Dated 20th November, 2019

 Subsequent judgment of the Apex Court cannot be used to re-open assessment or disturb past assessment which have been concluded-Department cannot be authorised to re-open the assessment, which stood closed on the basis of the law as it stood at the relevant time.

Demand of 6% of value of exempted supply cannot be made when proportionate credit of common inputs/input services reversed/paid 1

Facts of the case

Appellant is manufacturers of sponge iron and MS billets falling under Chapter heading 72031000 & 72051090 of the CETA, 1985 were availing the CENVAT credit under the Cenvat Credit Rules, 2004 (herein after referred to as “CCR”).

The iron ore dolomite coal etc. are charged in the Rotary Kiln for melting and production of iIron. The coal is burnt in the Kiln for melting the charge. In the process, ponge iron is produced as final product. Char dust/Dolochar, being coal ash and partially burnt coal, remains as residual waste in the Kiln. The waste heat from the Kiln which would have escaped or dissipated is passed through Waste Heat Recovery Boiler for generation of steam. The waste heat is thus used for generation of steam. The char dust, coal ash or dolochar, the residual waste, is fed in the Atmospheric Fluidised Bed Combustion Boiler to produce steam. The steam generated by using waste heat and coal ash/char dust in the boilers is used for generation of electricity, which is partly captively consumed within the factory for manufacture of final products and excess electricity is sold to GESCOM.

A show-cause notice was issued to the appellant demanding amount equal to 6% of the value of electricity sold outside the factory alleging electricity as an exempted and thus, non maintenance of separate accounts of common input/services as provided under Rule 6 of CCR 2004 towards manufacture of spong iron and electricity. The said demand was confirmed by the adjudicating authority and subsequently by Commissioner (Appeals).

Appellants Contention

The Appellant submitted that the impugned order is not sustainable as the same has been passed without properly appreciating the facts and the law. Further, CENVAT credit on inputs used in the generation of electricity was not availed. It is settled law that electricity is goods but not excisable goods and the ground made out in the show cause notice and confirmed in the impugned order are not correct.

In the appellant's own previous case for the earlier period, this Tribunal vide a final order held that electricity though listed in the Tariff, is not excisable goods. Appellant have not availed credit on any common input used for manufacture of dutiable final product and exempted final product and the show-cause notice as well as the impugned order have not furnished the details of the inputs on which credit was taken and were used for generation of electricity.It is a settled law that burning of coal in the boiler or kiln and generation of coal ash or residual waste coal is not a process of manufacture of coal ash or char. This issue stands settled by the judgment of the Hon'ble ApexCourt in the case of UOI Vs. Ahmedabad Electricity Co. [2003(158) ELT 3 (SC)]as well. He further submitted that the provision of Rule 6 of CCR, 2004 are not applicable to waste products generated in the course of manufacture of dutiable final products. In the present case, heat, not goods, and char, a waste, are used in the boiler for generation of steam, which is used for generation of electricity and such use of waste products does not attract the provisions of Rule 6 of the CCR, 2004.It was further submitted that with the introduction of Rule 6(3AA) in the CCR, 2004 w.e.f. 01.04.2016 , instead of paying 6% of the common credit, proportionate credit can be reversed. The appellant, by making use of this clause, has paid the required amount along with applicable interest.

Contentions of the department

Department defended the impugned order and submitted that the Appellants have suppressed the material fact from the department and on verification by the department, it was revealed that the Appellant is also selling the electricity to GESCOM. Further it was submitted that after the amendment in the definition of exempted goods w.e.f. 01.03.2015, exempted goods means excisable goods which are exempted from whole of the value of the excise duty leviable thereon and includes goods which are chargeable to NIL rate of duty. Further, payment of proportionate credit of input services attributable to the value of electricity sold during the relevant period was made after the issuance of the show-cause notice and the Order-in-Original. Reliance was placed upon the decision of the Tribunal in the case of CC,CE&ST, Tirupati Vs. Sri Sai Sindhu Industries Ltd. [2017(49) STR 84 (Tri. Hyd.)].

Judgment of the Hon’ble Tribunal

After considering the submissions it was held that in the Appellant's own case for the earlier period, this Tribunal relieved the Appellant from the payment of 6% of the value of the electricity cleared to the power distribution company. In the present case, the electricity was generated by us of the waste products and therefore Rule 6 of the CCR is not applicable in view of the judgment of the Hon'ble Apex Court in the case of UOI Vs. Hindustan Zinc Ltd.

It was also found that Coal ash/Dolo char is a residual waste arising out of the burning of coal which cannot be said to be a manufacture of final product. Both the authorities have ignored the amendment introduced w.e.f. 01.04.2016 by addition of Rule 6(3AA)which permits the assessee to reverse/pay proportionate CENVAT credit relating to common input or attributable to input services and in the present case, the appellant is making use of this sub-rule and has paid the proportionate amount along with applicable interest which according to the board, satisfied the requirement of Rule 6(3A). Consequently, the demand of 6% of the value of electricity sold to the GESCOM is not sustainable in law and therefore the impugned order was set aside by allowing the appeal of the appellant.

1Minera Steel and Power Pvt Ltd Vs. Commissioner of Central Tax [2019-TIOL-3179-CESTAT-BANG]

2Notification No.13/2016-CE (NT)dt. 01.03.2016

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