ORDER
T. Anjaneyulu, Member (J)
Page 91
1. Heard both sides.
2. The appellants, M/s. Ballarpur Industries Ltd., Ballarpur, are engaged in the manufacture of paper falling under chapter 48 of the Schedule to the Central Excise Tariff Act 1985 and are availing the benefit of CENVAT Scheme under Cenvat Credit Rules 2002 and Cenvat Credit Rules 2003.
Page 92
3. The appellants are also captively consuming electricity (exempted product), which is used in the manufacture of their final product and a part of the said electricity is supplied to the residential colonies. The appellants are also availing the facility of Cenvat credit on the inputs, namely, resin, maxtreat, hydrazine hydrate, morphile used for the demineralization of raw water. The treated water is used for generation of steam, which in turn is used for generation/manufacture of electricity. The appellants are reversing proportionate Cenvat Credit on the inputs contained in that part of the electricity, which is rolled out to the colonies.
4. The appellants are not maintaining separate inventory for the inputs used in the generation of the electricity used for production of their final products and part supplied to the residential colonies.
5. The appellants were served with a notice, proposing to recover an amount of 8 per cent of the value of electricity supplied outside in terms of Rule 6 of Cenvat Credit Rules on the ground that common inputs were used in relation to manufacture of dutiable goods (i.e. paper and exempted goods) and electricity and as such penalties under Rule 13 and Section 11AC were also proposed).
6. The Commissioner of Central Excise, Nagpur, confirmed the demand as made and equivalent penalties under Section 11AC, read with Rule 13, as imposed by the lower authority.
7. On perusal of the record and considering the matter at length, we are of the view that the electricity under the Central Excise Act 1944 read with Central Excise Tariff Act 1985 is not excisable goods. The proposal to bring in the provisions of Rule 6 of the Cenvat Credit 2002 cannot be upheld ab initio as that rule is applicable only to goods, which are excisable and further exempt or at nil rate of duty.
8. No reasons are advanced by the Revenue to call for to consider that electricity as goods as understood by Central Excise Act 1944 and the term “exempted goods” as used under Rule 6 cannot be stretched out by any other broader definition.
9. The reliance placed by the appellants on the decision of the tribunal in the case of CCE v. Kesar Enterprises Ltd. and U.P. State Sugar Corporation Ltd. v. CCE, Meerut are well founded and followed.
10. The ld. Commissioner differentiated the case law, which was cited before him on the ground that it related to waste, etc.
11. The Collector’s reliance on the Tribunal’s decision in the case of Shree S.G.K. Industries v. CCE, Mangalore 2002 (147) ELT (345) is not correct since that decision was in respect of D.G. sets used as capital goods for generation of electricity and not for raw material inputs used for generation of electricity. In the case before us, the electricity gets generated by super Page 93 hot steam and the steam thereafter used in the manufacture of paper. The inputs used in electricity generation and the credit thereon is not being questioned. There is no provision analogues to Rule 57Q(2), which is shown to us as regards electricity generated by super hot steam and such electricity use restricted to within the factory. We, therefore, in facts of this case, are not able to apply the decision in the case of Shree S.G.K. Industries v. CCE, Mangalore 2002 (147) ELT (345) as relied upon by the ld. CCE (Appeals).
12. This tribunal in case of M/s. Reliance Industries Ltd. 2004 (178) ELT 416, wherein a small quantity of electricity was sold, out of the total quantity produced from generated steam using inputs, on which, credit was availed, has not upheld the duty demands. In para 3 of this decision, it is recorded as follows:
3. In the decision of Essar Steel Ltd., in appeal No. E/1588/02, the Tribunal was concerned with similar quantity of electricity fed as unutilized by the electricity plant of Essar Gujarat Ltd., by the Gujarat Electricity Board, Relying upon the judgment of the Supreme Court in Sail v. CCE and in India v. CEE , the Tribunal concluded that such electricity would have to be considered waste since it could not be utilized due to unavailable circumstances and held that credit taken on the duty paid neptha used to produce such electricity was not required to be reversed.
Therefore, following this settled position by the tribunal, when there is no evidence of the electricity rolled out to the colony was required and usable in the factory, the same has to be considered as waste and input credit variations are not required. Similarly, 8 per cent recovery under Rule 6 of Cenvat Credit Rules cannot be arrived at.
13. When the demands are not being upheld, the penalty under Section 11AC and interest under Section 11AB also cannot be upheld. Consequently, the appeal is to be allowed after setting aside the impugned order; accordingly appeal is allowed.
(Pronounced in Court on 25th October, 2005).