2026-VIL-650-MAD-CE
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CENTRAL EXCISE High Court Cases

Central Excise - MODVAT/CENVAT Credit on Low Sulphur Heavy Stock (LSHS) used for Generation of Electricity – Eligibility when electricity is transferred to sister units of the same manufacturer for manufacturing final products - Appellant claimed MODVAT/CENVAT input credit on the LSHS used for electricity generation. Department reversed the credit contending that electricity generated in one factory cannot be transferred to sister units located outside the factory of production - Whether MODVAT/CENVAT input credit can be denied on LSHS used for generation of electricity for the manufacture of dutiable final products when such electricity is transferred to sister manufacturing units of the same company located at different geographical locations – HELD - The expansive definition of 'factory' under Section 2(e) of the Central Excise Act, 1944, includes multiple units of the same manufacturer at different locations. The expression 'within the factory of production' refers to the factory owned by the assessee and encompasses multiple units if they are engaged in manufacturing excisable goods. When one company has different units at different geographical locations and all units are manufacturing units, electricity generated in one unit and consumed in other units of the same company qualifies as captive generation and captive consumption - The phrase 'captive' is a qualification of the location where electricity is generated and not the location where it is consumed. Therefore, if electricity generated in a captive arrangement is used for manufacturing final products in any unit of the same company, the input credit cannot be denied merely because the units are located at different geographical locations - The definition of 'input' introduced by the Fourth Amendment to the Central Excise Rules, 1944, effective from 16.03.1995, specifically included inputs used for generation of electricity used within the factory of production for manufacture of final products or for any other purpose - Insofar as the surplus electricity used for lighting the housing colony, since it is not used for manufacturing of any final product dutiable, to that extent electricity transferred for lighting the housing colony, the denial of input credit is sustained - The Input credit on LSHS for electricity transferred to sister units for manufacturing final products is allowed. However, input credit is denied to the extent that electricity is used for lighting the staff housing colony, as such use is not for manufacturing any final product - The appeals are partly allowed - Extended Period of Limitation – Applicability when assessee suppresses information regarding diversion of electricity during inspection - The appellant challenged the applicability of the extended period of limitation, arguing that there was no intentional suppression aimed at evading duty - Whether the extended period of limitation under Section 11-A of the Central Excise Act, 1944, is invokable when the assessee discloses the diversion of electricity only after inspection of factory premises and not voluntarily – HELD - Since the assessee disclosed the transfer of electricity to sister units and housing colony only after the inspection of the factory premises by the Divisional Preventive Officers, an element of intentional suppression of the diversion is apparent. The expression 'suppression of facts' when used in the company of terms such as fraud, collusion and wilful misstatement must refer to a deliberate act of non-disclosure aimed at evading duty, requiring an element of intentional action. The timing of disclosure after inspection constituted a deliberate withholding of information that should have been disclosed when the credit was originally claimed. The non-voluntary nature of the disclosure and the timing thereof established the requisite element of intentional suppression necessary to invoke the extended five-year period of limitation under the proviso to Section 11-A(1) instead of the ordinary one-year period - The extended period of limitation is held to be applicable. The show cause notices issued beyond one year but within five years from the relevant date are legally sustainable.
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