2014 (2) TMI 279

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....s. Indian Organic Chemicals Ltd., (I.O.C.L., for short) are manufacturers of polyester staple fiber, falling under Chapter sub-heading 5503.20 and Polyethylene terephthalate falling under chapter sub-heading 3907.60 of the Central Excise Tariff Act, 1985. On the basis of Intelligence report that M/s. IOCL have been availing credit of duty paid on inputs used in the generation of electricity and steam, which were exported/cleared to Futura Polymers Ltd., Manali, which is a 100% export oriented unit, situated adjacent to the factory premises of M/s. IOCL and other units and clearing demineralized water and dealkanised soft water to M/s. FPL without payment of duty, the officials of Central Excise Department, inspected the premises of M/s. IOC....

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....Central Excise Rules was decided against the assessee. The third issue regarding usage of Modvat availed on furnace oil for the manufacture of Steam which was supplied to M/s. FPL was decided in favour of the assessee. The fourth issue regarding manufacture and clearance of DM Water and DAS Water without filing the required declaration under Rule 173B was also decided in favour of the assessee. 5. The Commissioner of Central Excise ultimately disallowed the credit of Rs. 6,52,964/- taken on Naphtha and SKO which were utilized in the manufacture of electricity supplied to M/s. FIL and the Silver Extraction Plant of the assessee for the period from February, 1998 to March, 2000. The Commissioner further directed recovery of the amount f....

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....be used within the factory of manufacture of final products and particularly when specific provisions exists that credit on goods used for generation of electricity or steam is available only if electricity/steam is used within the factory of production? (b)     Whether the Appellate Tribunal is correct in relying solely on the order of the Tribunal reported in 2005 (192) E.L.T. 787 particularly when an appeal has already been filed against the same and is pending before this Court for decision and particularly when the Tribunal in similar cases held that such credit is not eligible?" 9. We have heard the learned counsel for the parties. 10. The Issue Nos. 3 and 4 framed by the Commissioner of Central Excise....

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....cific question was as to whether the Department was right in reversing proportionate Cenvat credit to the extent of power wheeled out by the appellant to its sister units, vendors and joint ventures. The Supreme Court considered the concept of input as defined under Rule 2(g) of Cenvat Credit Rules, 2002 and held that the assessee is entitled to credit of inputs utilized in the generation of electricity only to the extent to which they are used to produce electricity within their factory. The relevant observation read thus :- 45. To sum up, we hold that the definition of "input" brings within its fold, inputs used for generation of electricity or steam, provided such electricity or steam is used within the factory of production for ma....