2012 (12) TMI 974 - AT - Central Excise

Denial of CENVAT Credit - inputs and capital goods used for generation of power - whether the appellant would be eligible for Cenvat credit in respect of inputs and capital goods used in the captive power plant - Held that - Renusagar Power Plant, which is a captive power plant of the appellant company, together with the cement factory of the appellant company constitute one integrated unit and it is not disputed that except of small quantity of electricity generated being used in the Renusagar township, the remaining quantity is used in the appellant s factory for production of aluminium. Therefore, the Cenvat credit in respect of capital goods and inputs used in the captive power plant located at Renusagar cannot be denied just because the power plant is located at some distance from the factory. Since, admittedly, some quantity of electricity generated is used in the township and is not used in the factory of the appellant company for manufacture of excisable goods, to that extent, the input duty credit would not be admissible in view of judgment of the Apex Court in the case of CCE v. Solaris Chemtech Ltd. 2007 (7) TMI 2 - SUPREME COURT OF INDIA . However, for determining the quantum of input duty credit, which would be inadmissible on this ground, the matter would have to be remanded to the original Adjudicating Authority. - Decided in favour of assessee.

Summary

Issues involved:
Eligibility for Cenvat credit in respect of inputs and capital goods used in a captive power plant located at a distance from the factory.

Detailed Analysis:

Issue 1: Eligibility for Cenvat credit
The dispute revolved around whether the appellant would be eligible for Cenvat credit in respect of inputs and capital goods used in their captive power plant located at a distance from the factory. The department argued that the power plant, being located separately, cannot be considered captive, leading to a demand for recovery of Cenvat credit. The appellant contended that the power plant, fully owned by them, is integral to their manufacturing process, citing relevant judgments to support their claim.

Analysis: The Tribunal examined the ownership and usage of the power plant, noting that except for a small portion of electricity used in the township, the majority was utilized in the factory for manufacturing. Drawing parallels with judgments on captive mines, the Tribunal found that the power plant and factory constituted an integrated unit, making the Cenvat credit claim valid. Additionally, the Tribunal referenced a previous ruling that affirmed the power plant as a captive facility of the appellant.

Issue 2: Interpretation of Cenvat credit rules
The Revenue argued that as per Cenvat Credit Rules and Central Excise Act definitions, inputs must be used within the factory premises to qualify for credit. They cited a Tribunal judgment to support their position that a captive power plant located far from the factory does not fall under the factory's ambit, justifying the denial of Cenvat credit.

Analysis: The Tribunal analyzed the relevant legal provisions and judgments to conclude that the phrase "within the factory of production" did not necessarily confine power generation to the factory premises for Cenvat credit eligibility. Drawing from Apex Court rulings on similar cases, the Tribunal held that the physical distance between the power plant and factory did not negate the captive nature of the power plant in this instance.

Conclusion:
The Tribunal set aside the impugned order, remanding the matter to the original Adjudicating Authority for re-quantification of the Cenvat credit demand. It upheld the appellant's eligibility for Cenvat credit concerning inputs and capital goods used in the captive power plant, emphasizing the integrated nature of the power plant and factory despite the physical distance.