TaxTMI 
TaxTMI 
2024 (12) TMI 1235
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....ellant 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) Magdalla unit (iii) Wanakbori unit (iv) Residen....
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.... 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 show cause notice have been adjudicated. The learned Adjudicating Authority has held as follows :- 4.1. I drop the proceedings initiated vide followings Show cause notices for dema....
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.... 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 basis for example under the impugned show cause notice dated 28th October, 2015 under para 11.2 which is reproduced here below, it is categorically mentioned that :- Year Proportionate Input Credit reversed Proportionate Input Service credit reversed TOTAL 2012-13 (April, 2012 to March 2013) 2468309 3039395 55,07,704 2013-14 (April, 2013 to March, 2014....
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....ricity 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 such electricity not sustainable - Rule 6(3) of Cenvat Credit Rules, 2004. 3.7 Since they have already reversed the credit attributable to exempted service/goods it can be said that they have not availed to such extent as held by the Hon'ble Apex Court in the case of Chandrapur Magnet Wires (P) Ltd V/s Commissioner of Central Excise, Nagpur reported in 1996 (81) E.L.T. 3 (S.C.) wherein the Apex Court has held as follows:- "Reversal of Modvat credit permissible to avail exemption Similar inputs used in the manufacture of dutiable as well as exempted final products - Amount of Modvat credit taken on the i....
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....T 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 paid. But our attention was drawn to a departmental circular letter on this problem in which it has been clarified by the Ministry of Finance as under :- "3. The credit account under MODVAT rules may be maintained chapterwise, MODVAT credit is not available if the final products are exempt or are chargeable to nil rate of duty. However, where a manufacturer produces along with dutiable final products, final products which would be exempt from duty by a notification (e.g. an end use notification) and in respect of which it is not reasonably possible to segregate the inputs, the manufacturer may be allowed to take credit of duty paid on all input....
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.... 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 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 ....
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....tion 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 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 ....
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....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 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 i....
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....i) 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 '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 ma....
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....s 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 others. Therefore, when one company has various different units located at different geographical locations, all the units are manufacturing units, and the electricity generated in one unit is being consumed in the other unit of the same company in addition to it being consumed in the same unit also, it can be safely concluded that it is a case of captive generation and captive consumption of such electricity. In such a situation, the case would satisfy the test "electricity generation is a captive arrangement." 15. In our considered opinion, therefore, Maruti's judgment will not apply in the present case and the decision which is taken by the Tribunal that the captive power plant of the sister concern, the same is against the fuel and fuel is used for the sister concern which is a part of the company itself. In that view of the matter, we are of the considered opinion that the view taken by the Tribunal is just and proper." 5.6. We also....