Electricity is not an excisable good under Section 2(d) of the Central Excise Act, and consequently, it cannot be treated as an 'exempted good' for the purpose of invoking Rule 6 of the Cenvat Credit Rules, 2004 to deny or recover Cenvat credit.

[ORDER PER: A.K. JYOTISHI]

M/s Madhucon Sugar & Power Industries Ltd., (hereinafter referred to as appellant are in appeal against the Order-in-Original dated 28.09.2012, whereby, the Commissioner has confirmed the demand for recovery of Cenvat Credit of Rs. 1,17,49,121/- along with interest and has also imposed equal penalty under Rule 15(2) of Cenvat Credit Rules 2004 (CCR) read with Section 11AC .

2. The brief fact of the case is that the Department noticed that appellant had availed credit of service tax on certain taxable services received for exclusive use in their captive power plant. These services were Commissioning & Erection, Engineering services, Professional Consultancy services, Repairing & re-shelling, Freight charges, Cable Laying, Supervision, Servicing, Testing, Vulcanizing, Fabrication, Inspection etc. The Department felt that since the electricity (electrical energy) is an excisable good covered under Tariff Heading 2716 0000 of Schedule to Central Excise Tariff Act 1985 and therefore no central excise duty is being payable, the same is to be treated as exempted goods. Hence, manufacture and clearance of electricity by a manufacture using input or input service shall attract provisions of Rule 6 of Cenvat Credit Rules (CCR) in the given factual position. Department demanded recovery of certain credit taken improperly in terms of Rule 6(3).

3. In the course of adjudication, the main argument of the appellant was that the power generated in such power plant is being utilised partly in the sugar manufacture captively and only surplus power is being sold out to the grid. It was also pointed out that the final products are only sugar and molasses which are excisable goods and they are discharging duty thereupon. Therefore, the credit of said input services can be taken as the power plant generating electricity is essential for manufacture of dutiable sugar and molasses. They also submitted that the presumption that all the inputs were being used only for power plant is also not factually correct in as much as apart from power plant they have also used said input service for boiler also, which is an integral part of the manufacturing plant. They also submitted that the assumption that the electricity is an exempted product is not correct since electricity is not exempted in terms of any notification issued under Section 5A of Central Excise Act 1944. The Adjudicating Authority, however, examined various contentions and submissions and, inter alia, held that power plant cannot be by any stretch of imagination considered as an integral part of the plant nor electricity can be considered as intermediate product for manufacture of sugar or molasses and accordingly even though the electricity is being partly used captively also for manufacturing of sugar, it cannot mean that electricity is an essential input for manufacture of sugar. He emphasised the fact that in the scheme of Value Added Tax, under CCR there is a provision for taking credit in respect of “inputs” used for generation of electricity, but there is no such provision for “input service”. He also held that electricity, even if it is held to be a non- excisable commodity, then also there is no scope to avail Cenvat Credit on inputs or input services utilised in the manufacture of electricity as the scheme of Cenvat only extends to manufacture of excisable goods and not to non-excisable goods. In this regard, he analysed the provisions under R