TaxTMI 
TaxTMI 
2024 (2) TMI 302
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....avoi, Perambalur District and a cement grinding unit at Chennai (referred to hereinafter as 'sister units'). Under an agreement dated 31.08.2012 entered into with the Tamil Nadu Generation and Distribution Corporation Limited ('TANGEDCO') the appellant had been permitted to wheel out a portion of the energy generated by the CPP to TANGEDCO for adjustment against drawal of electricity from the grid by the sister units. The drawal is not for cost and no consideration is received by the Appellant for the same. 3. The appellant had imported coal for the generation of electricity in the CPP availing CENVAT credit of Counterveiling Duty (CVD) on such imports. The imports span the period September 2012 to May 2013. The present litigation commenced with the show cause notice issued on 30.09.2013. The department alleges that no statement of accounts has been maintained for the receipt and consumption of coal for production of electricity. 4. Since the electricity generated had been both consumed in the factory at Sankar Nagar as well as wheeled out to the sister units, the respondents alleged contravention of Rule 6(1), 6(2) and 6(3) of the CENVAT Credit Rules, 2002 ('CCR'), proposing....
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....015 84,99,343/- 1/CE/2016 dated 21.01.2016 R-09/2016 dated 23.02.2016 4 21.04.2016 Aug, 2015 to Jan, 2016 46,38,324/- 4/2016 dated 12.05.2016 R-67/2016 dated 14.07.2016 COMMON Order TNLCEX-000-APP-36 & 37/2017 dtd 21.04.2017 E/4146 4/2017 40868/2018 dated 13.03.2018 913/2018 E/4146 5/2017 40869/2018 dated 13.03.2018 914/2018 8. Consequent on the SCN dated 30.09.2013 and response filed, an order in original came to be passed on 08.12.2014 and the issues framed by the authority were as follows: "4.2...... 1. Whether ICL is entitled for the full credit of duty on inputs and input services used for generation of electricity at their CPP, while a substantial portion of the electricity so generated is wheeled out to the grid of TANGEDCO for distribution to and drawal by their other units at Salem, Dalavoi and Chennai?; 2. Whether ICL, is liable to pay an amount equal to 6% of the value of electricity wheeled out to the grid of TANGEDCO in terms of rule 6(3)(i) of CCR?"2 9. After a detailed consideration of the matter, the proposals under the show cause notice were conf....
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....icity wheeled out to TANGEDCO and used by another unit cannot said to be captively consumed by the appellant. 16. We have heard the rival contentions advanced by the parties and have studied the files as well as statutory provisions and Rules. The definition of 'input' under Rule 2(g) of the CCR 2002 and 2004 contained a clear mandate that inputs must be consumed within the factory of production/generation and reads as follows:- "Rule 2 Definitions.- In these rules, unless the context otherwise requires,- ...... (g) "input" means all goods, except [light diesel oil] (inserted by M.F. & C.A. (D.R) Notification No. 13/2003-C.E.(N.T.), dated 1-3-2003.) high speed diesel oil and motor spirit, commonly known as petrol, used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final product or not, and includes lubricating oils, greases, cutting oils, coolants, accessories of the final products cleared along with the final product, goods used as paint, or as packing material, or as fuel, or for generation of electricity or steam used for manufacture of final products or for any other purpose, with....
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....t upon which the present appeals revolve. In the interests of clarity, we reiterate that the respondents have not in the matters before us, at any point in time, argued or pursued the stand that electricity is not an 'input' perse, that is not entitled to the grant of CENVAT credit. 24. The stand is restricted to the availment of credit by the principal unit only that is located proximate to the location of the CPP. 25. Paragraphs 19 and 20 of the judgment read as follows:- "19. 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? In the case of Collector of Central Excise v. Rajasthan State Chemical Works reported in 1991 (55) ELT 444 (SC) the test laid down by this Court is whether the process and the use are integrally connected. As stated above, electricity generation is more of a process having its own economics. Applying the said test, we hold that when the electricity generation is a captive arrangement and the requirement is for carrying out the manufacturing activity, the ....
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....o that extent, in our view, assessee was not entitled to CENVAT credit. In short, assessee is entitled to credit on the eligible inputs utilized 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 joint ventures, vendors etc., which is sold at a price. " 26. While the appellant would argue that judgment in Maruti Suzuki Ltd. (supra) did not involve the question that arises in this case, the respondents would maintain that it was on point. They specifically draw attention to the paragraphs set out above to support their argument that the final product must be consumed in the original location where input had been consumed. 27. The narration of facts as captured in paragraphs 1 and 7 of the judgment in Maruti Suzuki is to the effect that the supply of electricity in that case was to sister concerns, vendors and third parties, and at cost. Thus, the Court was concerned with the factual scenario where the power was sold to other units and whether, in such circumstanc....
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....ged between the goods used 'in the factory' by the 'manufacturer of the final product' and the goods used for 'generation of power'. While the former insists that the goods must be used 'in the factory', there is no stipulation of place as regards the goods in clause (iii). Therefore, we find merit in the position that electricity captively generated is an input, wherever used by the assessee concerned. The use of the term 'captive' is, in our view a qualification of the location where it is generated and not of the location where it is used. 32. In the present appeals, the period in question is September 2012 to May 2013 to which the substituted definition of 'input' would apply. There is a substantial cost in the setting up of a CPP. Perhaps the object of the substitution is itself that such expenditure must go to benefit the company as a whole, including the sister concerns to which supply is made. 33. There is no dispute on facts in relation to the power supplied gratis to the sister units. Thus the admitted facts that commend themselves to us are that (i) the captive power plant has been set up at substantial cost by the appellant....