2006 (12) TMI 520 - AT - Central Excise

Summary

Issues involved: Denial of Cenvat credit for inputs and capital goods used for generating electricity outside the factory premises.

The appellant challenged the Order-in-Original (OIA) denying Cenvat credit for inputs and capital goods used for generating electricity outside the factory premises. The denial was based on the premise that the generation of power occurred outside the factory, rendering the appellant ineligible for credit as per Board Circular No. 637/28/02 CE dated 8.5.02, which stipulates that credit can only be granted if inputs or capital goods are used within the factory premises. The appellant relied on the Supreme Court judgment in Vikram Cement vs CCE Indore (2006 (194) ELT 3 (SC)), along with decisions by the bench in Diamond Cements vs CCE Bhopal (2004 (169) ELT 34 (Tri-Del) and SRF Ltd., vs CCE Chennai (2005 (191) ELT 887), to argue that the use of electricity generated outside the factory but utilized in the production of final goods in another factory satisfies the requirements of Rule 2(g) of the Cenvat Credit rules. The appellant sought the benefit of credit based on these arguments.

The learned DR sought to distinguish the judgments cited by the appellant.

Upon careful consideration, the Member Judicial noted that the issue had been settled by the Apex Court in the Vikram Cements case, where credit was upheld for inputs and capital goods used outside the factory in a power project located outside but supplying power to the assessee's factory. This scenario was also addressed in the SRF case and the Diamond Cements case. Following the ratio of these judgments, the impugned order was set aside, and the appeal was allowed with any consequential relief deemed necessary.