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CX – Appellants are not required to pay 6% of value of electricity sold to outside agencies; reversal of proportionate CENVAT credit is compliance of rule 6(3A) of CCR : CESTAT

2019-TIOL-2350-CESTAT-BANG

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH, BANGALORE
COURT NO. I

Appeal No. E/21873/2018-SM

Arising out of Order-in-Appeal No. BEL-EXCUS-000-APP-MSC-264-2018-19, Dated: 26.09.2018
Passed by Commissioner of Central Tax , Belgaum (Appeals)

Date of Hearing: 10.04.2019
Date of Decision: 10.04.2019

M/s GOKAK SUGARS LTD
KOLAVI TAL GOKAK DIST
BELAGAVI-591344, KARNATAKA

Vs

COMMISSIONER OF CENTRAL TAX
BELAGAVI COMMISSIONERATE NO. 71
CLUB ROAD BELGAVI – 590001 KARNATAKA

Appellant Rep by: Shri S S Gupta, Adv.
Respondent Rep by: 
Shri L Patra, AR

CORAM: S S Garg, Member (J)

CX – Appellants are engaged in the manufacture of sugar, molasses and ethyl alcohol – they are availing cenvat credit – they are also engaged in the manufacture of electricity which is used captively for manufacture of excisable goods and the excess/surplus quantity of electricity is sold to outside power distribution companies on consideration without payment of duty, as no rate of duty has been prescribed in the CETA, 1985 – SCN issued demanding 6% of the value of exempted goods – original authority confirmed recovery of CENVAT credit of Rs.56,483/- (proportionate credit) attributable to input/input services used in the generation of electricity along with interest and also imposed penalty of Rs.5000/- – Department filed appeal before the Commissioner (A) who remanded the matter to examine the issue afresh – assessee in appeal before CESTAT.

HELD: In appellant’s own case for a different period, both the authorities have accepted the proportionate reversal and the Revenue filed appeal before the Tribunal which was dismissed by the Tribunal – further, as per Rule 6(1) of the Cenvat Credit Rules, 2004 [CCR] read with Explanation (1), the non-excisable goods which are manufactured by the manufacturer in his factory will get covered under Rule 6(1) in the light of the said Explanation – in other words, non-excisable goods which were not manufactured will not fit into the definition as prescribed under Rule 6(1) in spite of insertion of Explanation (1) to Rule 6 of the CCR – in view of the various decisions relied upon by the appellant, the appellants are not required to pay 6% of the value of the electricity sold to outside agencies – but in the present case, the appellant has reversed the proportionate credit and thereby complied with the statutory requirement as provided in Rule 6(3A) – the impugned order is not sustainable and, therefore, the same is set aside by allowing the appeal of the appellant : CESTAT [para6]Appeal allowed

Case laws cited:

DSCL Sugar Ltd. – 2015-TIOL-240-SC-CX…Para 4

CCE vs. Laila Sugars Pvt. Ltd. – 2019-TIOL-1271-CESTAT-BANG…Para 4

CCE vs. Gokak Sugars Ltd. : 2018 (10) TMI 1465…Para 4

CCE vs. Chhatrapati SSK Ltd. – 2019-TIOL-890-CESTAT-MUM…Para 4

Athani Sugars Ltd. vs. CCE – 2019-TIOL-595-CESTAT-MUM…Para 4

Pannageshwar Sugar Mills Ltd. vs. CCE – 2018-TIOL-3393-CESTAT-MUM…Para 4

Kichha Sugar Company Ltd. vs. CCE – 2019-TIOL-1436-CESTAT-DEL…Para 4

Shree Narmada Khand Udyog vs. CCE: 2018 (8) TMI 1075…Para 4

FINAL ORDER NO. 20352/2019

Per: S S Garg:

The present appeal is directed against the impugned order dated 26.9.2018 passed by the Commissioner (A) whereby the Commissioner (A) remanded the matter back to the original adjudicating authority.

