TMI Blog2018 (3) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... e removed from the factory of manufacture. In Rule 2 k of CCR, in the Sub rule (I iv), apart from sub rule (iii), the only other provision related to manufacture of excisable goods is sub-rule (i) which concerns all goods used in the factory by the manufacturer of final products. On the same analogy, the goods used in the production of electricity for captive use will then mean the goods used for generation of electricity for consumption of manufacturer within his own factory of manufacture but definitely not electricity which is sold outside the factory. Penalty - Held that: - the ingredients attracting imposition of penalty equal to tax demanded under Rule 15 (1) of CCR are not attracted to the facts of the present case - the equal penalty imposed under Rule 15(1) is set aside. Appeal allowed in part. - E/40444/2015 - Final Order No. 40498/2018 - Dated:- 28-2-2018 - Ms. Sulekha Beevi, Member (Judicial) And Shri Madhu Mohan Damodhar, Member (Technical) Shri C. Saravanan, Advocate for the appellant Shri A. Cletus, ADC (AR) for the respondent ORDER Per Bench The facts of the case are that M/s. India Cements Ltd., the appellants herein, are manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempted goods as per Section 2 (d) of the Act as no rate of duty has been prescribed for the same under CETH 2716. iii) The allegation that the input and input services used for generation of electricity wheeled out to TANGEDCO does not fit into the definition of input service as defined under Rule 2 (k) and 2 (i) of CCR respectively in as much as the same have not been consumed captively in toto, in or in relation to the final product manufactured by the appellants, is not sustainable in law as laid down in the following judgments passed by the Tribunal and Courts:- i) M/s. Ultra Tech Cement Ltd. Vs. CCE, Ahmd. 2008-TIOL-187-CESTAT-AHM ii) Arvind Mills Ltd. Vs. CCE, Ahmd. 2207 (220) ELT 981 (Tri.-Ahmd.) iii) Manglam Cement Ltd. Vs. CCE, Jaipur 2008 (225) ELT 354 (Tri.-Del.) iv) Kirloskar Ferrous Industries Ltd. Vs. CCE, Belgaum 2007 (219) ELT 233 (Tri.-Dang.) v) CCE,Gujarat Vs. Gujarat Alkalies Chemicals Ltd. 2007 (218) ELT 506 (Guj.) iv) The judgment of the Hon ble Supreme Court in the case of Maruti Suzuki Ltd. Vs. CCE reported in 2009 (240) ELT 641 (S.C.) is not applicable to the facts and circumstances of their case as it has been held by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emphasizes that the SCN has been issued only in respect of wrong availment of Cenvat credit attributable to generation of electricity wheeled out to TANGEDCO and accordingly, the amount equal to 6% of value of electricity not captively consumed by the appellant has been demanded under Rule 6 (3)(i) of the Cenvat credit Rules. Ld. AR also submits that the Hon ble Supreme Court has settled the issue in the case of Maruti Suxuki Ltd. Vs. CCE, Delhi 2009 (240) ELT 641 (S.C), which has been correctly laid down by the adjudicating authority. 4. Heard both sides and have gone through the facts. 5.1 For ready reference Rule 6 of CCR is reproduced as under:- Rule 6. Obligation of manufacturer of dutiable and exempted goods and provider of taxable and exempted services.- (1) The CENVAT credit shall not be allowed on such quantity of input or input service which is used in the manufacture of exempted goods or for provision of exempted services, except in the circumstances mentioned in sub-rule (2). Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able under clause (i) Provided further that if any part of the value of a taxable service has been exempted on the condition that no Cenvat credit of inputs and input services, used for providing such taxable service, shall be taken then the amount specified in clause (i) shall be six percent of the value so exempted. Provided also that in case of transportation of goods or passengers by rail the amount required to be paid under clause (i) shall be an amount equal to 2 percent of value of the exempted services. Explanation I If the manufacture of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by him, and such option shall not be withdrawn dur5ing the remaining part of the financial year. Explanation II For removal of doubt, it is hereby clarified that the credit shall not be allowed on inputs used exclusively in or in relation to the manufacture of exempted goods or for provision of exempted services and on input services used exclusively in or in relation to the manufacture of exempted goods and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... availment of Credit in respect of eligible inputs used for generating electricity, there cannot be any doubt. The important takeaway from the definition in Rule 2 (k) (iii) of CCR, however is that the eligibility of input credits will however be restricted to goods used for generation of electricity for captive use . No doubt, there is no definition of captive use in CCR. In such a situation, the meaning