Custom, Excise & Service Tax Tribunal
M/S.Dsm Sugar Mills Ltd vs Cce, Meerut-I on 24 February, 2014
IN THE CUSPTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, NEW DELHI, PRINCIPAL BENCH NEW DELHI
Date of Hearing/ Decision: 24/02/2014
1
Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982?
2
Whether it should be released under Rule 26 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether their Lordships wish to see the fair copy of the Order?
4
Whether Order is to be circulated to the Departmental authorities?
Excise Stay Application No.58923/2013 in
Excise Appeal No. E/58262 of 2013-EX (DB)
(Arising out of Order-in-Original No.33/Commr./MRT-I/2013 dated 30.03.2013 passed by the Commissioner of Central Excise, Meerut-I)
M/s.DSM Sugar Mills Ltd. Appellants
Vs.
CCE, Meerut-I Respondent
Appearance:
Rep. by Shri Alok Arora, Advocate for the appellant.
Rep. by Ms. S. Bector, DR for the respondent.Final Order No. 51042/2014
Per Rakesh Kumar:
The facts leading to filing of this appeal by the Revenue are, in brief, as under:-
1.1 The appellant are engaged in the manufacture of sugar and molasses chargeable to central excise duty. They availed cenvat credit of central excise duty paid on various inputs and capital goods and service tax paid on input services used in or in relation to the manufacture of final products. There is a co-generation plant in the appellants factory. To the extent possible, the power generated by the co-generation plant is used in the factory for manufacture of final products and the surplus power, if any, is sold out to the U.P. Power Corporation Ltd. The department was of the view that since the appellant have availed the cenvat credit in respect of various input services used in or in relation to the generation of electricity and also in respect of inputs such as lubricants, grease, chemicals, etc. used in or in relation to the generation of electricity and since separate account and inventory of the inputs/input services meant for dutiable final products and exempted final products have not been maintained, in respect of the electricity sold to U. P. Power Corporation Ltd., the appellant, in accordance with the provisions of Rule 6(3) of the Cenvat Credit Rules, 2004, would be liable to pay an amount @ 5%/10% of the sale value of the electricity. On this basis, a show cause notice dated 8.2.2012 was issued to the appellant for payment of an amount of Rs.2,56,66,776/- in respect of sale of electricity to U. P. Power Corporation during the period from November, 2007 to November, 2011 along with interest thereon under Section 11 AB and also for imposition of penalty under Rule 15(2) of the Cenvat Credit Rules, 2004 read with Section 11 AC of the Central Excise Act, 1944. In the above show cause notice, the department took a view that the electricity is an excisable good for which nil rate of duty has been prescribed in the tariff and hence, in accordance with the definition of excisable goods as given in Rule 2(d) of the Central Excise Rules, 2004, the same has to be treated as an exempted goods. The above show cause notice was adjudicated by the Commissioner vide order-in-original dated 30.03.2013 by which the Commissioner holding that the electricity is an excisable goods exempted from payment of duty and since by using common cenvat credit availed inputs and input services, electricity has been generated, a part of which has been used for the manufacture of excisable goods and a part of which was sold out, in respect of the electricity sold out, an amount as specified in Rule 6(3) of the Cenvat Credit Rules, 2004 would be payable, as the appellant have not maintained account and inventory of the goods and services used in or in relation to the manufacture of dutiable and exempted final products. Accordingly, the demand under Rule 6(3) of the Cenvat Credit Rules, 2004 as made in the show cause notice was confirmed against the appellant along with interest and penalty of equal amount was imposed on them. Against this order of the Commissioner this appeal has been filed along with stay application.
