2016 (9) TMI 1475 - AT - Central Excise

CENVAT Credit - common input service in respect of generation of the electricity - Rule 6(3) of Cenvat Credit Rules - Held that - In terms of the amended Rule 6 the appellant had debited an amount of Rs. 7, 82, 780/- from its Cenvat account and also deposited interest on such credit. Since the amount reversed is attributable to the input service used in generation of electricity sold outside such reversal is in conformity with the provisions of Section 6(3) ibid - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of Cenvat credit on input service for electricity generation.
2. Interpretation of Rule 6(3) of Cenvat Credit Rules, 2004.
3. Retrospective application of amended Rule 6(3) effective from Finance Act, 2010.
4. Liability for recovery of 10% value of electricity sold outside the factory.
5. Confirmation of demand by Commissioner of Central Excise.
6. Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004.

Analysis:

1. The appellant, engaged in manufacturing excisable goods, availed Cenvat credit on Central Excise duty paid on input services, including electricity generation. The issue arose when the department initiated proceedings, contending that 10% of the value of electricity sold outside the factory was liable for recovery under Rule 6(3) of the Cenvat Credit Rules, 2004.

2. The appellant argued that they had reversed the Cenvat credit on input service attributable to electricity sold outside customers as per the amended Rule 6(3) retrospectively effective from the Finance Act, 2010. The appellant contended that the amount had already been reversed as per the rules in force at the material time, making the demand improper and unsustainable. The department, however, supported the findings in the impugned order.

3. The Tribunal examined the records and noted that the appellant had debited a specific amount from its Cenvat account and paid interest on the credited amount, which was attributable to the input service used in generating electricity sold outside. The Tribunal held that the reversal made by the appellant was in conformity with the provisions of Rule 6(3) of the Cenvat Credit Rules. Despite the amendment in 2010, the Tribunal applied the retrospective effect of the Finance Act, 2010, validating the appellant's actions. Consequently, the Tribunal found no merits in the impugned order and allowed the appeal in favor of the appellant.

4. The judgment highlights the significance of complying with the rules and regulations governing Cenvat credit, emphasizing the need for businesses to adhere to the amended provisions, even if applied retrospectively. The case underscores the importance of proper interpretation and application of legal provisions to avoid unnecessary liabilities and penalties, as demonstrated by the Tribunal's decision in this matter.

5. The decision serves as a reminder for businesses to stay updated on regulatory changes and ensure proactive compliance with evolving legal frameworks to mitigate risks and potential disputes with tax authorities. By analyzing the specific circumstances and applying the relevant legal principles, the Tribunal provided clarity on the interpretation and application of Rule 6(3) of the Cenvat Credit Rules, guiding businesses on the correct approach to handling similar issues in the future.

6. Overall, the judgment exemplifies the Tribunal's role in adjudicating disputes, clarifying legal complexities, and upholding the principles of justice and fairness in tax matters. The detailed analysis and reasoning provided in the judgment offer valuable insights for businesses and legal practitioners dealing with Cenvat credit issues, underscoring the importance of thorough understanding and compliance with statutory provisions to avoid adverse consequences.