Order date – 19 October 2022

 Facts –

• The appellant, M/s. Sakthi Sugars Ltd. is engaged in manufacture of Sugar, Molasses and Industrial Alcohol is registered with the Department for manufacture of the final products. They were availing the facility of cenvat credit of service tax paid on various inputs services.
• During the conduct of audit in August 2008, it was noticed that appellant has availed wrong credit on input services used in the Co-generation plant for generation of electricity which was being wheeled out to T.N.E.B. They also availed credit on input services used for manufacture of Ethyl Alcohol. On being pointed by audit officers, the appellant paid the amount by reversing the credit on 16.08.2008.
• Thereafter, show cause notice dated 17.07.2012 was issued proposing to recover the wrongly availed cenvat credit along with interest and also for imposing penalty under Section 11AC of the Central Excise Act, 1944.
• Aggrieve appellant had filed an appeal.

Issue – 

• Whether Cenvat is allowed and penalty imposed under Section 11 AC of the Central Excise Act is in order?

Order – 

• The Tribunal observed that though audit was conducted in the year August 2008 and the appellant paid up the duty immediately when the audit had pointed out the defect of availing wrong credit. Even then, the department has taken a period of 4 long years to issue the show cause notice. 
• The Hon’ble Apex Court in the case of Maruti Suzuki Ltd. Vs CCE Delhi-III settled the issue by saying that credit is eligible only when electricity is used for manufacture of final products. Taking note of this aspect into consideration that there were conflicting views as to whether credit is eligible on input services used for generation of electricity that is sold outside, the appellant cannot be burdened with the guilt of suppression of facts with intent to evade payment of duty.
• The Tribunal also find with regard to cenvat credit of input service availed for manufacture of exempted goods, namely, Ethyl Alcohol, the only argument put forward by appellant is that they had availed credit by inadvertent mistake.
• Hence the Tribunal hold to set aside the penalty imposed In regard to credit availed in respect of input services used in the co-generation plant for generation of Electricity sold outside . Penalty imposed in regard to input service tax credit on the services used in manufacture of Ethyl Alcohol is upheld.
• Hence the appeal is partly allowed.