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M/S. Maruti Suzuki India Ltd. Manesar ... vs C.C.E & S.T. Delhi-Iii on 30 September, 2015 cites

Collector Of Central Excise, Jaipur ... vs Rajasthan State Chemical Works ... on 17 September, 1991

In the case of Collector of Central Excise v. Rajasthan State Chemical Works reported in 1991 (55) E.L.T. 444 (S.C.) the test laid down by this Court is whether the process and the use are integrally connected. As stated above, electricity generation is more of a process having its own economics. Applying the said test, we hold that when the electricity generation is a captive arrangement and the requirement is for carrying out the manufacturing activity, the electricity generation also forms part of the manufacturing activity and the input used in that electricity generation is an input used in the manufacture of final product. However, to the extent the excess electricity is cleared to the grid for distribution or to the joint ventures, vendors, and that too for a price (sale) the process and the use test fails. In such a case, the nexus between the process and the use gets disconnected. In such a case, it cannot be said that electricity generated is used in or in relation to the manufacture of final product, within the factory. Therefore, to the extent of the clearance of excess electricity outside the factory to the joint ventures, vendors, grid etc. would not be admissible for CENVAT credit as such wheeled out electricity, cleared for a price, would not fall within the definition of input in Rule 2(g) of the CENVAT Credit Rules, 2002.
Supreme Court of India Cites 7 - Cited by 125 - M F Beevi - Full Document

M/S Vikram Cement vs Commissioner Of Central Excise,Indore on 24 August, 2005

6. We find that the appellants are striving hard to make a distinction to the effect that the above decision of the Honble Supreme Court will not apply to input services. We fail to appreciate such distinction. The service tax paid on transportation of gas to the power plant is allowed as credit subject to fulfillment of certain conditions. Rule 2(l) of the Cenvat Credit Rules 2004 states that input services should be used by a manufacturer directly or indirectly, in or relation to the manufacturer of final products. The appellants emphasis that as long as the input service is used by the manufacturer no portion of such credit can be denied. The Ld. Counsel for the appellant contended that while inputs are to be received in the factory of manufacture, in respect of input services it is with relation to receipt by the manufacturer of final products. In other words, the nexus test as applicable to inputs cannot be applied in full force in the case of input services. We find that we are unable to agree with such proposition. For an input service to be eligible for credit the condition that it should be used by the manufacturer whether directly or indirectly in relation to the manufacturer of final product is stipulated. Nexus test is not applicable to input services is not acceptable. The tax paid on input services on transportation of gas is rightly eligible to the appellants as long as it is shown that the said gas transportation of which was subjected to service tax, was used in the production of electricity, in turn is used in or in relation to manufacture of dutiable final products. In the present case, the admitted fact is that electricity which is sold outside is not used in or relation to the manufacture of final product by the appellants. Consequently, the inputs and input services which are used in the production of such electricity sold outside will not be eligible for credit as they fall outside the ambit of input and input services as defined by Cenvat Credit Rules 2004. Here the service tax is paid on the inward transportation of gas used for power generation and there is no physical separation of supply lines or accounts to show which quantum of service tax is attributable to that gas used for electricity sold outside. Hence, it follows that proportionate to service tax attributable to the transportation of gas used for production of electricity sold outside has to be reversed. This is clearly in terms of provisions of Cenvat Credit Rules 2004 interpreted and decided by the Honble Supreme Court in the appellants own case (Supra). We find that the appellants took a plea to the effect that the electricity is neither the excisable goods nor exempted goods, as such the bar of availing credit will not apply to input services used in relation to such electricity. This argument is untenable in view of the clear findings of the Honble Supreme Court on the question of electricity sold outside by the appellants. As such we find no merit in appellants contention against the reversal of proportionate credit of service tax attributable to the electricity sold outside.
Supreme Court of India Cites 12 - Cited by 68 - Full Document
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