TaxTMI 
TaxTMI 
2024 (12) TMI 1235
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....e Central Excise Act, 1944. 1.1. The appellant have their sister units located at Magdalla (Surat), Wanakbori and Jafrabad in Gujarat. All the sister concerns of the appellant are also engaged in manufacture of cement and same is being cleared from respective units on payment of central excise duty. 1.2. It is a matter of record that the appellant have a captive thermal power plant (TPP) at Kovaya, Amreli (Gujarat) for generation of electricity. The captive thermal power plant of the appellant is using input like Pet cock, coal and lignite as fuel for generation of electricity, these inputs are also used for manufacture of the cement. The appellants have also been availing input services like manpower supply, repair and maintenance, technical consultancy services etc. The appellant availed CENVAT Credit of such inputs and input services at their factory located at Kovaya, Amreli. 1.3. The electricity generated by the captive thermal power plant at Kovaya was primarily used in the manufacture of cement at the Kovaya plant, however, excess electricity generated by the appellants at their Kovaya unit was wheeled out to the following units and concerns. (i) Jafrabad unit (ii) ....
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....ll as electricity (exempted ) without making separate record on receipt, consumption and inventory of the input and input services. 1.6. The following show cause notices came to be issued on the above premises. Sr. No. Show Cause Notice No. & Date Period Demand (In Rs.) 1 F. No. V/15-137/DEM/HQ/2014-15 dated 28.10.2015 April 2012 to June 2015 9,74,56,761 2 F. No. V/15-12/Dem/HQ/2016-17 dated 29.06.2016 July 2015 to Dec 2015 1,62,55,754 3 F. No. V/15-33/Dem/HQ/2016-17 dated 04.01.2017 January 2016 to March 2016 91, 54,541 4 F. No, V/15-42/Dem/HQ/2016-17 dated 01.05.2017 April 2016 to June 2016 59,05,421 1.7. The show cause notice mentioned at serial No (i) above have been issued by invoking the extended time proviso under Section 11 (A)(4) of the Central Excise Act, 1944 read with Rule 14 of the CENVAT Credit, 2004. The balance three show cause notices are for the normal period of demand. The matter has been adjudicated vide a common impugned Order-In-Original dated 27.03.2018 where under all the above mentioned four ....
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.... (i) The CESTAT may be pleased to hold that the assessee is liable to pay an amount equal to 6% of the value of exempted goods under Rule 6(3)(i) of the CENVAT Credit Rules, 2004 for the impugned period instead of reversal of CENVAT credit availed on common input and input services, in view of the grounds mentioned above. (ii) The CESTAT may be pleased to hold that the demand under Rule 6(3)(i) of the CENVAT Credit Rules, 2004 for the impugned period is liable to be upheld along with interest in view of the grounds mentioned above. (ii) The CESTAT may be pleased to hold that the assessee is liable to penalty under Section 15(2) read with Section 11AC of the Act. (iv) Pass any other order on merits, as deemed fit by the Hon'ble Tribunal." 5. We find that as per the provisions of the Rule 6 (3A) (a) and (b) provides that manufacture of service provider has to make payment every month of the amount calculated according to formula prescribed in the CENVAT Credit Rules. We find that as per the show cause notice itself, the appellant have reversed the CENVAT Credit on proportionate input credit as well as proportionate input service credit on monthly ba....
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....at if the amount of credit inputs/input services used in generation of electricity sold outside is reversed, the same is sufficient and in that case the assessee is not required to pay an amount equal to 8/10% of the value of electricity. The above legal point is well supported by the following judgments. (a) Commissioner V/s. Rukmani Power and Steel Ltd. 2017 (354) E.LT. A24 (High Court Chhattisgarh). Court held as follows:- Cenvat credit-Use of common inputs in manufacture of dutiable and exempted electricity sold outside factory Demand equal to 8%/10% value of exempted electricity not sustainable if credit reversed on input/input services used in manufacture of such electricity. (b) Ind Power Ltd.V/S Commissioner of C. Ex., Raipur- 2017 (347) E.L.T. 352 (Tri. Del.). Tribunal held as follows:- Cenvat credit Reversal of Use of common inputs in dutiable and exempted product Non-maintenance of separate records Demand of 10% value of exempted goods Since, appellant captively using part of electricity generated in their power plant within factory and reversing credit attributable to electricity sold to outside customers, demand of 10% of value of su....
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....nts relied upon by the Revenue, as mentioned in Para 5(b) above, such units situated far away cannot be treated as one factory once different registrations have been obtained by the appellant for all the three units." 5.2. We also find that the Hon'ble Karnataka High Court in case of Commissioner Central Excise and Service Tax, Banglore Vs. Bill Force Pvt Ltd reported under 2012 (279) 209 (Kar.) has held that the once the CENVAT Credit has been reversed by the assesse, it amounts to not taking of the CENVAT Credit on inputs. Similarly, the Hon'ble Apex Court in case of Chandrapur Magnet Wires (P) Ltd Vs. CCE reported under 1996 (81) ELT 3 SC has held that :- "6. It is true that the assessee has not maintained separate accounts or segregated the inputs utilised for manufacture of dutiable goods and duty free goods, as should have been done. The contention of the Department that in this situation, the assessee is not entitled to reverse the entries and get the benefit of the tax exemption is a question which merits serious consideration. There is no doubt that the assessee should have maintained separate accounts for duty free goods and the goods on which duty has to be p....
