TaxTMI 
TaxTMI 
2016 (3) TMI 1042
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....s, if the production of electricity was 100 unit and they were consumed 55 unit in their factory and wheeled out the balance 45 unit, they took credit of input services only to the extent of 55 % of duty paid. This credit took, as they did not take at beginning of the month and the same was taken in the end of the month when the electricity consumed and wheeled out was known to them. 2. The Revenue raised three different issues in respect of the electricity wheeled out. The first issue was that since all the electricity is not consumed captively and a part of it is wheeled out, the appellants are not entitled to capital goods CENVAT Credit. The second issue was that they are not entitled to CENVAT Credit on the input services because the plant was not set up with intention to captive consumption but also to the pre-set mind to sale electricity out of it for commercial consideration. Furthermore, it was alleged that the electricity generated from the plant does not attract Central Excise duty and hence, in terms of provisions of Rule 6(1), credit of Service Tax is not admissible to them. Numerous demands were raised on the second issue and three Orders-in-Original were passed, agai....
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....l goods is under Rule 6(4) of Cenvat Credit Rules, 2004 wherein it is stated that: - "No CENVAT credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted services, other than the final products which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made in a financial year" He argued that the said rule prohibits CENVAT Credit in respect of capital goods "exclusively used" in manufacture of exempted goods. In their case, they are clearing only a fraction of the electricity generated. The balance electricity is used for manufacture of final products which are dutiable. He argued that therefore the capital goods are not used exclusively for the electricity which is wheeled out to the factory and therefore they are not hit by the mischief of sub-rule 4 of Rule 6 of the Cenvat Credit Rules, 2004. The appellants also relied on the decision in case of H.E.G. Ltd. - 2012 (275) ELT 315 (Chhatisgarh). 3.2 Learned Counsel also pointed out that credit was sought to be disallowed in respect of certain items l....
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....lify as capital goods. The only restriction to that is provided in Rule 6(4) of Cenvat Credit Rules, 2004 wherein it is stated that: - "No CENVAT credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted services, other than the final products which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made in a financial year." It can be seen that in the instant case the Capital Goods are not used exclusively for producing electricity that is wheeled out. It is seen that in the same circumstances, in case of H.E.G. Ltd. - 2012 (275) ELT 315 (Chhatisgarh), the Hon'ble High Court has observed as under: - "12. Plain reading of Rule 6(4) of the Rules makes it abundantly clear that Cenvat Credit in respect of capital goods shall not be allowed on capital goods which are used "exclusively" in manufacture of exempted goods. In the instant case, though major portion of the generated electricity from the power plant was sold to MPEB through its grid, however, it cannot be said that capital goods were ex....
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....xact usage of these items. No reason is given for denying the credit on these items in the impugned order. Credit cannot be denied without reason arbitrarily. 5.1.3 In view of above the appeal E/1119/11 is allowed. 5.2 It has been alleged that since the appellants are using the services for production of electricity, which is an exempted product. It has been alleged that they are not entitled to take credit of the tax paid on input services in terms of Rule 6(1) of the Cenvat Credit Rules, 2004. It is apparent that the appellants are using the said input services for production of electricity which is in turn used for manufacture of the final products which are dutiable. However a certain part of electricity is sold for which they have been availing the benefit of Rule 6(2) of the Cenvat Credit Rules, 2004. They are availing credit of only that proportion of the duty paid, which proportion of the electricity has been used captively in production of dutiable goods. In the case of Maruti Suzuki Ltd. - 2009 (240) ELT 641 (SC), Hon'ble Supreme Court had the occasion to examine the issue. Hon'ble Supreme Court has observed as follows: - "20. To sum up, we hold that the defin....
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.... of turnover for the manufacturing sales and trading sales and service tax credit was taken only of the service tax relating to the manufacturing sales turnover. The department was of the view that in the absence of any maintenance of accounts for the dutiable goods and services, and exempted products and services, the appellant is liable to pay a sum @ 10% (up to 6-7-2009) and thereafter @ 5% on the value of the exempted goods cleared and the same is recoverable under the proviso to Section 11A of the Central Excise Act, read with Rule 14 and Explanation-III to Rule 6A of the CENVAT Credit Rules (CCR), 2004. The department was also of the view that interest on the above amounts were payable by the appellant under Section 11AB and the appellant is also liable to penalty under the provisions of Rule 15 of the CCR, 2004. 5.3 Secondly, as per Rule 6(2) maintenance of separate accounts is envisaged only when a manufacturer or provider of output service avails CENVAT credit. In the present case, the appellant has not availed any CENVAT credit at all in respect of input services relating to the traded goods. Therefore, question of maintenance of separate accounts does not arise at all.....