The Orissa High Court has held that use of the electricity manufactured in one unit of respondent but transmitted for use by another for use in manufacture of dutiable goods, to obtain cenvat credit.
The bench of Justice Arindam Sinha and Justice M.S. Sahoo has observed that the electricity has been used in the manufacture of dutiable final products and also the fact that all units belong to the appellant the denial of credit is not justifiable.
Background
The respondent/assessee has two units in the State, separated by approximately 500 kilometres. It is engaged in the manufacture of high carbon ferro chrome and chrome ore briquette. The units of respondent are engaged in manufacture of the products. One unit also manufactures electricity for captive use. Admittedly, part of surplus production was sold to Gridco and cenvat credit obtained, reversed. Respondent also used part of the surplus electricity by transmitting it to its other unit, engaged in the line of manufacture to produce the final products. They are dutiable goods.
Both units of assessee correspond or come within the meaning of ‘factory’ given in the Act. Input includes all goods used for generation of, inter alia, electricity for captive use. Apart from surplus electricity sold to Gridco, electricity that was surplus in the generating unit was transmitted to the other unit for use in manufacture of the dutiable goods. Hence, it cannot be said that the transmitted electricity was not captively used.
The department has filed the appeal under section 35G in Central Excise Act, 1944.
The department submitted that the surplus electricity supplied free of cost by respondent to its another unit does not entitle it to cenvat credit on input and input services. Therefore, periodical show cause notices were issued to respondent-assessee, to deny credit of input and input services used for generation of the electricity.
The department was successful before the appellate authority but the Tribunal erred on facts and in law, to set aside the appellate order.
Conclusion
The court while dismissing the appeal of the department held that the Cenvat credit on input
services used in the generation of power are eligible to the appellant as long as the electricity is used in the manufacture of a dutiable final product. The only dispute was related to the usage of electricity captively within the plant of generation or also outside the generation unit by the same manufacturer. Considering that the electricity has been used in the manufacture of dutiable final products and also the fact that all units belong to the appellant the denial of credit is not justifiable.
Case Title: Principal Commissioner, CGST Versus M/s. Indian Metal and Ferro Alloys
Case No.: OTAPL No. 19 of 2024
Date: 03/09/2024
Counsel For Appellant: K. Satapathy
Counsel For Respondent: Jagabandhu Sahoo
