TaxTMI 
TaxTMI 
TaxTMI 
2014 (2) TMI 280
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....ying the benefits of Modvat credit. Factual Matrix :- 2. M/s. SRF Ltd. (hereinafter referred to as 'the Assessee'), are manufacturers of Nylon Chips, Nylon Filament Yarn and Nylon Cord Fabrics falling under Chapters 39, 54 and 59 of the Schedule to the Central Excise Tariff Act, 1985. The assessee used furnace oil and lubricating oil for the purpose of generating electricity. Electricity generated by the assessee was used for manufacture of final products within the factory of production and a part of electricity generated was supplied to other units viz., M/s. SRF Ltd., Viralimalai and M/s. SRF Ltd. Gummidipoondi through TNEB Grid and M/s. SRF Polymers, Manali, directly. 3. The assessee reversed the credit duty on furnace oil ....
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....found that input used by the assessee in the generation of electricity and the electricity generated was used in the manufacture of excisable goods. The question regarding the use of electricity outside the premises was answered by the CESTAT by holding that tax laws should be interpreted in conformity with normal commercial practice and therefore, the manner of use should be accepted as to the economical, efficient and convenient manner of use. In short, CESTAT, opined that generation of electricity in one unit for use in all the neighbouring units of a manufacturer is more efficient and economical than generating electricity at each and every factory. Accordingly, the appeal was allowed. Feeling aggrieved by the said order, the Revenue is....
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....of the input within the factory premises nor does the rule require the inputs to be brought into the factory premises at any point of time. According to the learned Counsel, the furnace oil was used for generation of electricity and it was supplied to the other units of the assessee. Therefore, it cannot be said that the credit was improperly claimed. The learned Counsel fairly submitted that the assessee has sold the electricity for manufacture of final products to one another Company and to that limited extent, the Commissioner (Appeals) was justified in reversing the credit. Consideration of the issue :- 11. The assessee - M/s. SRF Limited are manufacturers of Nylon Chips, Nylon Filament Yarn and Nylon Cord Fabrics and for the per....
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....y which resulted in passing an order on 26 December, 2003, directing recovery of differential credit with interest and penalty. The said order was unsuccessfully challenged before the Appellate Authority. 12. Before the CESTAT, the assessee contended that it was a case of use of fuel and as such, the clause relating to "use for manufacture of final product within the factory of production" does not apply and therefore, the Assessing Authority and the Appellate Authority grievously erred in reversing the credit. 13. There is no dispute that the assessee took credit of furnace oil used for the generation of electricity. It is also a matter of fact that the electricity generated by the assessee was used for manufacture of final pro....
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....n, the said item would not become an eligible input. The Hon'ble Supreme Court further held that the observation "use in or in relation to manufacture" has many shades and would cover various situations, based on the purpose for which the input is used. However, the specific input would become eligible for credit only when used in or in relation to the manufacture of final product. The Supreme Court observed :- "42. The question which still remains to be answered is : whether an assessee would be entitled to claim Cenvat credit in cases where it sells electricity outside the factory to the joint ventures, vendors or gives it to the grid for distribution? 43. In CCE v. Rajasthan State Chemical Works - 1991 (55) E.L.T. 444 (S.C.) ....
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....or for any other purpose. The important point to be noted is that, in the present case, excess electricity has been cleared by the assessee at the agreed rate from time to time in favour of its joint ventures, vendors, etc. for a price and has also cleared such electricity in favour of the grid for distribution. To that extent, in our view, the assessee was not entitled to Cenvat credit. 46. In short, the assessee is entitled to credit on the eligible inputs utilised in the generation of electricity to the extent to which they are using the produced electricity within their factory (for captive consumption). They are not entitled to Cenvat credit to the extent of the excess electricity cleared at the contractual rates in favour of joi....