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M/s Maruti Suzuki India Ltd., M/s Maruti Suzuki India Ltd. Manesar Plant Versus Commissioner of Central Excise And Service Tax, Delhi-III

2016 (1) TMI 291 - CESTAT NEW DELHI

Reversal of CENVAT Credit - some part of electricity / power is sold outside for consideration. - Invocation of extended period of limitation - Held that:- 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 outside the ambit of 'input and input services' as defined by Cenvat Credit Rules 2004. Here the service tax is paid on the inward transportation of gas used for power generation and there is no phys .....

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he 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 to .....

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hereof 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 o .....

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he Hon'ble Supreme Court was dealing with inputs and reversal of proportionate credit availed on inputs in connection with electricity sold outside. The eligibility of service tax credit itself is not in dispute. It is only question of reversal of proportionate credit of service tax attributable to electricity sold outside. The appellants contended that principle for treatment of credit availed on inputs cannot be applied to the credit availed on input services. "Input" and "i .....

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initiated only consequent to the Hon'ble Supreme Courts decision in their case relating to input. As such they pleaded that the demand for the extended period will not stand and no penalty can also be imposed. 3. The Ld. AR reiterated the findings of the original 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, th .....

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ides and perused the appeal records. 5. The point for decision is whether or not the appellant are liable to reverse proportionate credit on service tax attributable to generation of electricity which is sold outside by the appellant. Maintainability of demand for longer period and penalty also is to be decided. The appellants are procuring LNG and the supplier is paying service tax on the services of transport of gas through pipeline to the appellants. Such service tax is being availed as credi .....

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t in the said case was dealing with reversal of credit of duty paid on inputs used in generation of electricity sold to outside units. The Hon'ble Supreme Court findings in para 19 & 20 are as below: "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 Exci .....

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"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 m .....

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ris Chemtech Limited -2007 (214) E.L.T. 481 (S.C) . Further, our view is supported by the observations of this Court in the case of Vikram Cement v. Commnr. of Central Excise, Indore - 2006 (194) E.L.T. 3 (S.C.) which is quoted below:- "It appears to us on a plain reading of the clause that the phrase "within the factory of production" means only such generation of electricity or steam which is used within the factory would qualify as an immediate product The utilization of inputs .....

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icity 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 en .....

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#39;ble Supreme Court will not apply to input services. We fail to appreciate such distinction. The service tax paid on transportation of gas to the power plant is allowed as credit subject to fulfillment of certain conditions. Rule 2(l) of the Cenvat Credit Rules 2004 states that input services should be used by a manufacturer directly or indirectly, in or relation to the manufacturer of final products. The appellants' emphasis that as long as the input service is used by the manufacturer n .....

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hat it should be used by the manufacturer whether directly or indirectly in relation to the manufacturer 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 .....

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d transportation of gas used for power generation and there is no physical separation of supply lines or accounts to show which quantum of service tax is attributable to that gas used for electricity sold outside. Hence, it follows that proportionate to service tax attributable to the transportation of gas used for production of electricity sold outside has to be reversed. This is clearly in terms of provisions of Cenvat Credit Rules 2004 interpreted and decided by the Hon'ble Supreme Court .....

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