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2014 (2) TMI 280 - HC - Central ExciseDenial of benefits of Modvat credit - Assessee reversed the credit duty on furnace oil used for generation of electricity supplied to the other units up to August, 2002 by adopting the lowest value of furnace oil procured during the relevant period - Short duty paid - Demand of differential duty - Held that:- the assessee would not be entitled to claim Cenvat credit in case where it sells electricity outside the factory to joint ventures, vendors, etc. - 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. However, to the extent the excess electricity is cleared to the grid for distribution or to the joint ventures, vendors, and that too for a price (sale) the “process and the use test” fails. In such a case, the nexus between the process and the use gets disconnected. In such a case, it cannot be said that electricity generated is “used in or in relation to the manufacture of final product, within the factory. Therefore, to the extent of the clearance of excess electricity outside the factory to the joint ventures, vendors, grid, etc. would not be admissible for Cenvat credit as such wheeled out electricity, cleared for a price, would not fall within the definition of “input” in Rule 2(g) of the Cenvat Credit Rules, 2002 - Therefore, assessee is entitled to credit on the eligible inputs utilised 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 - Following decision in the case of Maruti Suzuki Limited [2009 (8) TMI 14 - SUPREME COURT] - Decided in favour of Revenue.
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