualifies as 'captive' use.Detailed Analysis:1. Liability to Pay 6% on Exempted Goods:The department contended that the appellant should pay an amount equal to 6% of the value of electricity, which is considered an exempted good, under Rule 6(3)(i) of the CENVAT Credit Rules, 2004. The appellant, however, argued that they had already reversed the proportionate CENVAT Credit for inputs and input services used in the generation of electricity supplied to residential colonies and third parties. The tribunal found that the appellant had indeed reversed the CENVAT Credit proportionately, as evidenced by the show cause notices and the adjudicating authority's order. Therefore, the tribunal held that the demand for 6% payment was not sustainable, as the reversal of credit sufficed.2. Entitlement to CENVAT Credit for Inputs and Services:The appellant claimed entitlement to CENVAT Credit for inputs and services used in generating electricity supplied to sister concerns. The tribunal referred to various judgments, including those from the Supreme Court and High Courts, which supported the view that if CENVAT Credit is reversed for inputs used in exempted goods, the assessee is not required to pay an additional amount. The tribunal concluded that the appellant was entitled to CENVAT Credit for inputs and services used in electricity generation, as long as the credit was reversed for the portion of electricity not used within the factory.3. Reversal of CENVAT Credit:The appellant had reversed the CENVAT Credit on inputs and input services proportionately for electricity supplied to residential colonies and third parties. The tribunal found that this reversal was adequate and in line with legal precedents, which state that such reversal negates the need for further payment under Rule 6(3)(i). The tribunal upheld the adjudicating authority's decision to drop the proceedings for the demand of 6% value on exempted goods, confirming that the reversal of credit was sufficient.4. Electricity Supplied to Sister Concerns as 'Captive' Use:The department argued that electricity supplied to sister units located at different places could not be termed as 'captive' use. However, the tribunal noted that the electricity was supplied to units within the same corporate entity, and the appellant had reversed the credit for inputs used in electricity generation. The tribunal cited judgments that supported the view that electricity used by sister units within the same corporate group could be considered captive use, provided the credit was reversed for electricity not used within the factory. The tribunal concluded that the appellant was entitled to CENVAT Credit for inputs used in generating electricity supplied to sister concerns.Conclusion:The tribunal dismissed the department's appeal and allowed the appellant's appeal, holding that the appellant was entitled to CENVAT Credit for inputs and services used in generating electricity supplied to sister concerns, as long as the credit was reversed for electricity wheeled out to non-captive uses. The tribunal found no merit in the department's demand for 6% payment on the value of exempted goods, given the appellant's compliance with credit reversal requirements.