2009 (1) TMI 681 - AT - Central Excise

Summary

Issues involved: Denial of Cenvat credit on DG set/control panel due to sale of electricity outside the factory premises.

Summary:
The appellant, a manufacturer of automobile components, installed a DG set along with a control panel in their unit and claimed Cenvat credit amounting to Rs. 3,37,015/-. The Department contended that since a part of the electricity generated was sold outside the factory, the appellant was not eligible for the credit. The Asst. Commissioner confirmed the Cenvat credit demand, which was upheld by the C.C.E. (Appeals). The appellant appealed against this decision.

The appellant argued that as per Rule 57AD(3) of Central Excise Rules 1944/Rule 6(4) of Cenvat Credit Rules, 2001/2002, Cenvat credit cannot be denied if only a part of the electricity is used in the factory for manufacturing dutiable goods. They cited relevant tribunal judgments to support their case.

The Department defended the impugned order, stating that the capital goods Cenvat credit is admissible only if exclusively used in the production of dutiable goods. They referred to a Supreme Court judgment regarding input Cenvat credit and argued that the appellant's situation was different.

The Tribunal found that the denial of Cenvat credit was based solely on the sale of a portion of electricity outside the factory. As per Rule 57AD(3) of Central Excise Rules/Cenvat Credit Rules, Cenvat credit is not available only when capital goods are used exclusively for manufacturing exempted goods. Since the major portion of electricity generated was used in the factory, the denial of credit was not justified. The Tribunal referred to previous judgments supporting this interpretation and allowed the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, stating that the denial of Cenvat credit based on the sale of electricity outside the factory was not sustainable, and the appeal was allowed.