2025-VIL-1977-CESTAT-DEL-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Electricity generation and sale – Appellant availed CENVAT credit on inputs and input services used in its captive power plant. This power was partly consumed in the appellant's factory, partly transferred to its sister concerns, and partly sold to the State Electricity Board. The department objected to the availment of CENVAT credit for the portion of electricity that was wheeled out to the sister concerns and sold to the State Electricity Board - Whether interest could be charged under Section 11AA of the Central Excise Act read with Rule 14 of the CENVAT Credit Rules, 2004 on the CENVAT credit availed by the appellant towards the electricity sold to the State Electricity Board – HELD - The show cause notice did not give any reason as to why interest is recoverable under Section 11AA. It merely alleged that the credit was wrongly availed in contravention of the rules. However, the appellant had reversed the CENVAT credit attributable to the electricity sold to the State Electricity Board on a monthly basis prior to the issuance of the SCN. Thus, the credit was not wrongly availed but was voluntarily reversed, which amounts to non-availing of credit. The Department did not specifically allege any violation of Rule 6 of the CENVAT Credit Rules, 2004 in the show cause notice to justify the levy of interest. Therefore, the demand of interest is set aside – The appeal is allowed - Whether penalty could be imposed on the appellant under Rule 15(1) of the CENVAT Credit Rules, 2004 on the CENVAT credit availed towards the electricity sold to the State Electricity Board – HELD - Since the appellant had reversed the CENVAT credit attributable to the electricity sold to the State Electricity Board, it amounted to non-availing of credit. The Supreme Court and the Tribunal have held that reversal of credit means the party did not avail the input service credit. Therefore, Rule 15(1), which deals with wrongful availing or utilization of CENVAT credit, could not be invoked. Accordingly, the penalty imposed on the appellant is set aside.
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