TaxTMI 
TaxTMI 
2007 (12) TMI 329
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....erted outside the Plant II on the ground that they were not used in the final products. Four Show Cause Notices had been adjudicated, the first of which covered the period Oct '94 to Aug '98 and invoked proviso to Sec 11A(1). Demand for the period the assessee had reversed the credit is for the amount short reversed towards such diversions. Commissioner demanded Rs. 3091377/-under Rule 57-I of Central Excise Rules '44 (CER), applicable interest and imposed equal amount of penalty. A similar Order No. 2/2003 was passed in respect of Plant III for same periods on similar grounds. This demand also covered duty due on Hydrogen gas manufactured and captively used in the production of steam cleared outside as well as credit of LSHS relatable to power lost in conversion of AC power to DC power. An amount of Rs. 6075252/- was demanded under Rule 57 -I towards diverted power, steam and transformer loss under Rule 57 I, Rs. 65363/- towards duty on Hydrogen used in such steam, appropriate interest and penalty of a total Rs. 6140614/- under provisions of Section 11AC & Rules 57AH, 571 &173Q of CER '44. In this case also the first Show Cause Notice invoked larger period covering October '94 to ....
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....redit in terms of Rule 57A(c) and corresponding provisions that existed during the subsequent periods, demand relying on provisions of Rules 57C and 57D (2) was unsustainable. For the period 1-3-93 to 17-5-95 and for the period 18-5-95 to 28-2-97 respectively Rules 57C and 57D (2) had been relied on by the Commissioner. The dispute had begun in 1994 and was studied by the Departmental officers. On 24-4-96 the jurisdictional range Superintendent had addressed a communication to them referring to his visit to Plant III which recorded that he had noticed that power generated in the factory power plant was not being entirely used in the appellant's factory. Appellants had addressed a letter dated 1-10-97 to Assistant Commissioner, Salem stating that it was transferring a small portion of the power generated to its other units and was expunging the credit availed during 3/97 to 8/97 under protest. Therefore the department was well aware as early as April '96 that the appellant was transferring excess power to other units and the housing colony. Therefore, the finding that surprise visit of preventive officers in 9/99 had unearthed the irregular availment was incorrect. As demand of cred....
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....applied to clause (d) of the definition of Rule 57A. But they had availed credit as per Rule 57A(c), and from 1-3-97 onwards, they had expunged the credit on fuel relatable to electricity/steam diverted after Match '97. There was ambiguity in the rules. As per Apex Court's decision in Poulose and Mathen [1997 (90) E.L.T. 264 (S.C.)] case ambiguity had to be resolved in favour of the assessee. Therefore, the demand was time barred. Calculation of duty was rough estimates. Penalty was not imposable as interpretation of law was involved. They were not eligible for credit only from 1-3-97. If that reading [of 57A(d) & 57B (iv)] was not accepted, the said provision [57A(d)] lacked clarity during the material time and benefit of doubt had to be given. Demands were time barred as they were reversing the credit, since 1-3-97, under intimation to the Department. Fuel oil additive was eligible for credit just like LSHS. 3. Ld. Counsel appearing for the appellants relied on the decision of the Tribunal in Reliance Industries Ltd. v. CCE and C, Surat [2004 (178) E.L.T. 416 (Tri. Mumbai)] wherein it had observed, "2. In its decision in Essar Steel Ltd. in appeal L/1-588/02, the ....
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....y circular clearly spells out that the assessee would be entitled to the benefit of exemption on LSHS to the extent it is used in Thermal Power Plant located within the refinery area for generating electricity which in turn is used in the process of manufacture of petroleum products ................................. The exemption shall not be available in respect of RCO/LSHS used in the generation of electricity which in turn is not used in the process of manufacture of petroleum products within the refinery area." He submitted that a benefit available for use of LSHS in the production of petroleum products was not available if the same was used to generate power. In her rejoinder, the ld. Counsel argued that the judgment was not relevant as the same dealt with an exemption and not Modvat scheme. 5. We have carefully considered the facts of the case and the submissions by both sides. The issue to be decided in these appeals is the admissibility of MODVAT/CENVAT credit on LSHS relatable to electricity and steam generated (using such LSHS) and diverted outside the factory (of its production). The appeals also cover eligibility to credit of a similar input 'additive fuel....
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....ff in any manner entitles its inputs for credit. The notices have elaborately explained the liability confirmed in the impugned orders with reference to provisions of Rules 57A, 57A(c), 57A (d), 57B (iv), 57C and 57D (2). The notices cannot be assailed on the ground that they have resorted to different bases. The demand for the period 1-3-97, when 'inputs used as fuel' were not subject to restrictions contained in Rule 57A, 57B(iv) mandated that the credit would be available on fuel used in the generation of electricity or steam used within the factory of production. 5.3 In CCE v. Solaris Chemtech Ltd. reported in 2007 (214) E.L.T. 481 (S.C.), the Apex Court observed as under :- "In the present case, the LSHS is used to generate electricity which is captively consumed. Without continuous supply of such electricity generated in the plant it is not possible to manufacture cement, caustic soda etc. Without such supply the process of electrolysis was not possible. Therefore, keeping in mind the expression 'used in relation to the manufacture' in Rule 57A we are of the view that the assessees were entitled to MODVAT credit on LSHS. In our opinion, the present case falls in cl....