TMI Blog2018 (12) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... acturing process of newsprint, is an input used in the manufacture of the final product of the assessee being newsprint, which is assessable to tax under the KVAT Act. The assessee is entitled to claim input tax credit. In this context, it is also to be noticed that electricity though included under the First Schedule is specifically excluded from the definition of “goods” as available under Section 2(xx) of the KVAT Act. The assessee would also be liable to produce sufficient documents to prove the payment of tax on purchase of raw material for which input tax credit is claimed. The assessee should also produce sufficient materials before the Assessing Officer to segregate the percentage of electricity used for manufacturing purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of manufacture, the assessee requires electricity which was obtained through self generation. The assessee generated 0.56 lakh kwh of electricity through diesel generators and 1,137.82 lakhs kwh through steam turbine generators. The electricity so generated is used in the production activities as also for illuminating factory premises. For the purpose of generation of electricity, oil and coal were used as fuel in the boilers for generating steam to be used in the steam turbines. The raw materials used for production of electricity were purchased on payment of tax. The said tax payment is sought to be claimed as input tax credit on the manufacture and sale of newsprint. 3. The assessing officer found that since electricity is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e did not at all rely on the dictum laid down with respect to CENVAT Credit Rules. The reliance was more on the concept of electricity generation being an integral part of the manufacturing activity. Useful reference can be made to paragraphs 29 31 of the decision in Maruti Suzuki Limited v. Commissioner of Central Excise, Delhi III [(2009) 9 SCC 193] which read as follows : 29. In J.K. Coton Spg. Wvg. Mills Co.Ltd. v. STO this Court held that the expression in the manufacture of goods should normally encompass the entire process carried on by the dealer of converting raw material into finished goods. It was further held hat where any particular process (generation of electricity) is so integrally connected with the ultimate p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect agreement with the reasoning of the Tribunal and as found by the Tribunal, generation of electricity, on the facts arising in this case, is an integral part of the manufacturing activity. 7. In this context it is to be noticed that sub-section (5) of Section 11 prohibits input tax credit on purchase of goods inter alia used in the manufacturing process or packing of goods specified in the First Schedule and the Fourth Schedule which are exempted from Value Added Tax. The prohibition is insofar as advancing the proper functioning of a Value Added Tax Regime. When tax is paid on purchase of the raw material used in the manufacture of goods, which again is taxable, the measure of input tax is introduced to ensure that the inability to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods as available under Section 2(xx) of the KVAT Act. 9. The Tribunal has correctly remanded the matter for segregating that proportion of the raw material which was employed in the generation of electricity and used for illuminating the factory premises. The assessee would also be liable to produce sufficient documents to prove the payment of tax on purchase of raw material for which input tax credit is claimed. The assessee should also produce sufficient materials before the Assessing Officer to segregate the percentage of electricity used for manufacturing purpose and for illuminating purpose. If the assessee is not able to produce such material to the satisfaction of the Assessing Officer, then on best judgment, the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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