2026-VIL-214-CESTAT-CHD-CE
  1. Home
  2. 2026-VIL-214-CESTAT-CHD-CE

CENTRAL EXCISE CESTAT Cases

Central Excise - Cenvat credit of fuel used in generation of Electricity - Appellant is a manufacturer of slabs, blooms, ingots etc. To overcome power shortages and outages, the appellant established a captive power plant with DG Sets to generate electricity. The electricity generated was unstable and unsuitable for direct use in the furnaces and mills, so the appellant entered into agreements with State Electricity Board (HSEB) to synchronize power with the grid and receive back an equivalent power. The appellant availed CENVAT credit on the inputs such as furnace oil used for generation of electricity – Denial of CENVAT credit, holding that the electricity generated was not used in the manufacture of final products within the factory but was sold to HSEB - Whether the appellant is eligible for CENVAT credit on the inputs used for generation of electricity that was exported to the grid – HELD - for a transaction to be “sale” under the Central Excise Act, it has to be a transfer of possession of goods for cash, or deferred payment, or other valuable consideration. In the instant case, the transaction involves supply, of the entire electricity being unsuitable to be used in the factory of the appellants in the production of excisable goods, to the grid and receiving the stable power from the grid in return. The supply of the entire electricity generated by the appellant to the grid of HSEB/DHBVNL constitutes a sale - As per the definitions of "input" under the CENVAT Credit Rules, the primary eligibility for goods to be considered as "input" is that they should be used in the manufacture of final product or for any other purpose, within the factory of production. In the instant case, the entire electricity generated by the appellant was wheeled out to the HSEB grid, which was located outside the factory of production. Thus, the inputs used in the generation of such electricity were not used either in the manufacture or for any other purpose within the factory. The Supreme Court in Maruti Suzuki Ltd. and Gujarat Narmada Fertilizers Co. Ltd., held that the CENVAT credit is available only to the extent the electricity produced is utilized within the factory of production and not on the portion of electricity transferred/sold outside the factory – the appellants are not entitled to the Cenvat credit on the fuel used in the generation of such electricity which was entirely exported/ supplied/ fed to the grid of State Electricity Board. The appellant is eligible to Cenvat credit on inputs only to the extent the electricity produced and utilized in the factory of production and not on the portion of electricity transferred/sold to the grid - The invocation of the extended period of limitation is not sustainable as the appellant had a bona fide belief based on the earlier favorable decisions and there was no evidence of suppression of facts or intent to evade duty – The appeal is partly allowed
Download File
show more Judgements  

Quick Search

/

Advance Search

GST Resources

/

Gst Rate Finder

Tax Vista

Your Weekly Tax Recap

By Kasi Viswanathan V

Weekly Summary

VIL Video

GST Jan '26 Burning issues:
By CA Vivek Jalan

Create Account

Security-Code
New Code?

Log In

New User ? Forgot Password ?

Forgot Password

Security-Code
New Code?
Please Note: This facility is only for Subscribing Members.

Email this page

Feedback this page

Schedule a Demo

Schedule a demo to know the features and advantages of VILGST portal. Get to know the tips to find the desired results in faster way.

Caselaw Request Form (CRF)

Didn’t find what you are searching for? No worries, please give us the following details and VIL will email you the desired Caselaws at the earliest:

Security-Code
New Code?