of the phrase captive use as understood when used in central excise law and notifications will prevail. For example, there are notifications exempting intermediate products from liability to discharge central excise duty when captively consumed in the manufacture of final products. In our opinion, the interpretation of the phrase captive use in respect of manufacture of excisable goods will only mean consumption of goods within the factory of manufacture and, more importantly, the fact that such goods are not sold of otherwise removed from the factory of manufacture. In Rule 2 k of CCR, in the Sub rule (I iv), apart from sub rule (iii), the only other provision related to manufacture of excisable goods is sub-rule (i) which concerns all goods used in the factory by the manufacturer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be outside the factory. Therefore, whatever goes into generation of electricity or steam which is used within the factory would be an input for the purposes of obtaining credit on the duty payable thereon. As far as the Explanation is concerned, the inputs are restricted to inputs notified under Rule 57A. There is no dispute that both explosives and limestone are notified under Section 57A for manufacture of the final product viz. cement. 5.4 Ld. Advocate has also placed reliance on the Tribunal decision in the case of Mangalam Cements Ltd. Vs. CCE, Jaipur 2008 (225) ELT 354 (Tri.-Del.), where it was held that Credit on that part of electricity generated using inputs supplied to other units cannot be denied on the ground that the units are separate. However, we note that the Hon ble Supreme Court in the landmark judgment of Maruti Suzuki Ltd. Vs. CCE - 2009 (240) ELT 641 (S.C), has held to the contrary. The Hon ble Apex Court in that subsequent judgment held that input used as fuel in generation of electricity wheeled out to vendors will not be entitled for credit availment. The relevant portions of the judgment are reproduced as under:- 19. The question which still r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s used within the factory would be an input for the purposes of obtaining credit on the duty payable thereon. 20. To sum up, we hold that the definition of input brings within its fold, inputs used for generation of electricity or steam, provided such electricity 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 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. 5.5 In the course of the arguments, Ld. Advocate has als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TANGETCO in respect of electricity wheeled out by them and thereafter supplied by them to sister units. It is definitely not the appellant s case that the electricity wheeled out was supplied free or without any adjustment towards cost of the goods of the units wheeled out. In this scenario, the ratio laid down by the Hon ble Apex Court in the cases of Maruti and Ultratech (discussed supra) will be applicable on all force to the facts of the present appeal. The contention of the appellants that was no sale of electricity to third party is therefore not acceptable. In a recent judgment of the Punjab and Haryana High Court in Maruti Suzuki India Ltd. Vs. CCE, Delhi 2017 (5) GSTL 18 (P H), it was held that electricity that was wheeled out to third parties was not used in the manufacture of final products, therefore LNG to the extent used for production of electricity wheeled out was not input of service of inward transportation thereby was not input service . The relevant portion of the Hon ble High Court judgment is reproduced below:- 17. Moreover, the service of inward transportation of the LNG used by the assessee was not in relation to the manufacture of the final product o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion for quit sometime. On this very issue, the Hon ble Supreme Court in p-21 of their judgment in Maruti Suzuki Ltd. Vs. CCE, Delhi - 2009 (240) ELT 641 (SC) waived the penalty. The relevant portion is reproduced as under:- 21. Before concluding, it may be clarified that on account of repeated amendments in the CENVAT Credit Rules, huge litigation in the country stands generated. In the circumstances, we are of the view that penalty is not leviable on appellant/assessee, particularly when in large number of other cases, on account of conflict of views expressed by various Tribunals/High Court, the assessees have also succeeded. Hence, although M/s. Maruti Suzuki Ltd. (appellant) has failed in their civil appeals the Department will not impose penalty. We find that the same mitigating factors are applicable to the facts of the present case also. We therefore of the considered opinion that the ingredients attracting imposition of penalty equal to tax demanded under Rule 15 (1) of CCR are not attracted to the facts of the present case. This being so, we set aside the equal penalty imposed under Rule 15(1). 8. Appeal is partly allowed on above terms. 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