Order Date: 21 July 2022

Facts:

• The respondent, M/s Himadri Speciality Chemical Private Limited, is engaged in the manufacture of carbon black on which Central Excise duty is remitted.
• Show cause notice was issued raising a demand of Central Excise Duty to be calculated at 6 % on the value of the electricity sold by invoking Rule 6 (3) of the Cenvat Credit Rules, 2004 on the ground that electricity is ‘exempted goods’ and the assessee did not reverse the proportionate Cenvat Credit availed on inputs and input services.
• The Tribunal held that for the purpose of reversal of Cenvat credit, non-excisable goods would be considered to be exempted goods and the assessee would be liable to reverse the proportionate credit with effect from 1st March, 2015 onwards and not for the prior period.
• This appeal is filed by the revenue under Section 35C of the Central Excise Act, 1944 challenges the order passed by the Customs, Excise and Service Tax Appellate Kolkata (tribunal).

Issue:

• Whether the electricity generated from waste gas / tail gas is classifiable under Chapter Heading 2716 and whether the same can be said to be ‘exempted goods’?

Order:

• The Court observed that the Appeal filed by the Revenue Department, has affirmed the views taken by the Tribunal in favour of the assessee. The Tribunal had set aside the Central Excise Duty demand raised by the Ld. Commissioner by seeking reversal of CENVAT Credit under Rule 6 on the ground that the “Waste Gas”, arising in the course of manufacture of Carbon Black, was further used in generation of electricity which was ultimately sold by the assessee.
• Affirming the views taken by the Tribunal by placing reliance on other decisions, the High Court has held that electricity generated from “Waste Gas” cannot be classified under chapter heading 2716 and hence, cannot be said to be “exempted goods”, since not excisable goods so as to warrant reversal of credit.
• The Court held that the Tribunal rightly allowed the appeal filed by the assessee and set aside the order of adjudication. Hence the appeal filed by the revenue is dismissed and the substantial questions of law are answered against the revenue.