Order Date: 10 June 2022

Facts:

• The appellants, M/s. Vandana Global Ltd., are engaged in the manufacture of Sponge Iron, Ingot, Billet, Silico Manganese etc. They are also availing the Cenvat credit of duty paid on inputs, capital goods and service tax paid on input services in terms of Cenvat Credit Rules, 2004 (herein after referred as CCR, 2004). 
• The department while scrutinizing the ER-1 returns noted that the appellants while manufacturing the above mentioned excisable goods are simultaneously engaged in generation of electricity which was captively used but some part thereof was also sold by them to state electricity body. Electricity was considered to be an exempted goods by the department and accordingly it alleged that appellants were required to pay an amount equal to Cenvat credit in terms of Rule 6(1), 6(2), 6(3A), 6(3D) of CCR, 2004. 
• Accordingly, Show Cause Notice No. for the period from April’ 14 to March’ 15 was served upon for an amount of Rs.22,96,788/- along with appropriate interest and penalty. The said proposal was initially confirmed vide Order-in-Original No. 28/2017 dated 22.09.2017.
• The impugned demand confirmed demand holding that the value of exempted goods sold for the items namely, Windmill, Coal Fins, Coal (imported), Pig Iron, Manganese Ore, Stores Items, Iron Ore Fines, Fly Ash and Waste Scrap etc. were not included for calculation of reversal of input services.
• The appellants contended that they have suo moto reversed the Cenvat credit taken on input and input services used for production of that portion of electricity that has been wheeled out to State Electricity Company amounting to Rs.10,19,252/-

Issue:

• Whether the appellant is required to reverse Cenvat credit in terms of Rule 6(1), 6(2), 6(3A) for 6(3D) of CCR, 2004 for selling electricity to state electricity body ?

Order:

• The Tribunal observed that Rule 6 of CCR, 2004 gives three separate options to the assessee as mentioned under sub rule (1), (2) and (3) thereof and to exercise any one of these options is the prerogative of assessee. Department cannot compel the assessee to opt for a particular option. Further, w.e.f. 01.04.2008 Rule 6 (3A) has been introduced, according to which the assessee is eligible to reverse proportionate credit on inputs and input services used in manufacture of exempted goods. Instead of reversal at the rate of 10% / 5% as prescribed by Rule 6 (3) of CCR, 2004 apparently and admittedly the said reversal has already been made. 
• The excess amount of duty over and above the amount of Rs.10,19,252/-, department has confirmed the duty while adding the value of electricity as was generated from scrap as that of Windmill, Fly Ash etc. High court of Allahabad had held in the case of Gularia Chini Mills Vs. Union of India reported as 2014 (34) STR 175 (All.) that electricity generated out of waste, provisions of Rule 6 (3) of CCR, 2004 are not applicable.
• Therefore, it was held that Commissioner (Appeals) has laid wrong emphasis on the decisions as mentioned in the order under challenge. Hence, liable to set aside.