2007 (4) TMI 66 - AT - Central Excise

Cenvat/Modvat - Department contended that cenvat credit on the inputs and capital goods were received by assessee and subsequently cleared to the power plant and used for manufacture of electricity was not admissible - Held department contention was not correct and credit admissible

Summary

Issues:
1. Duty demands and penalties confirmed by the Commissioner of Central Excise, Raigad.
2. Admissibility of Cenvat credit on inputs and capital goods for a captive power plant.
3. Treatment of a new industrial undertaking as a separate factory for Cenvat credit purposes.

Analysis:
The appeals before the Appellate Tribunal CESTAT, Mumbai arose from adjudication orders confirming duty demands and penalties imposed by the Commissioner of Central Excise, Raigad. The assessees had claimed income-tax exemption under Section 80IA/80IB of the Income-tax Act, 1961 for the financial year 2000-2001 based on income from captive power plants. The department contended that Cenvat credit on inputs and capital goods used for manufacturing electricity in the power plants was not admissible as the power plants were considered separate industries. Show cause notices were issued, leading to the current appeals.

The central issue revolved around whether the captive power plants should be treated as separate factories for Cenvat credit purposes. The Commissioner found that the assessees had set up new industrial units within the existing premises to avail tax benefits. However, the Tribunal disagreed with this finding, citing the Supreme Court's judgment in Grauer & Weil (India) Ltd. v. CCE, Baroda, which held that units on the same plot of land, using each other's outputs, should be treated as one factory. Similarly, in Dhampur Sugar Mills Ltd. v. CCE, Meerut, the Tribunal ruled that different plants in the same premises constitute one factory. Since the power plants were within the same premises as the existing unit, the Tribunal concluded that the credit taken by the assessees was valid and set aside the duty demands and penalties imposed.

In conclusion, the Appellate Tribunal CESTAT, Mumbai ruled in favor of the assessees, holding that the captive power plants should not be considered separate factories for Cenvat credit purposes. By applying relevant legal precedents, the Tribunal set aside the duty demands and penalties imposed by the Commissioner, allowing the appeals of the assessees.