By TIOL News Service

ALLAHABAD, APR 17, 2016: AUDIT contention - Electricity is incorporated in Central Excise Tariff with effect from 28/2/05, however, column of rate of duty is kept blank, electricity becomes taxable goods although no duty had been specified. As no date of duty has been indicated for electrical energy, the said item is to be treated as exempted goods.

The audit noticed that for the period January, 2007 to December, 2008 the appellant had not made the payment of 10% of the amount of sale price of exempted final product, that is electricity sold, to U.P.Power Corporation Ltd. nor have made reversal of proportionate Cenvat credit availed on inputs, input services used and consumed in generation of electricity sold, in terms of rule 6(3) of CCR 2004.

Accordingly, SCN dated 28/9/11 was issued invoking extended period and proposing to recover Rs.1,97,96,236/- and imposition of interest and penalty.

The adjudicating authority upheld the allegations leveled in the SCN but confirmed an amount of Rs.1,57,55,793/- along with interest and an equal penalty. The amount of proportionate Cenvat credit debited of Rs.1,60,002/- was also appropriated.

While refuting the allegations the appellant submitted that only the surplus electricity generated, as it cannot be stored, is sold to U.P. Power Corporation Ltd.; that the interpretation of the revenue on the basis of clause 1 (c) of Additional Notes of General Rules for the interpretation of the first schedule to hold that "as no rate of duty is indicated for electrical energy it is exempted goods" is not sustainable since a specific definition is given of ‘exempted goods' under the CCR. Reliance is also placed on the Tribunal ruling in Ex. Appeal No. E/52882/2014-Ex (SM), Final Order No. 51791/2015-Ex (SM) dated 08.08.2015 wherein similar demand was under consideration and the Tribunal had allowed the appeal in favour of the appellant.

In that case, the Tribunal had concluded thus -

The AR supported the order of the lower authority. On a query as to whether the revenue have filed further appeal in respect of the aforementioned ruling of the Tribunal, the AR submitted that he is not aware of the same. The appellant also informed that they had not received any notice in respect of any appeal filed by revenue before the High Court.

The Bench observed that the issue in the present appeal was, therefore, no longer res-integra and the same was covered by aforementioned Tribunal decision.

The impugned order was set aside and the appeal was allowed.

(See 2016-TIOL-902-CESTAT-ALL)