2017 (12) TMI 1365

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.... inputs like lubricants, greases, coolant, chemicals, et cetera and input services used and consumed commonly in the manufacture of sugar and molasses which are chargeable to duty as well as in the generation of electricity which is exempted. Besides, use of electricity generated in the plant, same is also being sold to U.P.Power Corporation Ltd. as well as used in residential colony, guest house, bank, canteen, et cetera, that is, being used for non-manufacturing activity. It was noticed that the appellant did not maintain separate account for the receipt, consumption and inventory of inputs and input services meant for use in the manufacture of dutiable final products and the quantity of inputs meant for use in the manufacture of exempted goods or non-manufacturing activities. As because electricity have been incorporated in CETA with effect from 28/2/05, however, column of rate of duty is kept blank, electricity becomes taxable goods although no duty had been specified. As no date of duty has been indicated for electrical energy, the said item as per revenue, is to be treated as exempted goods. Accordingly, show cause notice dated 04/03/08 was issued as it appeared to revenue th....

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....diate product. It is further contended that electricity having been inserted vide the Finance Act, 2005 under the CET first schedule but till date it is neither chargeable to any duty, nor nil rate of duty as Column 4 meant for rate of duty has been left blank in the tariff entry. Thus, the essential ingredient of chargeable to duty being absent electricity can neither be taken as taxable nor exempted goods. The learned Counsel further relies on the ruling of SMB Bench of this Tribunal in Ex.Appeal No.E/52882/2014-Ex (SM), wherein vide Final Order No.51791/2015-Ex (SM) [2015 (329) E.L.T. 295 (Tri.)] relating to the period 01.04.2007 to 31.03.2008, wherein similar demand was under consideration. This Tribunal have allowed the appeal in favour of the appellant. The relevant paragraphs are reproduced below for ready reference : "5. In this case the short issue is to be decided by me whether the appellant is required to pay 10% of the value of electrical energy produced from bagasse which is sold to M/s U.P.Power Corporation Ltd., or not. 6. Whether the appellant has already reversed the credit attributable on bagasse which was used in manufacturing of final exempted ....

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....28. Hence, manufacture is referred to both dutiable/excisable goods and exempted goods, which are final products. Only then, it is necessary for the manufacturer to maintain separate accounts. Rule 6 of the Cenvat Credit Rules, 2004, (which is pari materia to the erstwhile Rule 57CC) provides that if Cenvat credit has been taken on the inputs which are used for manufacture of dutiable and exempted final products then the assessee is required to reverse the proportionate credit or pay 10%/5% amount of the value of the exempted final products. Electricity is not excisable goods under Section 2(d) of the Act, hence Rule 6 of the Cenvat Credit Rules, 2004 is not applicable as held by the Apex Court in the case of Solaris Chemtech Ltd. (supra). 32. The definition of excisable goods given in Section 2(d) means the goods, which are specified in the First or Second Schedule and which are subjected to duty of excise, can only be treated as excisable goods. A proposition has also been accepted by the Commissioner in its findings. A perusal of Section 2(d) of Central Excise Act shows that the excisable goods are only those goods which are subjected to duty of excise as specified in t....

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....n, the issue for consideration was whether electrical energy is excisable goods as defined in Section 2(d) of the Central Excise Act and whether Rule 6 of the CENVAT Credit Rules, 2004 would be applicable in respect of inputs/input services used in the manufacture of electricity. The Hon ble Allahabad High Court held that electrical energy which is mentioned in Chapter 27 of the Central Excise Tariff Act covers only such electrical energy which is generated from mineral fuels, mineral oil and products obtained therefrom and electrical energy produced from bagasse is not covered under Chapter 27 and hence, such electrical energy is not excisable goods nor is it exempted goods as defined in Section 2(d) of the Act. It was further held that Rule 6 of the CENVAT Credit Rules, 2004 refers to both dutiable/excisable goods and exempted goods. Only then, it is necessary for the manufacturer to maintain separate accounts. Rule 6(3) of the said Rules provides that when CENVAT credit is taken on the inputs/input service which are used for manufacture of dutiable as well as exempted final products, then the assessee is required to reverse proportionate credit or pay 5% amount of the value of t....