TaxTMI 
TaxTMI 
2008 (6) TMI 154
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....The electricity so generated is used by the appellants in the soda ash plant. Part of the electricity is also supplied by the appellants to the salt plant which is engaged in the manufacture of exempted goods. 1.4 For the generation of electricity in the captive power plant, appellants use pet coke and furnace oil as fuel. The pet coke and furnace oil is first used for generation of steam which steam is further used for generation of electricity. Part of the steam generated is also used directly in the manufacture of soda ash. Admittedly, entire quantity of steam generated and electricity generated is used within the factory of production of steam or electricity. No part of steam or electricity is cleared outside the factory. 1.5 Appellants avail Cenvat credit of the duty paid on the furnace oil and pet coke so used for the generation of electricity. Till 16-5-2005, in view of the specific exception carved out for 'inputs used as fuel' in' Rule 6 of the Cenvat Credit Rules, 2004 and the predecessor Rules, appellants availed Cenvat credit of the duty paid on the entire quantity of furnace oil/pet coke used in the generation of electricity irrespective of the further use of electri....
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.... the show cause notice, recovery of interest and penalty equal to the amount payable under Rule 6(3) read with Rule 14 of Cenvat Credit Rules, 2004. The appeal is against this order. 3.1 The grounds of appeal taken by the appellants are briefly explained below:- (A) On the demand of Rs. 22,41,76,788/- for the period from 16-5-2005 to 31-3- 2006 :- Effective from 16-5-2005, when inputs used as fuel were specifically excluded from the provisions of Rule 6(3), the appellants at the time of issue of furnace oil and pet coke for generation of steam/electricity, reversed the proportionate Cenvat credit attributable to the quantity of electricity used in salt plant and other non-excisable purposes by making necessary entries in the cenvat register. This is done by the appellants at the beginning of every month and reflected in the monthly ER1 returns. Thus the appellants effectively took Cenvat credit of the duty paid on the furnace oil and pet coke only to the extent of the same finding use in the electricity used for making dutiable final products. Therefore, the provisions of Rule 6 could not get attracted at all. In support of this claim, they cited the following judgments:- 1. CC....
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.... is to be demanded. The appellant has worked out the quantum of steam used in the generation of electricity based on the records maintained by them for the disputed period and the amount payable is only Rs. 36,44,971/-. If electricity is treated as exempted final product, the amount payable would only Rs. 41,01,158/-. They cited the following decisions in support of this claim:- (a) Tata Chemicals Ltd. v. CCE - 2007 (214) E.L.T. 95 (b) Texmo Inds. v. CCE - 2007 (208) E.L.T. 338 (Tri.-LB). (B) Submissions on the demand of Rs. 2,77,15,038/- for the periods from 2001- 02 to 2005-06 under Rule 6(3)(b) :- The demand has been confirmed on the ground that appellants have used inputs in the manufacture of soda ash, a part of which have been used for the manufacture of pure salt. The appellant have since reversed the credit paid on the duty on the inputs that went into the manufacture of soda ash used in the manufacture of brine used for the manufacture of exempted products for the entire period. They have also since paid excise duty on the quantity of soda ash used for purification of brine for the entire period along with interest. Since, full excise duty has been paid on the intermed....
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.... even though the decision of M/s. Texmo Industries is in respect of the erstwhile Rule 57CC but since Rule 57CC and Rule 6 have not been considered in depth, it may not be correct to hold that both the rules are pan materia but Tata Chemicals case cited above is comparable on facts and relates to the present Rules and hence is relied upon. 6. After hearing both the sides and considering the arguments advanced, we find that the offer made by the ld. Advocate that they have already reversed the amount payable if steam or electricity is taken as exempted product in respect of the final products viz. Iodized salt/vacuum salt has to be accepted. Even though the amount payable on electricity is higher than what is payable on steam, we feel that it would be appropriate if the amount is calculated on the cost of steam and not electricity since electricity comes after the steam but before the final product viz. Iodized salt vacuum salt. Further once the amount is paid on steam, the requirement of Rule 6(3)(b) is fulfilled and therefore we do not find any need to consider the arguments advanced in support of their claim that reversal of credit would amount to not taking the credit at all. F....
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....n 5-9-2006 voluntarily also supports view. They have also claimed that they have reversed the credit also even though duty is paid on soda ash used for manufacture of exempted products, credit need not be reversed. However, the Commissioner has observed that this payment has been made without authority and without proper calculation. Therefore, the case will have to be remanded to the original Adjudicating Authority, who can get the correctness of the duty paid on the soda ash for the 5 year period by the appellants verified. Needless to say once duty is paid on the soda ash used in exempted goods, the reversal of the credit of duty paid on the inputs will not be required. Since, the duty has been paid in the soda ash used in the exempted product, the demand of amount of Rs. 2,77,15,038/- on salt has to be set aside. 8. Since appellants have paid excise duty on the entire quantity of soda ash captively consumed for purification of brine, the demand for Cenvat credit of the duty paid on the HDPE bags used for packing of soda ash captively consumed amounting to Rs. 15,85,909/- also fails. 9. In view of the discussions above, the conclusions on the appeal be fore us are as under:- ....