Order Date: 6 September 2022

Facts-

• The Respondent, Hira Ferro Alloys Ltd. is engaged in manufacture of Ferro Alloys. It also has another unit in the same area and both units have separate central excise registrations and both are maintaining separate statutory records. 
• The appellant’s records were audited by the Department for the period December 2011 to March 2016. The only one which remains to be decided is regarding the Cenvat credit on the inputs /input services used by it for providing electricity, part of which it supplied free of cost to its sister unit. According to the Revenue, the respondent is entitled to Cenvat Credit on the inputs and input services used in manufacture of its final product but not the inputs and input services which go into production of electricity which it supplied to its sister unit.
• Accordingly, a show cause notice was issued to the appellant seeking to recover an amount under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A of Central Excise Act along with interest under Section 11AA. It was further proposed to impose a penalty upon it under Rule 15 of CCR read with Section 11AC (1) (c).
• On appeal, the Commissioner (Appeals) held that the appellant was not required to reverse proportionate Cenvat Credit in respect of power which it supplied to its sister unit during the period and to that extent the demand had to be reduced.
• Revenue being aggrieved, has filed this appeal 

Issue-

• Whether the respondent is entitled to avail Cenvat Credit of inputs supplied free of cost to its sister concern?

Order-

• The Tribunal observed that the case of the appellant Revenue is that since part of the electricity is transferred to sister unit, the inputs used in generating it to that extent is an input for the sister unit as it is relatable to the goods manufactured by it and they are not inputs relatable to the final products of this respondent. Each unit is separately registered and is a separate assessee as far as central excise is concerned. To the extent the electricity is sold to outsiders, the respondent has reversed the Cenvat Credit.
• On identical issue, High Court of Rajasthan had in COMMISSIONER OF CENTRAL GOODS AND SERVICE TAX, JAIPUR VERSUS SHREE CEMENT LIMITED allowed Cenvat Credit on the inputs used in production of electricity which is supplied free of cost to the assessee’s sister unit.
• Accordingly, the Tribunal held that the respondent is entitled to Cenvat Credit to the extent the inputs are used for production of electricity which is transferred free of cost to its sister unit and the appeal is dismissed.