2004 (9) TMI 551 - AT - Central Excise

Summary

Issues:
Appeal against Order-in-Appeal allowing Modvat credit for parts of power plant as capital goods.

Analysis:
The appeal was filed by the Revenue against the Order-in-Appeal passed by the Commissioner (Appeals) which granted the benefit of Modvat credit for the parts of a power plant considered as capital goods. The dispute arose as the Revenue sought to deny the Modvat credit for parts used in setting up the power plant, arguing that electricity, being an intermediate product, did not fall under the definition of capital goods as per Rule 57Q of Central Excise Rules. Additionally, the Revenue contended that since electricity was exempt from duty, the benefit of capital goods should not apply to the parts used in manufacturing exempted goods.

The respondents, engaged in cement manufacturing, set up a power plant to generate electricity for captive consumption in the cement manufacturing process. They claimed credit for the parts of the power plant. The respondents argued that the power plant was essential for manufacturing electricity used in the production of the final dutiable product, cement. They relied on previous Tribunal decisions where Modvat credit was allowed for parts of power plants used for generating electricity for dutiable products.

The Tribunal, in line with previous decisions, upheld that Modvat credit for parts of a power plant used in generating electricity for the production of final dutiable products is permissible. The Tribunal found no fault in the Order-in-Appeal, citing precedents where such benefits were granted. Consequently, the appeal filed by the Revenue was dismissed, affirming the entitlement of Modvat credit for the parts of the power plant used in the manufacturing process.

The judgment highlights the importance of considering the purpose and use of machinery or parts in the manufacturing process when determining eligibility for Modvat credit as capital goods. It underscores the significance of prior judicial decisions in establishing precedents for similar cases, ensuring consistency and predictability in tax-related matters.