2007 (6) TMI 73 - AT - Central Excise

Cenvat/Modvat Revenue contended that appellant is not entitle for credit on parts and components of co-generation plant for the impugned period Held that revenue contention was not valid and allowed credit

Summary

Issues:
- Challenge to the order allowing Modvat credit on parts and components of co-generation plant
- Interpretation of Rule 57R(2) of the Central Excise Rules, 1944
- Determination of whether electricity generated from the co-generation plant is an exempted intermediate or final product

Analysis:

1. The appeals by the Revenue challenge the order of the Commissioner (Appeals) allowing Modvat credit to the respondents on parts and components of a co-generation plant for the period 1997-2000. The main issues considered were whether the credit could be denied under Rule 57Q of the Central Excise Rules, 1944 due to the items being parts of an immovable structure, whether the electricity generated was removed from the factory, and whether Rule 57R(2) applied. The Commissioner (Appeals) ruled in favor of the respondents on all issues, leading to the Revenue's challenge specifically on the decision related to Rule 57R(2).

2. The Tribunal referred to a previous case where a Larger Bench ruled that non-fulfillment of conditions under Rule 57D(2) did not disentitle the assessee from claiming input-duty credit. This decision was crucial in understanding the scope of Rule 57R(2) and similar provisions. Another case held that Modvat credit on capital goods could not be denied based on non-fulfillment of conditions under Rule 57Q/57AB. The Tribunal noted that the appellant's argument about the electricity being an exempted product contradicted the ruling of the Larger Bench, which clearly stated that electricity was not an exempted intermediate or final product.

3. The Tribunal upheld the impugned order, dismissing the appeals. The decision was based on the clear ruling from the Larger Bench regarding the nature of electricity generated from the co-generation plant. The foundation of the appellant's legal argument was deemed invalid in light of the precedent set by the Larger Bench. The judgment emphasized the factual determination that electricity was not to be considered an exempted intermediate or final product, thereby supporting the respondents' claim for Modvat credit on the parts and components of the co-generation plant.

In conclusion, the Tribunal's decision affirmed the order allowing Modvat credit and rejected the Revenue's challenge based on the interpretation of Rule 57R(2) and the nature of the electricity generated from the co-generation plant. The judgment highlighted the importance of precedent set by the Larger Bench in similar cases, providing a clear legal basis for the outcome of the appeals.