2. Heard both the sides in respect of stay application.
3. Shri Alok Arora, Advocate, ld. Counsel for the appellant, pleaded that Rule 6(2) of the Cenvat Credit Rules, 2004 read with Rule 6(3) of the Cenvat Credit rules, 2004 is applicable only to a case where a manufacturer using common cenvat credit availed inputs or input services, manufacturers dutiable final products as well as exempted final products and does not maintain separate accounts and inventory in respect of inputs/input services used in or in relation to the manufacture of dutiable final products and exempted final products, that Rule 6(2) read with Rule 6(3) would not be applicable when one of the products being manufactured is non-excisable, that in terms of the definition of excisable goods as given in Rule 2(d) of the Cenvat Credit Rules, 2004, this term means the excisable goods which are exempt from the whole of the excise duty leviable thereon and includes the goods, which are chargeable to nil rate of duty and the goods in respect of which the benefit of exemption under notification no.1/2011-CE dated 1.3.2011 or under entries at sl.no.67 and 128 of notification no.12/2012-CE dated 17.03.2012 has been availed, that though the electricity is covered by Heading No.27160000 of the Central Excise Tariff, it is not an excisable goods as no rate of duty has been specified against this heading, that the Honble Allahabad High Court vide its judgement dated 13.08.2013 in respect of writ petitions filed by M/s. Gularia Chini Mills, Gularia, Distt. Lakhimpur, Kheri, M/s. Haidergarh Chini Mills, Haidergarh, M/s. Mankapur Chini Mills, M/s. Kumbhi Chini Mills,Kumbhi, M/s. Upper Ganges Sugar & Ind. Ltd., Seohara and Another, M/s. Mankapur Chini Mills and M/s. Akbarpur Chini Mills and Others has held that electricity is not an excisable good and hence, no amount can be charged under Rule 6(3) of the Cenvat Credit Rules, 2004 in respect of the electricity sold by the Sugar Mills to U.P. Power Corporation Ltd., that the ratio of this judgment of the Allahabad High Court is squarely applicable to the facts of this case, that the appellant have strong prima facie case in their favour and hence the requirement of pre-deposit may be waived for hearing of their appeal and recovery thereof may be stayed.
4. Ms. S. Bector, ld. Departmental Representative opposed the stay application by reiterating the findings of the Commissioner in the impugned order. She pleaded that this is not a case for waiver from the requirement of pre-deposit.
5. We have considered the submissions from both the sides and perused the records.
6. The basis of the departments case against the appellant is that
(a) they are using common cenvat credit availed inputs and input services for generation of power;
(b) while part of the power generated is being used in the sugar mill for manufacture of dutiable final products, the remaining electricity is being sold out to U. P. Power Corporation;
(c) electricity is an excisable goods attracting nil rate of duty and hence the same is to be treated as an exempted goods within the meaning of this term, as defined in Rule 2(d) of the Cenvat Credit Rules; and
(d) since the appellant have not maintained separate account and inventory of the inputs/input services used in or in relation to the manufacture of dutiable final products (sugar and molasses) and exempted final products (electricity), the provisions of Rule 6(3) of the Rules would become applicable in respect of sale of electricity to U.P. Power Corporation.
However, Honble Allahabad High Court in the case of Gularia Chini Mils, Gularia & Ors. Vs. Union of India (supra) on this very issue has held that the electricity is not an excisable good and hence, in respect of the sale of the electricity to U.P. Power Corporation Ltd., the provisions of Rule 6(3) of the Cenvat Credit Rules would not be applicable. In view of this judgment of the Honble Allahabad High Court, the impugned order demanding the amount under Rule 6(3) of the Cenvat Credit Rules, 2004 would not be sustainable. There may have been a case for denial of proportionate credit in respect of the cenvated inputs or input services to the extent the same have been used in or in relation to the generation of power sold to U.P. Power Corporation Ltd., but the show cause notice is silent on this point. It does not even mention as to which common input or input service were being used and if so, how much is the cenvat credit taken.
7. The appellant, therefore, have strong prima facie case in their favour. The requirement of pre-deposit of cenvat credit demand under Rule 6(3) of the Cenvat Credit Rules, 2004, interest thereon and penalty is, therefore, waived for hearing of their appeal and recovery thereof is stayed. Stay application is allowed.
(Justice G. Raghuram) President (Rakesh Kumar) Member (Technical) Ckp.