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TMI Blog2016 (1) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... eof liable to Central Excise duty. They are availing Cenvat Credit on duty paid on inputs and input services used in the manufacture of their final product. The appellants also have captive power plants inside their factories. Some portion of the power generated are sold to other units on consideration. Proceedings were initiated against the appellants to reverse Cenvat Credit amount proportionate to quantum of power sold by them. The Cenvat Credit was availed on input services of transport of gas to their power plant. The proceedings concluded by issue of order dated 07.08.2012 by the Commissioner. He confirmed demands attributable to proportionate Cenvat Credit availed on input services relatable to electricity sold outside. Aggrieved by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al authority and stated that the credit of service tax paid on input services is subject to condition that the final product should be liable to duty. In the case of electricity produced and consumed by the appellant in their plant, the eligibility of input service credit is not in dispute. When the electricity produced using the various duty paid inputs/input services are not used in or relation to the manufacture of dutiable final product, the eligibility of credit is barred. He reiterated that decision of the Hon'ble Supreme Court in the appellants own case (supra) is squarely applicable for input services also. The distinctions sought to be made by the appellant is artificial and untenable. 4. We have heard both the sides and perus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Chemical Works reported in 1991 (55) E.L.T. 444 (S.C.) the test laid down by this Court is whether the process and the use are integrally connected. As stated above, electricity generation is more of a process having its own economics. Applying the said test, we hold that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. To sum up, we hold that the definition of "input" brings within its fold, inputs used for generation of electricity or steam, provided such electricity or steam is used within the factory of production for manufacture of final products or for any other purpose. The important point to be noted is that, in the present case, excess electricity has been cleared by the assessee at the agreed rate from time to time in favour of its joint ventures, vendors etc. for a price and has also cleared such electricity in favour of the grid for distribution. To that extent, in our view, assessee was not entitled to CENVAT credit. In short, assessee is entitled to credit on the eligible inputs utilized in the generation of electricity to the extent to w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of final product is stipulated. "Nexus test" is not applicable to input services is not acceptable. The tax paid on input services on transportation of gas is rightly eligible to the appellants as long as it is shown that the said gas, transportation of which was subjected to service tax, was used in the production of electricity, in turn is used in or in relation to manufacture of dutiable final products. In the present case, the admitted fact is that electricity which is sold outside is not used in or relation to the manufacture of final product by the appellants. Consequently, the 'inputs' and 'input services' which are used in the production of such electricity sold outside will not be eligible for credit as they fall o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s decision (Supra). 8. The Hon'ble Supreme Court observed in the appellants own case that in view of repeated amendments in Cenvat Credit Rules resulting in huge amount of litigation, no penalty can be imposed on the appellant. We find in the present case the proceedings have been initiated only after the decision by the Hon'ble Supreme Court in appellants case. This much has been stated in the notice as well as the impugned order. Hence, we find invoking extended period of demand alleging fraud and suppression etc on the part of the appellant is not sustainable. Accordingly we hold that while the demand of reversal of proportionate credit is sustainable for the normal period the demand for extended period along with penalty is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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