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2016 (1) TMI 291

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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be set aside. - Appeal disposed of - Appeal Nos. E/3530-3531/2012-EX(DB) - Final Order Nos. A/53153-53154/2015-EX(DB) - Dated:- 30-9-2015 - Ashok Jindal, Member (J) And B. Ravichandran, Member (T) For the Appellant : Shri B L Narsimhan, Adv For the Respondent : Shri Govind Dixit, DR ORDER Per B Ravichandran There are two appeals filed by the appellants and are taken up together for decision as the issue involved is same. The appellants are engaged in the manufacture of motor vehicle and parts t .....

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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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e 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 s .....

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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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anufacture of final product, within the factory". Therefore, to the extent of the clearance of excess electricity outside the factory to the joint ventures, vendors, grid etc. would not be admissible for CENVAT credit as such wheeled out electricity, cleared for a price, would not fall within the definition of "input" in Rule 2(g) of the CENVAT Credit Rules, 2002. This view is also expressed in para 9 of the judgment of this Court in the case of Collector of Central Excise v. Sola .....

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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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o portion of such credit can be denied. The Ld. Counsel for the appellant contended that while inputs are to be received in the factory of manufacture, in respect of input services it is with relation to receipt by the manufacturer of final products. In other words, the 'nexus test' as applicable to inputs cannot be applied in full force in the case of input services. We find that we are unable to agree with such proposition. For an input service to be eligible for credit the condition t .....

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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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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 .....

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