Proportionate CENVAT credit reversal for wheeled-out electricity defeats the demand, as reversed credit is treated as non-availment.

Proportionate reversal of CENVAT credit attributable to electricity wheeled out to sister concerns was treated as equivalent to non-availment of that credit, so the demand raised under Rule 6 on that basis could not survive. The Tribunal followed the settled position in Chandrapur Magnets and Precot Meridian, and its earlier orders in the same assessee's case, and rejected the Revenue's distinction based on recovery provisions and Rule 14 because it did not alter the substantive legal effect of the reversal. The impugned order was set aside and the appeals were allowed.

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Issues: Whether the demand raised under Rule 6 of the CENVAT Credit Rules, 2004 in respect of credit relatable to electricity wheeled out to sister concerns could be sustained when proportionate credit had been reversed.

Analysis: The Bench treated the issue as covered by the principle that reversal of proportionate CENVAT credit attributable to the electricity sold out amounts to non-availment of credit. Relying on the settled position in Chandrapur Magnets and Precot Meridian, and on the Tribunal's own earlier orders in the appellant's case, it held that once the credit attributable to the wheeled-out electricity is reversed, the foundation for confirming the demand on that account does not survive. The distinction sought to be drawn by Revenue on the basis of recovery provisions and invocation of Rule 14 was rejected as not altering the substantive legal position.

Conclusion: The demand could not be sustained and the issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and all the appeals were allowed.

Ratio Decidendi: Proportionate reversal of CENVAT credit attributable to electricity wheeled out has the effect of non-availment of such credit, and a demand founded on such reversed credit cannot be sustained.

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