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M/s JSW Steel Coated Products Ltd. Versus Commissioner of Central Excise, Thane-II

2016 (3) TMI 1042 - CESTAT MUMBAI

Entitlement to capital goods CENVAT Credit - capital goods credit denied on the ground that the same are used partially for producing electricity which is sold outside - Held that:- It can be seen that in the instant case the Capital Goods are not used exclusively for producing electricity that is wheeled out. The benefit of credit can not be denied to items namely, Sr No. 21, 42, 43, 61, 63, 65, 67 and 53 of the annexure B.Items at Sr. No. 22, 58 and 64 of the said annexure B are claimed to be .....

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ut also to the pre-set mind to sale electricity out of it for commercial consideration - Held that:- The Cenvat rules are common for both the inputs and for input services. Thus what the Hon'ble Supreme Court in Maruti Suzuki Ltd. [2009 (8) TMI 14 - SUPREME COURT ] has held in case of inputs will apply to the input services as well. In the instant case they have infact not availed entire credit but only the credit which is admissible to them in terms of Rule 6(2) of the Cenvat Credit Rules, 2004 .....

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llants have taken credit only to the extent of credit that is eligible to them as the demands of reversal credit themselves have been set aside. In such circumstances the rule 6(3)(i) of the Cenvat Credit Rules 2004 cannot be invoked. The said rule comes into play only when there is a wrong and excess availment of credit. As the appellant have been taking credit only to the extent eligible to them rule 6(3)(i) of the Cenvat Credit Rules 2004 cannot be invoked. - Decided in favour of assessee - A .....

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availed credit of capital goods duty. The appellants were producing electricity and the electricity produced in excess to their requirement was wheeled out in the Grid. The appellants were consuming certain inputs and services for the production of electricity. In respect of services consumed in production of electricity, they were taking credit of only that proportion of the Service Tax paid which was the proportion of electricity consumed captively. In other words, if the production of electr .....

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ot consumed captively and a part of it is wheeled out, the appellants are not entitled to capital goods CENVAT Credit. The second issue was that they are not entitled to CENVAT Credit on the input services because the plant was not set up with intention to captive consumption but also to the pre-set mind to sale electricity out of it for commercial consideration. Furthermore, it was alleged that the electricity generated from the plant does not attract Central Excise duty and hence, in terms of .....

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. It was alleged that the appellant had failed to maintain separate account for input and input services used in the generation of electricity for captive use and for sale, and therefore they were required to pay the amount equal to 5% upto 31.3.2012 and 6% from 1.4.2012 onwards, on the value of electricity sold to MSEB, which was exempted from payment of Central Excise duty. 3. Learned Counsel for the appellant explained in detail how they were taking credit. He explained that no credit was tak .....

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manner and taking credit only to that proportion of input services which were used in electricity consumed captively, Rule 6 does not come into operation. He further argued that no notice was issued in respect of inputs consumed for manufacture of electricity, for which they had taken credit in the similar manner. Learned Counsel also relied on the decision of Hon'ble Supreme Court in the case of Maruti Suzuki Ltd. - 2009 (240) ELT 641 (SC). He argued that Hon'ble Supreme Court had recog .....

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ut that the only provisions that prohibited CENVAT Credit of capital goods is under Rule 6(4) of Cenvat Credit Rules, 2004 wherein it is stated that: - No CENVAT credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted services, other than the final products which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances .....

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rule 4 of Rule 6 of the Cenvat Credit Rules, 2004. The appellants also relied on the decision in case of H.E.G. Ltd. - 2012 (275) ELT 315 (Chhatisgarh). 3.2 Learned Counsel also pointed out that credit was sought to be disallowed in respect of certain items listed in Annexure-B of the show-cause notice. In respect of some items, the appellant had accepted and reversed the credit. In respect of other items namely, Sr No. 21, 42, 43, 61, 63, 65, 67 and 53 of the said annexure, it was observed by t .....

