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2015 (6) TMI 1011 - CESTAT NEW DELHI

2015 (6) TMI 1011 - CESTAT NEW DELHI - 2015 (329) E.L.T. 295 (Tri. - Del.) - Requirement to pay 10% of the value of electrical energy produced from bagasse which is sold to M/s. UP Power Corporation Ltd. - Held that:- The facts of the case in hand are similar to the facts of the case of Gularia Chini Mills (2013 (7) TMI 159 - ALLAHABAD HIGH COURT ) wherein held that electricity generated from bagasse is not an excisable goods and does not qualify as tariff item as per Chapter 27 of the Central E .....

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ealt by both the lower authorities. In these circumstances, hold that as the appellant has already reversed the Cenvat credit on input/input services attributable to generation of electricity sold to M/s. UP Power Corporation Ltd. is sufficient in compliance to provisions of Rule 6 of the Cenvat Credit Rules, 2004, therefore, the appellant is not required to pay 10% of the value of electricity sold to M/s. UP Power Corporation Ltd.- Decided in favour of assessee - E/52882/2014-EX(SM) - Final Ord .....

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c energy) which is used for operation of manufacturing unit producing sugar and molasses and a part of the so electricity generated is sold to M/s. UP Power Corporation Ltd. A show cause notice was issued to the appellant on 20-1-2012 for the period 1-4-2007 to 31-3-2008 by invoking extended period of limitation alleging that appellant is liable to pay 10% of the value of electrical energy produced in terms of Rule 6(3) of the Cenvat Credit Rules, 2004 on the ground that the electrical energy is .....

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d to M/s. UP Power Corporation Ltd. as the appellant is not maintaining the separate account of input used in dutiable and exempted final goods as per Rule 6(3) of the Cenvat Credit Rules, 2004. Therefore, the impugned proceedings were initiated against the appellant and by way of the impugned order, the demand of ₹ 45,18,674/- was confirmed along with interest and equivalent amount of penalty was also imposed by invoking extended period of limitation. 3. The ld. Counsel for the appel .....

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r and it is not a manufactured exempted goods and electricity is not an exempted goods as held by Solaris Chemtech Ltd. (supra). Thereafter, the Hon ble High Court held that Chapter 27 of Central Excise Tariff Act shall not be applicable for electrical energy produced by bagasse and held that electric energy is not an excisable goods under Section 2(d) of the Act. Therefore, provision of Rule 6 of Cenvat Credit Rules are not applicable. The said decision was held by this Tribunal in the case of .....

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ctrical energy is classifiable under CTH 2716 00 00. She further submits that same form part of the Customs Tariff Act. She also submits that in the case of Geetanjali Woollens v. CCE - 2007 (218) E.L.T. 152 (CESTAT) this Tribunal has held that electricity is a tariff item and is excisable goods. She further submits that the decision of the Apex Court in the case of CCE, Hyderabad v. Aldec Corporation - 2005 (188) E.L.T. 241 (S.C.) held that goods electricity is both marketable and specified in .....

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entitled to take Cenvat credit to the extent of excess electricity cleared at contractual rates in favour of joint venture/vendors, etc., which is sold at a price. She further submits that the decision of the Allahabad High Court in the case of Gularia Chini Mills (supra) is per incuriam. She further submits that in the case of Orient Paper and Industries Ltd. v. Orissa State Electricity Board - 1989 (42) E.L.T. 552 (Orissa) the Hon ble High Court of Orissa held that electricity is excisable goo .....

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s, 2004, or not. The contention of the Revenue is that as electricity is excisable goods and exempted from duty, therefore, as per Rule 6(3) of the Cenvat Credit Rules, 2004 the appellant is required to pay 10% of the value of electric energy sold. To say the same, the ld. AR relied on the decision in the case of Geetanjali Woollens (supra), Aldec Corporation (supra), Maruti Suzuki Ltd. (supra) and Orient Paper and Industries Ltd. (supra). It is also submitted by her that electricity is a tariff .....

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gh court has observed as under : 23. It is not in dispute that petitioners do not avail Cenvat credit on any input and input services used in generation of electricity insofar as this fact has been admitted by the Assistant Commissioner as well as Commissioner, Central Excise, Lucknow vide letters dated 30-1-2013, 21-2-2013, respectively. In order to become any goods to be an excisable goods , it has to fulfil the following conditions : (1) Goods must be manufactured; (2) Must be specified .....

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red under Chapter 27. Similarly, Chapter 27 does not cover electrical energy produced by solar power, hydro power, wind power or from bagasse. Therefore, we are of the view that electrical energy is not an excisable goods nor it is exempted goods as defined in Rule 2(d) of the 2004 Rules. 26. Hence, manufacture is referred to both dutiable/excisable goods and exempted goods, which are final products. Only then, it is necessary for the manufacturer to maintain separate accounts. Rule 6 of th .....

