2012 (10) TMI 922 - AT - Service Tax

Cenvat credit input services - insurance policies - manufacture of aluminium - power plant located at some distance from the main unit of the appellant - alleged that since Renusagar Power Plant was located at different premises, it is a separate entity and it could not be termed captive power plant - appellant had wrongly availed Cenvat credit in respect of the services to be paid on the insurance policies pertaining to the power plant Held that - Renusagar Power Plant is a captive power plant of the Appellant s manufacturing unit, the two have to be treated as one intergrated unit and therefore, the Cenvat credit of service tax paid on insurance policy for the power plant would be admissible

Summary

Issues:
1. Whether the appellant rightly availed Cenvat credit on service tax paid for insurance policies related to the power plant.
2. Whether the Renusagar Power Plant is considered a captive plant of the appellant company.

Issue 1:
The appellant, engaged in the manufacture of aluminum, availed Cenvat credit on service tax paid for insurance policies covering the power plant. The Department contended that since the power plant was at a different location, it could not be termed captive, and thus, the Cenvat credit was wrongly claimed. The adjudicating authority disallowed the credit, leading to an appeal by the appellant. The Commissioner (Appeals) affirmed the decision, prompting the appellant to challenge the order.

Issue 2:
The main dispute revolved around whether the Renusagar Power Plant was a captive plant of the appellant company. The appellant argued that the power plant belonged to them and supplied power exclusively to their operations, making it captive. The definition of a captive generating plant under the Electricity Act, 2003 was referenced to support this claim. The Tribunal noted that the power plant being captive meant that the input services used were essential for the final product, entitling the appellant to claim Cenvat credit. Citing a Supreme Court judgment, the Tribunal held that as the power plant was integral to the manufacturing unit, the Cenvat credit for the insurance policies was admissible.

In conclusion, the Appellate Tribunal, after considering the legal definitions and precedents, ruled in favor of the appellant, setting aside the order of the Commissioner (Appeals) and allowing the appellant's claim for Cenvat credit on the service tax paid for insurance policies related to the captive power plant.