2. Briefly the facts of the present case are that the appellants are engaged in the manufacture of sugar, molasses and ethyl alcohol falling under Chapter 17 of the Schedule to the Central Excise Tariff Act, 1985. They are availing CENVAT credit under CENVAT Credit Rules, 2004. They are also engaged in the manufacture of electricity classifiable as Electrical Energy under Tariff Item No.2716 0000 of CETA, 1985 which is used captively for manufacture of excisable goods and the excess/surplus quantity of electricity is sold to outside power distribution companies on consideration without payment of duty, as no rate of duty has been prescribed in the CETA, 1985. Therefore, CENVAT credit involved input and input services related to the quantity of electricity sold to outside agencies is not eligible to the appellant. The appellant had not followed the procedure in terms of Rule 6 of CENVAT Credit Rules, 2004. Hence, a show-cause notice was issued to the appellant by the jurisdictional Asst. Commissioner vide show-cause notice dated 28.12.2017 demanding 6% of the value of exempted goods amounting to Rs.19,12,463/- for the period from January 2016 to March 2016. After following the due process, the original authority confirmed the demand and ordered for recovery of CENVAT credit of Rs.56,483/- (proportionate credit) attributable to input/input services used in the generation of electricity along with applicable interest thereon and imposed a penalty of Rs.5,000/- and he has appropriated the said amount reversed by the appellant along with interest of Rs.7,521/-. Aggrieved by the said order, Department filed appeal before the Commissioner (A) and the Commissioner (A) remanded the matter back to the original authority to examine the issue afresh.

3. Heard both the parties and perused the records.

4. Learned authorized representative Shri Rahul Patil appearing for the appellant submitted that the impugned order is not sustainable in law. He further submitted that the issue involved in the present case is no more res integra and has been settled in by the apex court in the case of DSCL Sugar Ltd.: 2015 (322) ELT 769 = 2015-TIOL-240-SC-CX. He also submitted that though the appellant was not required to reverse the proportionate CENVAT credit attributable to the input service but still the appellant as per the Order-in- Original have reversed the credit of Rs.56,483/- along with interest of Rs.5,721/- which was appropriated by the original authority. He further submitted that the demand of 6% of the value of electricity in the light of Explanation (1) inserted to 6(1) of CENVAT Credit Rule is not sustainable in view of the following decisions:

– CCE vs. Laila Sugars Pvt. Ltd.: 2019 (2) TMI 568 = 2019-TIOL-1271-CESTAT-BANG

– CCE vs. Gokak Sugars Ltd. : 2018 (10) TMI 1465

– CCE vs. Chhatrapati SSK Ltd. : 2019 (2) TMI 1301 = 2019-TIOL-890-CESTAT-MUM

– Athani Sugars Ltd. vs. CCE: 2019 (2) TMI 379 = 2019-TIOL-595-CESTAT-MUM

– Pannageshwar Sugar Mills Ltd. vs. CCE: 2018 (10) TMI 966 = 2018-TIOL-3393-CESTAT-MUM

– Kichha Sugar Company Ltd. vs. CCE: 2018 (10) TMI 1151 = 2019-TIOL-1436-CESTAT-DEL

– Shree Narmada Khand Udyog vs. CCE: 2018 (8) TMI 1075

5. On the other hand, the learned AR defended the impugned order.

6. After considering the submissions of both the parties and perusal of the material on record, I find that in appellant’s own case for the different period which is reported in 2018 (10) TMI 1465 (Tri.-Bang.), both the authorities have accepted the proportionate reversal and the Revenue filed appeal before the Tribunal which was dismissed by the Tribunal. Further, I find that as per Rule 6(1) of the CENVAT Credit Rules, 2004 read with Explanation (1) the non-excisable goods which are manufactured by the manufacturer in his factory will get covered under Rule 6(1) in the light of the said Explanation. In other words, non-excisable goods which were not manufactured will not fit into the definition as prescribed under Rule 6(1) in spite of insertion of Explanation (1) to Rule 6 of the CENVAT Credit Rules, 2004. In view of the various decisions relied upon by the appellant cited supra, the appellants are not required to pay 6% of the value of the electricity sold to outside agencies. But in the present case, the appellant has reversed the proportionate credit and thereby complied with the statutory requirement as provided in Rule 6(3A). In view of the discussion above, the impugned order is not sustainable and therefore, I set aside the same by allowing the appeal of the appellant.

(Operative portion of the Order was pronounced in Open Court on 10.04.2019)

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