TaxTMI 
TaxTMI 
2026 (2) TMI 231
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....an equivalent power from the grid; as the electricity generated by the DG Sets was used in the factory for manufacture of excisable goods, the appellants have taken CENVAT credit of duty paid on furnace oil etc. used in the generation of electricity. HSEB were charging 10% as wheeling charges from the appellants. 2.1. Department initiated an investigation and made enquiries with Assistant Electrical Engineer (AEE), Hisar, who vide letter dated 30.07.2003 informed that there is an arrangement between the appellants and HSEB wherein the charges for electricity produced and pumped by the appellants to the grid were adjusted in the monthly electricity bills of the appellants by charging 10%. On completion of the investigation, Revenue issued 04 show cause notices dated 30.12.2003, 28.06.2004, 28.12.2004 & 27.06.2005 seeking denial of CENVAT credit of duty paid by them on the inputs such as furnace oil etc. used in the manufacture of electricity. Commissioner vide OIO dated 30.11.2005 confirmed the demand of CENVAT credit of Rs.6,58,08,706/-, for the period January 1999 to December 2004, along with interest and penalty of Rs.4,22,06,993/- under Rule 57I(4) read with Rule 13(2) read w....
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....ther after a retention fee of 10% as synchronization charges, does not amount to sale of electricity and hence, the credit of input cannot be denied; Revenue preferred an appeal, no. 64/2015, against this order before Hon'ble High Court of Punjab & Haryana which was later withdrawn under the Litigation Policy; he submits that even otherwise, as per the Electricity Act, 1948 and the agreement between the appellant and HSEB, they are not permitted electricity. 5. Learned Counsel submits that since the entire quantity of furnace oil is used within the factory and credit was availed in accordance with law, credit cannot be denied; clause (c) to the Explanation under Rule 57A (inserted on 01.03.1994) specifically included goods used as fuel; clause (d) introduced w.e.f. 16.03.1995, further allowed credit on inputs used for the generation of electricity within the factory; these provisions were retained through subsequent amendments via Rule 57B (w.e.f. 1997), Rule 57AA under CENVAT Credit Rules, 2000 and Rule 2(f) of the CENVAT Credit Rules, 2001/2002; Commissioner erred in denying credit by applying only the second limb of the definition by assuming that the input was used a fuel. ....
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....ed to grid; by the appellants own admission the total capacity of generated was 60MWs of the total quantity of 100MW required by the appellants. She submits that the appellants claim on payment of wheeling charges not relevant as the same cannot determine the eligibility to Cenvat credit. 9. Learned Authorized Representative submits that the appellants contend that the credit has been availed on the goods "used as fuel" within the factory of production, conveniently ignoring the phrase "used in the manufacture of final products". She submits that the appellants themselves submit that the quality of electricity generated being poor, they were forced to export the same to the HSEB grid; therefore, the question that arises is not about the quality or quantity of the electricity; it is an admission by the appellants that the electricity generated within the factory of production was not being used in the production of final product and therefore, credit is not admissible; the feasibility report given by the TCS also confirms that the electricity generated by the appellants was not capable of being used in the factory for production of final products. She submits, reverting to the cl....
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....l of the above shows that the dispute in the present case is that the electricity generated in captive plant was not used in or relation to manufacture of final products within the factory of production but was sold to HSEB whereas learned Tribunal did not decide this dispute and held that there is no dispute with regard to the appellant receiving same quantity of electricity which was cleared to the Electricity Board, therefore, the issue in dispute was never decided by the learned Tribunal." 12. In view of the above, our mandate is to decide whether electricity generated in captive plant was used in or relation to manufacture of final products within the factory of production or was sold to HSEB. The appellants submit that they did not sell the electricity excess generated by them. They base their arguments on the provisions of electricity act and the correspondence they entered in to with the electricity authorities as follows. (i). As per the Electricity (Supply) Act, 1948, no captive power plant can sell his surplus energy either to any consumer or to the Nigam (ii). Letter dated 30.11.1987, permission letter dated 11.10.1990 of the HSEB and the approval l....
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.... is no sale of electricity to the power grid. It is also noted that the electricity sent to power grid was returned back to the appellant, which was further used in the manufacture of final product. The Hon'ble Supreme Court categorically observed that the reversal of credit would be required on the wheeled out of electricity at a price to the joint venture/vendor etc., for manufacture. In the present case, there is no sale of electricity, and the same was returned back to their factory for consumption in their final product. So, we do not find any substance in the submissions of the learned Authorized Representative." 14. We find that in a series of judgments, Hon'ble Apex court held that though the 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); However, 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. Hon'ble Supreme Court in the case of Maruthi Suzuki Ltd 2009 (240) ELT 641 (SC), held as un....
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....nput would still fall in sub-rule (1). As stated above, sub-rule (1) is plenary, hence, it cannot be said that because sub-rule (2) is inapplicable to fuelinput(s), CENVAT credit is automatically available to such inputs even if they are used in the manufacture of exempted goods. The cumulative reading of sub-rules (1) and (2) makes it abundantly clear that the circumstances specified in sub-rule (2), which inter alia requires separate accounting of inputs, are not applicable to the fuel-input(s). However, the said sub-rule (2) nowhere says that the legal effect of sub-rule (1) will stand terminated in respect of fuel-inputs which do not fall in sub-rule (2). In other words, the legal effect of sub-rule (1) has to be applied to all inputs including fuel-inputs, only exception being non-fuel inputs, for which one has to maintain separate accounts or in its absence pay 8% /10% of the total price of the exempted final products. Therefore, sub-rule (1) shall apply in respect of goods used as "fuel" and on such application, the credit will not be permissible on such quantity of fuel which is used in the manufacture of exempted goods. In our view, the above aspect has not been properly a....
