2025 (7) TMI 1534

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....is waste gas so generated is captively consumed in its integrated power plant for production of electricity which is captively consumed as also sold to West Bengal State Electricity Distribution Co Ltd. The waste gases are byproducts of the manufacturing process and generation of waste gases is completely involuntary and inevitable during the manufacturing process. The Appellant has a choice of either letting the waste gases in the atmosphere or convert them into either electricity or put it for some such purpose. 2. During the excise audit conducted it was observed that the Appellant is engaged in the manufacture of dutiable goods (Coke) and exempt products (electricity) and have not maintained separate books of account for receiving consumption and inventory of input (Coking Coal). Therefore, it was observed that the Appellant is required to pay an amount equivalent to 6% of the value of exempted goods, i.e., electricity, in terms of Rule 6(3)(i) of the Credit Rules. The Show Cause Notices came to be issued for the period April 2011 to February 2016 [demand Rs.11,60,62,456], March 2016 to December 2016 [demand Rs. 2,01,62,182]. The same were adjudicated vide Order-in-Original ....

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....oking Coal for generation of waste gases and as mentioned earlier waste gases are generated as inevitable and involuntary outcome, i.e., by-product of the manufacturing process. 4.5 With the above background when Rule 6 of the Credit Rules is understood and interpreted, the whole proceedings of issuing demand against the Assessee will prove to be incorrect and the Orders granting relief to the Assessee will be found to be sustainable in law 4.6 Rule 6(1) of the Credit Rules stipulates that CENVAT credit shall not be allowed on such quantity of inputs which is used in the manufacture of exempted goods. In this case, no input is used in the manufacture of exempted goods i.e., waste gases. The input i.e., Coking Coal is used for manufacture of Coke. Therefore, the Appellant is in compliance with Rule 6(1) of the Credit Rules. 4.7 Furthermore, Rule 6(2) of the Credit Rules which requires a manufacturer to maintain separate accounts for receipt, consumption and inventory of input meant for use in the manufacture of dutiable and exempt goods is also being complied with, as there are no specific inputs that are used in generation of waste gases and the entire quantity of inputs a....

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....nputs used in generation of electricity is held to be inadmissible when the electricity so generated is used outside factory premises. In the present case, it is admitted in the Impugned Order itself (Para 10.33 - Page 167) that no additional inputs are used in generation of waste gas or electricity. Further, the question in the cited judgements was that of eligibility for cenvat credit on inputs whereas in the present case the dispute is whether the assessee is required to pay 6% of exempted by-product. Thus, the cited judgements do not support Revenue's case in any manner. 4.12 With respect to limitation, it is submitted that in the given facts and circumstances, where by-product is generated during the manufacturing process where no specific inputs are used for the said manufacture, there is no question of the Appellant having misstated or suppressed any facts. In any case considering the issue being pure question of law, the allegation of suppression of facts is not sustainable. 4.13 Thus, even on limitation certain period will be barred by limitation. Similarly, levy of penalties would not be sustainable. 5. In view of the above, it is prayed that, the Assessee's appe....

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....e appeal with consequential benefit to the appellants. 11. On an identical issue, our Bench relying on the above case law and other decided issues, in the case of Durgapur Projects Ltd. Vs Commissioner of Central Excise, Durgapur vide in Appeal No.E/75960 /2016, vide FINAL ORDER NO. 76895/2025 Dated 13.06.2025, has held as under : The Appellant, Durgapur Projects Limited, a Government of West Bengal Enterprise, is engaged in generation, transmission and distribution of electricity . They are also involved in manufacture of Metallurgical Coke, Crude Coal Tar and Naphthalene Sludge, etc., falling under Chapter 27 of Central Excise Tariff Act, 1985. During the manufacture of coke, the final product, certain by-products emerge. One such by-product is Coal Gas which attracts NIL rate of duty under the Central Excise Tariff. 8. It is observed that admittedly the exempted goods in question necessarily emerges as a by-product in the course of manufacture of the finished goods of the appellant. In view of the practical difficulties, the appellants cannot separately account for the inputs going into the manufacture of the finished goods and the exempted goods. As a matte....