2008 (1) TMI 729 - AT - Central Excise

Summary

Issues: Denial of credit on spare parts used in the boiler turbine for production of steam and electricity.

Analysis:
The appellant appealed against the denial of credit on spare parts used in the boiler turbine for the production of steam and electricity. The Commissioner (Appeals) noted that while a part of the electricity generated was used captively in the manufacture of sponge iron, a significant portion was supplied through distribution lines. The Advocate referred to Rule 6(4) of the Cenvat Credit Rules, 2002, which prohibits credit on capital goods exclusively used for manufacturing exempted goods. However, in this case, the denial of credit on spare parts used in the boiler was deemed unjustified as they were not exclusively used in manufacturing exempted goods.

The Tribunal's decision in the case of Kothari Sugars & Chemicals Ltd v. CCE, Trichy was cited, where it was held that steam generating boiler parts used in a captive power plant and partly sold to the Electricity Board are eligible for Cenvat credit. Following this precedent, the judge found no valid reason to deny Modvat credit on the spare parts used in the boilers. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief. The judgment highlights the importance of correctly applying rules and precedents to determine the eligibility of credit on spare parts used in specific manufacturing processes.