P.V. Subba Rao ORDER
P.V. Subba Rao, Member (T)
1. This appeal has been filed by the Revenue assailing the order in appeal dated 28.06.2018 passed by the Commissioner, Central Excise (Appeals), Raipur where whereby he modified the order of the lower authority dated 29.3.2018 reducing the proportionate credit to be recovered from the respondent to Rs. 12,35,667/- from Rs. 1,66,45,239/-.
2. The respondent is engaged in manufacture of Ferro Alloys falling under Chapter 72 of the Central Excise Tariff. 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 and several points were raised by the audit. The only one which remains to be decided is regarding the Cenvat credit on the inputs/input services used by it for providing of electricity part of which it supplied 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. The appellant had sold part of the electricity to the Chhattisgarh State Power Distribution Company Limited and had to that extent reversed the Cenvat credit on the inputs and input services. However, the appellant had not reversed Cenvat credit to the extent it had supplied the power to its own sister unit which has a separate central excise registration.
3. Accordingly, a show cause notice dated 29.11.2016 was issued to the appellant seeking to recover an amount of Rs. 1,66,45,239/- under Rule 14 of the Cenvat Credit Rules, 20041 read with Section 11A of Central Excise Act along with interest under Section 11AA. It was further proposed to impose penalty upon it under Rule 15 of CCR read with Section 11AC(1)(c).
4. The Additional Commissioner has passed an order dated 29.3.2018 confirming the demand along with interest and imposing penalties. On appeal, the Commissioner (Appeals) has passed the impugned order holding that in his considered view, 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. Accordingly, he modified the order of the lower authority as discussed above.
5. Revenue's submissions are as follows:
(a) Cenvat credit can be availed by a manufacturer in terms of CCR which allows it to take credit on inputs or input services used for manufacture/production of dutiable goods by it. There is no provision under which the Cenvat credit can be availed on the inputs or input services which are used by a sister unit with a separate central excise registration;
(b) The respondent's contention that the supply of electricity to its sister unit is not sale has no bearing in this case. It is immaterial whether the goods produced (electricity in this case) is supplied free of cost or sold to its sister unit. There is no distinction between the inputs or input services which were used for production of electricity which is sold to the Power Distribution Company and which is supplied to its sister units and so long as the inputs/input services are not used in manufacture of final products by the appellant, no Cenvat is admissible;
(c) Cenvat credit can be availed by manufacturing unit only on the inputs or input services used for goods manufactured by it. It cannot avail the Cenvat credit on........