2021 (8) TMI 685 - AT - Central Excise

Recovery under Rule 14 of CCR 2004 read with Section 11A (10) of Central Excise Act 1944 - electricity sold out to the electricity company - liablity to payment of 6% of amount received from MSEDCL towards sale of electricity - Rule 6 (3) (i) of Cenvat Credit Rules 2004 - period January to March 2016 - demand of interest and penalty - applicability of amendments made in CENVAT Credit Rules 2004 in 2015 - HELD THAT - Though the Commissioner (Appeals) has decided appeals against two orders-in-original No. 05/CGST-Solapur/2017-18 dated 21.08.2017 and 14/CGST-Solapur/2017-18 dated 25.10.2017 this appeal has been filed only against upholding of order-in-original No. 14/CGST-Solapur/2017-18 dated 25.10.2017. It has been confirmed by the counsel for the appellant that no appeal has been filed against the upholding of second order-in-original i.e. 05/CGST-Solapur/2017-18 dated 21.08.2017. Therefore this order is limited to the order appealed against. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Demand confirmation under Rule 14 of CCR, 2004
2. Interest demand confirmation under Rule 14 of CCR, 2004
3. Penalty imposition under Rule 15 (1) of CCR, 2004
4. Penalty imposition under Rule 27 of the Central Excise Rules, 2002

Analysis:

Demand Confirmation under Rule 14 of CCR, 2004:
The appeal challenged the Order in Appeal upholding the demand confirmation of Rs. 18,00,577 under Rule 14 of CCR, 2004. The Commissioner (Appeals) affirmed the original order dated 25th October 2017 of the Assistant Commissioner of Central Goods and Service Tax, Solapur Division. The dispute arose from the sale of electricity generated from bagasse during the manufacture of sugar and molasses. The revenue contended that the electricity sold to Maharashtra State Electricity Distribution Co. Ltd. was subject to a 6% payment under Rule 6 (3) (i) of Cenvat Credit Rules, 2004. However, the Tribunal, citing relevant case law, held that the electricity generated from bagasse did not involve cenvatable inputs and was neither excisable nor exempted goods, thus ruling out the applicability of Rule 6.

Interest Demand Confirmation under Rule 14 of CCR, 2004:
In addition to the demand confirmation, interest was also demanded at the applicable rate under Rule 14 of CCR, 2004. The Tribunal's decision on the demand confirmation also nullified the interest demand, as it was based on the same premise that the electricity generated from bagasse did not fall under the purview of Rule 6, rendering the interest demand unjustifiable.

Penalty Imposition under Rule 15 (1) of CCR, 2004:
The Commissioner (Appeals) imposed a penalty of Rs. 18,00,577 under Rule 15 (1) of CCR, 2004, with a provision for reduced penalty at 25% of the mentioned amount. However, the Tribunal's ruling in favor of the appellant on the demand confirmation issue led to the setting aside of this penalty imposition as well, aligning with the earlier decision that the electricity generated from bagasse did not attract the provisions of Rule 6.

Penalty Imposition under Rule 27 of the Central Excise Rules, 2002:
A penalty of Rs. 5000 was imposed under Rule 27 of the Central Excise Rules, 2002, for the failure to furnish information regarding the sale of electricity. Given the Tribunal's overall decision in favor of the appellant on the primary demand confirmation issue, this penalty was also set aside, as the core argument regarding the non-applicability of Rule 6 to electricity generated from bagasse rendered the penalty unjustified.

In conclusion, the Tribunal allowed the appeal, overturning all adverse orders and penalties imposed by the lower authorities based on the finding that the electricity generated from bagasse did not involve cenvatable inputs and was neither excisable nor exempted goods, thereby negating the applicability of Rule 6 of the Cenvat Credit Rules, 2004.