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TMI Blog2025 (1) TMI 1439X X X X Extracts X X X X X X X X Extracts X X X X ..... with the Central Excise vide Registration Number AABCJ1969MXM001. The party are availing the Modvat/CENVAT Credit facility of duty paid on input/raw materials and Capital Goods. The party have installed a captive power plant for generation of electricity using fuel namely, R.O., R.F.O, H.P.S. and L.D.O. on which they are taking Modvat/CENVAT credit under Rule 57A and 57B of the Central Excise Rules, 1944, Rule 2 and 3 of CENVAT Credit (No. 2) Rules, 2001 and Rule 2 and 3 of CENVAT Credit Rule, 2002. 2. Acting on an intelligence that the said party ware clearing some part of electricity generated by their Captive Power Plan to Electricity Board the Haryana State (HSEB) ((now Dakshin Haryana Bijli Vitran Nigam Ltd. (DHBVNL)) an enquiry was conducted by the officers of Central Excise. The party produced the permission letter Memo No. 210/DB-33 (3)85/Jindal Strips/Hisar dt 1-10-90 the Secretary, Technical Section, HSEB, Panchkula (Haryana) for parallel operation of their Captive Power Plan with HSEB, Power Grid. On scrutiny of the Permission Letter it was observed by the Central Excise officers that as per Clause0II of the Permission Letter, the Captive Power Plant was synchronized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the power cleared/injected in HSEB system was adjusted in the Monthly Electricity Bill. On 21-8-03 he stated that they were taking CENVAT credit on fuel used for generation of power and for other purpose in the factory. He further stated that the price of the fuel used in the generation of the electricity might be taken on average basis as they were making oil consumption report as total oil used and not item wise. 6. Vide their letter dt. 9-10-03 the Party submitted the total fuel received in their factory and Modvat/CENVAT credit taken on the same for the period Jan., 99 to June, 03. In his further voluntary written statement dated 21-10-2003 Shri R.K. Gupta admitted that they were taking Modvat/CENVAT credit on the entire fuel used in their Captive Power Plant for generation of electricity. It is characteristic of the Electricity that Electricity cannot be stored and also the Electricity once cleared cannot be brought back. 7. As per the provisions of Rule 57B of the Central Excise Rule, 1944, 57AA of the Central Excise (2nd amendment) Rules, 2000 and Rule 2 (f) of CENVAT Credit (No. 2) Rules, 2001 and Rule 2 (g) of the Cenvat Credit Rule, 2002, a manufacturer of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voke-able against the party. (iii) Shri R.K. Gupta, General Manager (Excise) Incharge of Central Excise matter of the Company dealing with day to day affairs of the Party was expected to inform this fact of using fuel in the generation of the electricity being exported to HSEB (now DHBVNL) and to reverse the Modvat/ CENVAT Credit taken on that portion of fuel.. He had failed in his duty and rather intentionally did not take action as stated above with intent to evade Central Excise duty by way of taking inadmissible Modvat/CENVAT credit. He, thus, appeared liable to penal action under Rule 209A of the Central Excise Rules, 1944 and Rule 13 of CENVAT Credit Rules." 3. The show cause notice was issued to the respondent and they filed reply to the same. 4. After considering the reply and after giving personal hearing the learned Commissioner held as under:- "13. From the above the following undisputed facts have emerged. The Party have installed a captive power plant for generation of electricity and they are using F.O., R.F.O., H.P.S. and L.D.O. as fuel in the D.G. sets installed for this purpose and are availing Modvat/Cenvat credit on F.O., R.F.O., H.P.S. and L.D.O. They have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the factory of production. I observe that the said party have fulfilled the first condition/leg because they have used the inputs/goods on which they have taken Modvat/Cenvat Credit for the generation of electricity. But they have failed to fulfill the second condition/leg because they have not used electricity so generated and exported to HSEB for the manufacture of their final products or for any other purpose within their factory of production. The department in the show cause notice has not disputed the admissibility of Cenvat/modvat credit on F.O., R.F.O., H.P.S. and L.D.O. used in the generation of electricity. Therefore, the contentions of the party regarding admissibility of Cenvat/modvat credit are insignificant. The only dispute is in respect of the amount of Cenvat/modvat credit availed on the inputs used in the generation of electricity exported to HSEB as the same has not been used in the manufacture of final product within the factory of production as required under the second leg of the definition of inputs under Rule 2 (f)/2 (g) of the Rules, ibid. The party in their reply have stressed that they have been exporting power to HSEB to remove the fluctuations a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngement of synchronization is such that only the excess power is being injected/cleared out to HSEB Grid from their factory. 17. Another contention raised by the party is that since no facts were suppressed from the Departmental authorities as has been alleged in the Show Cause Notice so extended period of limitation is not invokable. The facts of captive generation of electricity by the party were in the knowledge of the department since the audit has visited them and they were availing the credit of duty paid on D.G. Sets. They further contended that the departmental authorities had vide letter dt.15.11.2000 specifically asked them to furnish information about agreement entered into with the State Electricity Board and they submitted the various details. I have gone through the documents produced by the party in support of this contention raised by them. I observe that the audit of their record was conducted and from the availment of Cenvat/modvat credit on the duty paid on the D.G. Sets it should have been in the knowledge of the department that the party was engaged in the captive generation of electricity but the party has not produced any documentary evidence to suggest tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Six Thousand and Three only) and order for recovery of the same from the said party under Rule 12 of the Cenvat Credit Rules, 2002 as proposed in the show Cause notice dt. 28.06.2004 and 28.12.2004 respectively. (III) I disallow CENVAT Credit amounting to Rs. 87,20,836/- (Rupees Eighty Seven Lacs Twenty Thousand Eight Hundred and Thirty Six only) and order for recovery of the same from the said party under Rule 12 of the Cenvat Credit Rules, 2002 and Rule 14 of the Cenvat Credit Rules, 2004 as proposed in the show cause notice dt.27.06.2005. (IV) I impose a penalty of Rs. 4,22,06,993/- (Rupees Four Crores Twenty Two Lacs Six Thousand Nine Hundred and Ninety-Three only) upon the party under Rule 571(4) of Central Excise Rule, 1944, Rule 57AH (2) of Central Excise (2nd amendment) Rules, 2000 and Rule 13 (2) of CENVAT Credit Rules, 2001 and 2002 read with Section 11AC of the Central Excise Act, 1944 respect of show notice dt.30.12.2003. (V) I Am also Impose penalty Rs. 5,00,000/- (Rupees Five Lacs only) upon the party under Rule 1730 (1) (bb) Rules, 1944 of for Central Excise the aforesaid violation of Rules in respect of show cause notice dt.30.12.2003. (VI) I also order fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nerating electricity, as an intermediary product, and is integrally connected with several operations, which result in emergence of the final product, however, in the instant case, fuels used in the captive plant for generating electricity, which was sold to Haryana State Electricity Board was not at all connected with the operations leading to emergence of the final product. 8. Per contra, learned counsel for the respondent contends that they were exporting power to HSEB to remove fluctuations and other shortcomings in the power generated by their DG sets since the same cannot be used as it is and they were receiving back equal quantity of power from HSEB. Therefore, they are entitled to CENVAT Credit availed on fuel used in generation of electricity. 9. We have heard learned counsel for the parties and perused the whole record of the case. 10. Relevant portion of the impugned order dated 21.08.2008 passed by the learned Tribunal is reproduced as under:- "5. We find that the appellants availed credit in respect of inputs in generation of electricity. The appellants entered into an agreement with the State Electricity Board termed as Wheeling Agreement by which the appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X
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