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n the case of Solaris Chemtech Ltd. (supra). 30. The definition of excisable goods given in Section 2(d) means the goods, which are specified in the First and Second Schedule and which are subjected to duty of excise, can only be treated as excisable goods. A proposition has also been accepted by the Commissioner in its findings. A perusal of Section 2(d) of Central Excise Act shows that the excisable goods are only those goods which are subjected to duty of excise as specified in the First .....

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electrical energy. 32. For the discussions made hereinabove, it is clear that Geetanjali Woollens Mill judgment relied upon by the Commissioner in the impugned orders have no relevance as Geetanjali Woollens Mill s judgment was in respect of custom duty and was only concerned with the tariff item and not with respect to the excisable goods as defined under Section 2(d) of Central Excise Act, 1944. The bagasse, which emerges as a residue of sugarcane, admittedly, is a waste product and this .....

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rcane. Thus, we have no hesitation to say that electrical energy emerges from the bagasse and sold to U.P. Power Corporation Ltd. does not fall within the ambit of excisable goods. Accordingly, all the writ petitions are liable to be allowed, which is hereby allowed. The orders/show cause notice impugned in the respective writ petitions are hereby quashed. The respondents are directed not to realize any excise duty on electrical energy which was sold to U.P. Power Corporation Ltd. 6. Furthe .....

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ed in section 2(d) of the Central Excise Act and whether rule 6 of the Cenvat Credit Rules, 2004 would be applicable in respect of inputs/input services used in the manufacture of electricity. The Hon ble Allahabad High Court held that electrical energy which is mentioned in Chapter 27 of the Central Excise Tariff Act covers only those electrical energy which are generated from mineral fuels, mineral oil and products obtained therefrom and electrical energy produced from bagasse is not covered u .....

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nal products, then the assessee is required to reverse proportionate credit or pay five per cent./ten per cent amount of the value of the exempted final products. As regards electricity which is not excisable goods, the provisions of Rule 6 would not ab initio apply. In the present case, it is an admitted fact that the appellant has generated electricity from bagasse. Bagasse on burning generates heat and with the help of heat, steam is generated which is used to rotate turbines as a result of w .....

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in or in relation to the manufacture of excisable goods or for providing taxable services. Inasmuch as the appellant has utilised part of the inputs/input services in or in relation to the generation of electricity which has been sold, to that extent the appellant would not be eligible for taking of Cenvat credit on such inputs/input services used in the generation of electricity which has been sold to MSEB. Therefore, the appellant would be liable to reverse the credit if any taken on such inpu .....

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as nothing to do with the generation of electricity and therefore, there is no need to reverse any credit taken in respect of these inputs. Similarly, in the case of input services, common input services are (1) inward cane transportation, (2) technical inspection and certification, (3) telephone services, (4) general insurances, (5) maintenance and repairs, (6) audit fees and (7) construction services. Inward cane transportation has nothing to do with electricity generation. Inspection and test .....

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regard and if they are able to prove that the inputs and input services have no nexus with electricity generation, the question of reversal of credit taken will not arise at all. The learned counsel has mentioned that they have partly reversed proportionate credit on such inputs/input services used in the manufacture of electricity, which have been sold. This reversal should be verified and if the appellant has reversed the credit taken, then there won t be any further liability. However, if it .....

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 As regards the question whether the electricity is exempted goods or not, we find that the issue is already settled in favour of the appellant in the case of Gularia Chini Mills case cited (supra). In the said decision, the issue for consideration was whether electrical energy is excisable goods as defined in Section 2(d) of the Central Excise Act and whether Rule 6 of the Cenvat Credit Rules, 2004 would be applicable in respect of inputs/input services used in the manufacture of electrici .....

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ules, 2004 refers to both dutiable/excisable goods and exempted goods. Only then, it is necessary for the manufacturer to maintain separate accounts. Rule 6(3) of the said Rules provides that when Cenvat credit is taken on the inputs/input service which are used for manufacture of dutiable as well as exempted final products, then the assessee is required to reverse proportionate credit or pay 5% amount of the value of the exempted final products. As regards electricity which is not excisable goo .....

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ince electricity is not excisable goods , the appellant is not eligible to take any Cenvat credit on the inputs/input services used in the generation of such non-excisable electricity sold to MSEB. Cenvat credit is available only when input/input services are used in or in relation to the manufacture of excisable goods or for providing taxable services. Inasmuch as the appellant has utilized part of the inputs/input services in or in relation to the generation of electricity which has been sold, .....

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