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M/s Bajaj Hindusthan Ltd. Versus Commissioner of Central Excise, Meerut-I

2016 (5) TMI 1117 - CESTAT ALLAHABAD

Reversal of attributable credit on inputs and input services consumed for generation of electricity used in colony, guest house, bank, canteen etc. for non-manufacturing activity or pay an amount equal to 10% of sale price of such electricity sold to U.P.Power Corporation Ltd. - Held that:- as the appellant has already reversed the Cenvat Credit on input/input services attributable to generation of electricity sold to M/s U.P.Power Corporation Ltd. is sufficient in compliance to provisions of Ru .....

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095/2016-DB - Dated:- 19-1-2016 - Anil Choudhary, Member (J) And H K Thakur, Member (T) For the Appellant : Shri P K Mittal, Adv For the Respondent : Shri Raj Kumar Maji, Asstt Commr. (AR) ORDER Per Anil Choudhary Appellant is engaged in manufacture of sugar and molasses and is in appeal against order in original dated 25.09.2012, passed by Commissioner of Central Excise, Meerut I. 2. The facts in brief are that that in the course of audit for the period January, 2007 to December,2008, it was no .....

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consumed commonly in the manufacture of sugar and molasses which are chargeable to duty as well as in the generation of electricity which is exempted. Besides, use of electricity generated in the plant, same is also being sold to U.P.Power Corporation Ltd. as well as used in residential colony, guest house, bank, canteen et cetera, that is, being used for non-manufacturing activity. It was noticed that the appellant did not maintain separate account for the receipt, consumption and inventory of .....

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d as exempted goods. Accordingly, show cause notice was issued as it appeared to revenue that the appellant is required to reverse the attributable credit on the inputs and input services consumed for generation of electricity used in colony, guest house, bank, canteen et cetera for non-manufacturing activity or pay an amount equal to 10% of sale price of such electricity sold to U.P.Power Corporation Ltd. Accordingly, show cause notice dated 28/9/11 was issued invoking extended period of limita .....

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57,55,793/- was confirmed along with proposed appropriation of ₹ 1,60,002/- with interest and further penalty of equal amount was imposed under Rule 15 of CCR read with Section 11 AC of the Act. 4. Being aggrieved, the appellant is before this Tribunal on the grounds that the appellant manufactured dutiable goods namely, sugar and molasses and the electricity, a non-excisable item is produced primarily for running the sugar mill, wherein a small quantity of inputs being turbine oil and lub .....

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sis of clause 1 (c) of Additional Notes of General Rules for the interpretation of the first schedule to hold that "as no rate of duty is indicated for electrical energy it is exempted goods". But this interpretation is not sustainable as per specific definition given under Cenvat credit Rules. In the facts and the circumstances that the electricity is primarily generated for captive consumption and not for sale or clearing outside the factory, the provisions of Rule 6 are not attracte .....

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learned Counsel further relies on the ruling of SMB Bench of this Tribunal in Ex.Appeal No.E/52882/2014-Ex (SM), wherein vide Final Order No.51791/2015-Ex (SM) relating to the period 01.04.2007 to 31.03.2008, wherein similar demand was under consideration. This Tribunal have allowed the appeal in favour of the appellant. The relevant paragraphs are reproduced below for ready reference: "5. In this case the short issue is to be decided by me whether the appellant is required to pay 10% of t .....

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of the value of electric energy sold. To say the same, the ld.A.R. 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 item as per Chapter 27 of the Central Excise Tariff Act. But, she has failed to explain that whether electricity generated from bagasse is covered under Chapter 27 of Central Excise Tariff Act or not. As in th .....

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has been admitted by the Assistant Commissioner as well as Commissioner, Central Excise, Lucknow vide letters dated 30-1-2013 and 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 in the First or Second Schedule of the Central Excise Tariff, (3) It must be subjected to tariff." 26. Admittedly, none of these conditions are attracted in the instant cas .....

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t electrical energy is not an excisable goods nor it is exempted goods as defined in Rule 2(d) of the 2004 Rules. 28. 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 the Cenvat Credit Rules, 2004, (which is pan materia to the erstwhile Rule 57CC) provides that if Cenvat credit has been taken on the inputs which are used for manufacture of dutiable .....

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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 Schedule or Second Schedule of the Central Excise Tariff Act. Since Column of rate of duty is blank, therefore, in view of Section 2 of the Central Excise Tariff Act, 1985, elect .....

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elevance as Geetanjali Woolens Mill's judgment was in respect of customs 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 bagasse is used in boiler as a fuel for generation of steam for running the turbine and for boiling the juice for the manufacture of sugar. Turbine generates electrica .....

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isable goods. 35. Accordingly, all the writ petitions are liable to be allowed, which is hereby allowed. The orders/show cause notice impugned in 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. 8. This Tribunal has also got an opportunity to examine the said issue in the case of Sharad SSK Ltd. (supra) wherein this Tribunal observed as under: 6.1 As regards the question wh .....

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gh Court held that electrical energy which is mentioned in Chapter 27 of the Central Excise Tariff Act covers only such electrical energy which is generated from mineral fuels, mineral oil and products obtained therefrom and electrical energy produced from bagasse is not covered under Chapter 27 and hence, such electrical energy is not excisable goods nor is it exempted goods as defined in Section 2(d) of the Act. It was further held that Rule 6 of the CENVAT Credit Rules, 2004 refers to both du .....

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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 which electricity is generated. In view of the above, the impugned demands confirmed against the appellant @ 5% of the value of the electricity supplied to MSEB is clearly unsustainable in law. 6.2 However, since electricity is not "exc .....

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pellant 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 inputs/input services which have been used in the generation of electricity which have been sold to MSEB. 8. Further, the issue before me is that in case the appellant is not maintaining separate account of input/input services used in manufacturing of final d .....

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case of Gularia Chini Mills (supra) wherein the Hon'ble High Court as well as this Tribunal has 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 Excise Act, 1984. In these circumstances, the issue is answered in favour of the appellant is not required to pay 10% of the value of the electricity sold to M/s U.P.Power Corporation Ltd. Further, I also find that appellant has already reversed the Cenvat cre .....

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