2006 (5) TMI 481 - AT - Central Excise

Summary

Issues: Interpretation of Rule 2(g) of the Cenvat Credit Rules, 2002 regarding the eligibility of credit for electricity supplied outside the factory from steam generated within the factory.

In this judgment by the Appellate Tribunal CESTAT CHENNAI, the subject appeal was filed by M/s. The Madras Aluminium Co. Ltd. (MALCO) against an Order-in-Appeal requiring them to pay a certain amount under the Central Excise Act for inadmissible credit taken on inputs used in the generation of steam converted into electricity supplied outside the factory. The Commissioner held that inputs related to electricity supplied outside the factory would not be considered as inputs used in the manufacture of final products within the factory. The dispute revolves around the interpretation of Rule 2(g) of the Cenvat Credit Rules, 2002, which defines "inputs" as goods used in or in relation to the manufacture of final products, including for generation of electricity or steam used for manufacturing final products within the factory. The Tribunal's decision in Gujarat Narmada Fertilizers Co. Ltd. case supported the eligibility of credit for inputs used for multiple purposes within the factory, including electricity generation. The Tribunal's ruling was upheld by the Gujarat High Court in a subsequent case. Following these precedents, the Tribunal allowed MALCO's appeal, stating that credit must be allowed on all inputs if the steam generated with them is used within the factory for any purpose.

This judgment clarifies the eligibility of credit under the Cenvat Credit Rules, emphasizing that if inputs are used within the factory for any purpose, including the generation of electricity or steam, credit must be allowed. The decision highlights the importance of the location and purpose of input usage in determining credit eligibility. The Tribunal's reliance on previous rulings and the interpretation of Rule 2(g) provides a framework for assessing credit claims related to electricity generation from steam within the factory.