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....e main body of sub-rule (1). Qualifications have been introduced to the extent stated in Clauses (i) to (vi) read with the Explanation. Thus Clause (i) provides for inputs which are manufactured and used within the factory of production. Paints, fuel, packing materials and accessories are also treated as inputs under clauses (ii), (iii), (v) and (iv) without any requirement for user within the factory. Clause (iv) provides for credit on inputs used for generation of electricity or steam used for manufacture of the final products or for any other purposes "within the factory of production". It appears to us on a plain reading of the clause 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 intermediate 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. As far as the Explanation i....
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....e, Delhi-III, (2009) 9 SCC 193 = 2009 (240) E.L.T. 641 (S.C.) on the ground that the issue in the said judgment relates to the entitlement of credit on eligible inputs utilized in generation of electricity to the extent to which excess electricity cleared at the contractual rates in favour of sister units, vendors, joint ventures, etc., which was sold at a price. However, in the case on hand, electricity was wheeled out only in favour of sister units and as such, there was no element of sale. 18. The order passed by the CESTAT does not contain any discussion about the contention now raised by the assessee or the distinguishing features. CESTAT by following the earlier decision of the Tribunal, held that the assessee is entitled to credit in spite of the fact that electricity so generated was used in the other units also. The CESTAT has not decided the question as to whether the electricity supplied to the other units of the assessee situated in different premises are also entitled to the credit. The sale made to the other concern was also not made referred to in the order passed by the Tribunal. 19. Since the judgment in Maruti Suzuki was rendered subsequent to th....
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....s (for short TCE) to verify the feasibility of the power plant, which was set up; TCE, after undertaking the study, issued a feasibility report in September 1987, observing that the power which was generated by the appellant was of a fluctuating type, and that the said power generated could not be used in the arc furnace, strip mill, and blooming mill and recommended parallel operation of the captive DG set with the Haryana State electricity Board Grid. As per their own submission the electricity generated could never be utilized within the factory of production by the applicant. The appellants accordingly, entered into an agreement dated 30.11.1987 with the Haryana State Electricity Board. The appellants submit that the entire quantity of fuel on which credit was taken has been used within the factory of production; in view of the poor quality of electricity generated, which result in jerking loads, breakdown etc, the appellants were forced to export the quantity of electricity generated to the grid. The appellants claim, however, that they received equal quantity of electricity back from the grid. 20. The clear direction given by the Hon'ble Punjab & Haryana High Court for the....
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....upplies. Barter transactions have been held to be taxable under the CGST Act as well as under the VAT Act. Further, Hon'ble High Court of Mumbai in the case of Sumer Corporation, Writ Petition No.2119 of 2016, while dealing with "sale" and "consideration", held that a transaction involving exchange of rights in immovable property for construction constitutes "other valuable consideration" capable of being computed in money and is liable to tax. The Court held as follows: 64.................................. 14................ The classic definition of "valuable consideration" is given in Currie v. Misa, (1875) 10 Ex. 153 at p. 162, thus: "A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility, given, suffered or undertaken by the other." 22. As per their own admission and as per the feasibility report given by the consultants appointed by the appellants in this regard, the Electricity generated by the appellants was not unusable in the factory of the appellants and therefore, the appellants entered in to an agreement wit....
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....packing material, or as fuel, or for generation of electricity or steam used for manufacture of final products or for any other purpose, within the factory of production. 23.2. Rule 2(g) of the Cenvat Credit Rules 2002, for the period 01.03.2002 onwards defines input as (g) " input" means all goods, except light diesel oil, 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, within the factory of production. 24. From a bare reading of the definitions as above, it is observed that the primary eligibility for some goods to be input" for the purpose of availing Modvat/ Cenvat credit, is that they should be used in the manufacture of final product or for any other purpose, within the factory of production. In the instant ca....
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....nnot be extended to the input/intermediate products sent out side the factory, substituting the same with similar products procured from outside. We are of the considered opinion that the underlying principle enunciated by the Hon'ble Apex Court, in the case of Maruti Suzuki & ors (supra), is that the inputs should be used in the factory of production. We find that otherwise, Hon'ble Supreme Court could not have held that the appellants therein, are not eligible to avail CENVAT credit, on the inputs contained in the amount of electricity that was transferred/sold to other units, colony or to the grid. Therefore, the only logical conclusion that one can arrive, in view of the judgments mentioned above, is that credit on inputs is available only to the extent the electricity produced and utilized in the factory of production and not on the portion of electricity transferred/sold to the grid. 27. Coming to the issue of limitation, we find that the appellants submit that the demand in respect of the Show Cause Notice dated 30.12.2003 is time-barred as all the relevant facts were known to the department, and the assessee acted under a bona fide interpretation of the law, the extended....