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Commissioner of Central Excise & Service Tax Jaipur II Versus M/s. JK Cement Works

2015 (329) E.L.T. 564 (Tri. - Del.) - Denial of Cenvat credit - credit on pet coke which was used for generation of electricity by the sister unit of the respondent which in turn sent the electricity to the respondent which was ultimately used in the manufacture of final product - whether the respondent is entitled to take Cenvat credit on pet coke which has been used in generation of electricity outside the factory and said electricity has been used by the respondent in manufacturing of their f .....

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or after being partially processed, sent to power plant and raw material used by the power plant for generation of electricity; said electricity is sent to the principal manufacturer. On such inputs sent to the job worker, the assessee is entitled to take Cenvat credit. Similarly, in the case of pet coke which has been sent by the respondent to their sister unit for manufacturing of electricity which ultimately has been used by the respondent for manufacturing of their final product, i.e. cemen .....

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is in appeal against the impugned order seeking denial of Cenvat credit on pet coke which was used for generation of electricity by the sister unit of the respondent which in turn sent the electricity to the respondent which was ultimately used in the manufacture of final product. 2. The brief facts of the case are that the respondent is manufacturer of cement. To manufacture cement, electricity is being used. For generation of electricity, the respondent procured pet coke which was sent to the .....

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interest and penalty equivalent to the duty was imposed. On appeal before Commissioner (Appeals), relying on the decision of Tribunal in the case of M/s. Haldia Petrochemicals Ltd. vs. CCE [2006 197) ELT 97 (Tri-Del)] Commissioner (Appeals) allowed the Cenvat credit. Against that order, Revenue is before me. 3. Learned AR relied on the description of inputs as defined in Rule 2(k) of the CCR, 2004 to say that pet coke is not input for manufacturing of their final product i.e. cement and this pe .....

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ty does not qualify as job work. He also relied on the notification No. 214/86-CE dated 25.3.1986 to say that as this notification does not cover the electricity, therefore electricity can not be manufactured by job worker. He also submits that decision in the case of Haldia Petrochemicals Ltd. (supra) has been appealed against before Calcutta High Court, therefore the said decision cannot be relied upon. He further submits that process of generation of electricity is not integrally connected an .....

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which has been followed in the case of Sanghi Industries Ltd. vs. CCE [2006 (206) ELT 575 (Tri-Del)] 5. Heard the parties. Considered the submissions. 6. The short issue before me is that whether the respondent is entitled to take Cenvat credit on pet coke which has been used in generation of electricity outside the factory and said electricity has been used by the respondent in manufacturing of their final product or not. I have gone through the case law relied upon by the learned AR in the cas .....

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ent to the job worker and ultimately used in the manufacture of final product. In para 19 of said decision the Hon ble Apex Court has observed as under:- 19. The question which still remains to be answered is : whether an assessee would be entitled to claim CENVAT credit in cases where it sells electricity outside the factory to the joint ventures, vendors or gives it to the grid for distribution? In the case of Collector of Central Excise v. Rajasthan State Chemical Works reported in 1991 (55) .....

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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 .....

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