Case Law Details
Finolex Industries Ltd Vs Commissioner of Central Tax (CESTAT Mumbai)
The dispute between Finolex Industries Ltd and the Commissioner of Central Tax, Mumbai, revolves around the admissibility of CENVAT credit on inputs and input services used for electricity generation transferred to their sister unit.
The appellant, engaged in manufacturing PVC products, availed CENVAT credit on inputs used for electricity generation, later transferred to its sister unit. Initially, they reversed credit as per Rule 6(3)(ii) of Cenvat Credit Rules, 2004. However, following a tribunal decision, they ceased the reversal from January 2015.
The department contested, issuing show cause notices for improper calculation under Rule 6(3)(ii). Though two notices were upheld, the appellant argued against valuation based on electricity sale to MSEDCL, which didn’t occur.
The CESTAT Mumbai examined precedents and observed no electricity sale during the disputed period. Referring to Maruti Suzuki Ltd case, it emphasized electricity must be cleared for a price to disallow CENVAT credit. As electricity was transferred free of cost, the demand valuation was deemed improper.
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