TaxTMI 
TaxTMI 
2026 (5) TMI 638
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....reby, the Commissioner has confirmed the demand for recovery of Cenvat Credit of Rs. 1,17,49,121/- along with interest and has also imposed equal penalty under Rule 15(2) of Cenvat Credit Rules 2004 (CCR) read with Section 11AC. 2. The brief fact of the case is that the Department noticed that appellant had availed credit of service tax on certain taxable services received for exclusive use in their captive power plant. These services were Commissioning & Erection, Engineering services, Professional Consultancy services, Repairing & re-shelling, Freight charges, Cable Laying, Supervision, Servicing, Testing, Vulcanizing, Fabrication, Inspection etc. The Department felt that since the electricity (electrical energy) is an excisable good c....
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....ting Authority, however, examined various contentions and submissions and, inter alia, held that power plant cannot be by any stretch of imagination considered as an integral part of the plant nor electricity can be considered as intermediate product for manufacture of sugar or molasses and accordingly even though the electricity is being partly used captively also for manufacturing of sugar, it cannot mean that electricity is an essential input for manufacture of sugar. He emphasised the fact that in the scheme of Value Added Tax, under CCR there is a provision for taking credit in respect of "inputs" used for generation of electricity, but there is no such provision for "input service". He also held that electricity, even if it is held to....
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....ed for fabrication, erection etc., of co-generation of Plant and Machinery 55,54,596 3 Services of erection and commission of Boilers for use in sugar plant 35,91,788 He further submitted that credit was taken in respect of input services in relation to setting up of the co-generation power plant which is part of the sugar manufacturing unit and therefore Rule 6 of CCR cannot be invoked for reversal of credit since electricity is not an excisable goods. His further argument is that the appellant was entitled to avail credit of service tax paid on input services used for setting up and modernization of plant as per the inclusive definition of the input service and that said input services were not used merely for manufacturing....
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.... have been alleges used for manufacture of electricity and therefore not eligible in terms of provisions of Rule 6 of CCR as electricity was a non-excisable/exempted good or otherwise. The Adjudicating Authority has mostly relied on the concept that Cenvat Credit is allowed for mitigating the cascading effect and therefore when there is no payment of duty on the final goods in terms of their being attractive either nil rate or exempted from payment of duty in terms of any exemption, then taking of credit itself is not permissible. The principle which regulates taking of credit by a service provider, who is taking credit covered in Rule 6 clearly provides that Cenvat Credit shall not be allowed, inter alia, of input service used in or in rel....
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.... being subjected to excise duty for the purposes of being excisable goods under Section 2(d) of the Central Excise Act. Furthermore, Rule 6 of the 2004 Rules, which is applicable only to excisable goods, can alone be treated as exempted goods for the purposes of Rule 6(3) of 2004 Rules, does not apply to electrical energy. We also note that this order of Hon'ble High Court of Allahabad has been further affirmed by Hon'ble Supreme Court, as reported in [2015 (322) ELT 769 (SC)]. 7. Therefore, in view of this judgment affirmed by Hon'ble Supreme Court, we find that the Rule 6 which has been invoked as the ground in the present appeal for recovery of erroneous credit taken by them cannot sustained as the electricity cannot be treated as ....