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argued that Sr. No. 32 is G.I. Plates scrap; Sr. No. 58 is SHRINKKOMP-30 and Sr. No. 64 is FRP Motor Cover. No reason is given for denying the credit on these items in the impugned order. 3.3 Learned Counsel for the appellant in respect of third issue argued that the question of applicability of Rule 6 of Cenvat Credit Rules will arise only when the appellant takes ineligible credit. He argued that the appellants have not taken any credit on the services used in the manufacture of exempted good .....

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ricity which is sold outside. The law is very clear in this regard. The term Capital goods is defined in Cenvat Credit Rules 2004 as follows (a) capital goods means :- (A) the following goods, namely :- used - (1) in the factory of the manufacturer of the final products, but does not include any equipment or appliance used in an office; or [(1A) outside the factory of the manufacturer of the final products for generation of electricity for captive use within the factory; or] (2) for providing ou .....

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e leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made in a financial year. It can be seen that in the instant case the Capital Goods are not used exclusively for producing electricity that is wheeled out. It is seen that in the same circumstances, in case of H.E.G. Ltd. - 2012 (275) ELT 315 (Chhatisgarh), the Hon'ble High Court has observed as under: - 12. Plain reading of Rule 6(4) of the Rules makes it abundantly clear that .....

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cts sponge iron of the respondent factory, which is leviable to the excise duty and is not exempted goods. 13. On the basis of aforesaid analysis, we are of the opinion that the Tribunal was justified to hold that respondent was entitled for modvat credit against the capital goods used in the captive power plant of the respondent and Rule 6(4) of the Rules was no bar for denying Cenvat Credit. In view of the above we consider that there is no bar on availment of Capital Goods Cenvat Credit in th .....

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at the appeal is a continuation of the original proceedings. The order passed by the original authority does not attain finality till the appellate authority disposes of the matter finally. Being so, even assuming that in the matter before adjudicating authority, no claim was made under Rule 57A and the claim was made under Rule 57Q that would not debar the assessee from establishing his claim for the benefit under Rule 57A even at the appellate stage. What is relevant to be seen in such a case .....

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aid annexure B are claimed to be capital goods. Learned counsel informed that Sr. No. 32 is G.I. Plates scrap; Sr. No. 58 is SHRINKKOMP-30 and Sr. No. 64 is FRP Motor Cover. He could, however, not give exact usage of these items. No reason is given for denying the credit on these items in the impugned order. Credit cannot be denied without reason arbitrarily. 5.1.3 In view of above the appeal E/1119/11 is allowed. 5.2 It has been alleged that since the appellants are using the services for produ .....

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t Credit Rules, 2004. They are availing credit of only that proportion of the duty paid, which proportion of the electricity has been used captively in production of dutiable goods. In the case of Maruti Suzuki Ltd. - 2009 (240) ELT 641 (SC), Hon'ble Supreme Court had the occasion to examine the issue. Hon'ble Supreme Court has observed as follows: - 20. To sum up, we hold that the definition of input brings within its fold, inputs used for generation of electricity or steam, provided .....

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essee is entitled to credit on the eligible inputs utilized in the generation of electricity to the extent to which they are using the produced electricity within their factory (for captive consumption). They are not entitled to CENVAT credit to the extent of the excess electricity cleared at the contractual rates in favour of joint ventures, vendors etc., which is sold at a price. The Cenvat rules are common for both the inputs and for input services. Thus what the Hon'ble Supreme Court has .....

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from 1.4.2012 onwards, on the value of electricity sold to MSEB, which was exempted from payment of Central Excise duty in terms of rule in terms of rule 6(3)(i) of the Cenvat Credit Rules 2004. Tribunal in the case of MIRC Electronics - 2015 (38) STR 199. held as under: - 2.1 On scrutiny of the records it was found that the appellant had not maintained any separate accounts for the services used in respect of manufacturing activity and the trading activity and, therefore, a letter was issued t .....

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ence of any maintenance of accounts for the dutiable goods and services, and exempted products and services, the appellant is liable to pay a sum @ 10% (up to 6-7-2009) and thereafter @ 5% on the value of the exempted goods cleared and the same is recoverable under the proviso to Section 11A of the Central Excise Act, read with Rule 14 and Explanation-III to Rule 6A of the CENVAT Credit Rules (CCR), 2004. The department was also of the view that interest on the above amounts were payable by the .....

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