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....ssioner and therefore we find no merit in the departmental Appeal, accordingly same is dismissed. Now coming to learned Commissioners impugned Order-In-Original in para 4.2, where it has been ordered that : " I confirm and order the noticee to reverse the CENVAT credit attributable to electricity supplied to their sister concern through GEB from M/s UltraTech Cement Ltd., Gujarat Cement Works, Post. Kovaya, Dist Amreli, under Rule 15 of CENVAT Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944 read with Rule 6(3A) of the Cenvat Credit Rules, 2004 as discussed in para 3.10 of my findings. The jurisdictional officer should work out the amount and do the needful to recover the same." 5.4. We find that the learned Adjudicating Authority has not quantified the amount of the duty which is to be recovered from the appellant and therefore, same is not sustainable on the merit, at the same time however, the Hon'ble Madras High Court in case of M/s. India Cement Limited Vs. Commissioner Of Customs, Central Excise and Service Tax - Tirunelveli reported under 2024 (2) TMI 302 has held as follows :- "16. We have heard the rival contentions advanced by ....
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....or generation of electricity in gas turbines. There was a common distribution point for the electricity generated in all three turbines as well as the diesel generator set. To be noted, no CENVAT credit was claimed in respect of the diesel used as fuel. 21. From the common generation point some portion of the electricity was consumed captively and some was wheeled to its joint ventures, vendors etc. The assessee had contested the denial of CENVAT credit on the electricity wheeled to its joint ventures and vendors. 22. The revenue had argued that it is only in the case of inputs used in, or in relation to manufacturing of final products, that CENVAT credit was admissible. The input in that case had been used for production of electricity which was not excisable. The argument was that the Rule covers all inputs as long as they were used in or in manufacturing of final products directly or indirectly. 23. Additionally, they argued that all the inputs mentioned therein had to be used only within the factory or production. That is the point upon which the present appeals revolve. In the interests of clarity, we reiterate that the respondents have not in the ma....
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....e that the phrase "within the factory of production" means only such generation of electricity or steam which is used within the factory would qualify as an immediate product. The utilization of inputs in the generation of steam or electricity not being qualified by the phrase "within the factory of production" could be outside the factory. Therefore, whatever goes into generation of electricity or steam which is used within the factory would be an input for the purposes of obtaining credit on the duty payable thereon." 20. To sum up, we hold that the definition of "input" brings within its fold, inputs used for generation of electricity or steam, provided such electricity or steam is used within the factory of production for manufacture of final products 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, assessee was not entitled to CENVAT credit. In short, assessee is entitled to credi....
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....s included in the value of the final product and goods used for providing free warranty for final products; or (iii) all goods used for generation of electricity or steam for captive use; or (iv) all goods used for providing any output service;" 30. Upon a comparison of 2002 and 2004, Rules one would see that under the 2002 Rules, the mandate was categoric that an input must be consumed 'within the factory or production'. Under the substituted Rules however, inputs have been categorized into four categories (i) goods used 'in the factory' by the manufacturer of the final product (ii) all goods including accessories cleared along with the final product, the value of which is included in the value of the final product and goods used for providing free warranty for final products (iii) all goods used for generation of electricity or steam for captive use and (iv) all goods used for providing any output service. 31. Clauses (ii) and (iv) are not relevant for the purposes of this order. Importantly, a distinction has been envisaged between the goods used 'in the factory' by the 'manufactu....
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....imited 2018 (16) GSTL 196 (Raj.) has held para 14 and 15 as follow : "14. On the contrary, the AO observed as under : "That in this connection, as far as the present case is concerned, it is submitted that is transferring power to its own units without there being any sale. In such a situation no denial of credit can be made in the case. This is because of certain observations made in the order itself, which are as under :- (a) "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 electricity generation also forms part of the manufacturing activity and the "input" used in that electricity generation is an "input used in the manufacture" of final product. This observation makes it clear that in the case where there is an arrangement for captive generation of electricity, it has to be treated as a requirement for carrying out manufacturing process and therefore credit would be admissible. Therefore, the key expression is "captive arrangement". Captive arrangement means arrangement made by the company for its own use and not for use by ot....
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....eration unit by the same manufacturer, Considering that the electricity has been used in the manufacture of dutiable final products and also the fact that all units belong to the appellant the denial of credit is not justifiable in the present case. Further, it is a fact that if the appellant were to follow the procedure for input service distribution the credit eligibility on part of the electricity cleared to sister unit could not have been questioned and the credit could have been passed on to the unit which is actually using the electricity or retained fully by the appellant himself without proportionate distribution. Such being the factual position, I find that the impugned orders are not sustainable. Further, the reliance placed in the impugned order on the ratio of Hon'ble Supreme Court in Maruti Suzuki Ltd. vs. CCE, Delhi - III (supra) is not appropriate. In fact the appellate Authority records that the facts are different in both the cases but still goes ahead and applies the ratio. As mentioned earlier in this order, the Hon'ble Supreme Court was dealing the sale of electricity to outside parties and not to clearance of electricity to another manufacturing unit of....