2008 (2) TMI 236 - AT - Central Excise

Credit in respect of LDO fuel and lubricants used in the generation of electricity was denied on the ground that part of electricity is supplied to the other units since both units are sister units & both are issued with single registration, credit is not deniable - denial of credit is not sustainable

Summary

Issues:
- Denial of credit for LDO fuel and lubricants used in the generation of electricity supplied to another unit.
- Interpretation of separate registration of factories under Central Excise.
- Comparison of case law regarding credit for inputs used in the generation of power supplied to a sister concern.

Analysis:
The appellant filed appeals against the order denying credit for LDO fuel and lubricants used in generating electricity supplied to another unit, M/s Neer Shree Cement. The appellant argued that both units, M/s Manglam Cement and M/s Neer Shree Cement, are owned by the same entity, situated on the same plot, and share power generation through DG sets. They cited a Tribunal decision allowing similar credit in a related case. The Revenue contended that both units were separately registered during the relevant period, relying on a Tribunal decision that disallowed credit for capital goods used in one unit but claimed by another. However, a subsequent single registration was issued for both units.

The Tribunal noted that both units were engaged in cement manufacturing, with power generation shared between them. The Tribunal differentiated the present case from the precedent cited by the Revenue, emphasizing that it dealt with capital goods, not inputs for power generation. The Tribunal highlighted the subsequent single registration granted to both units, indicating a unified entity. Citing the precedent of Diamond Cements case, the Tribunal concluded that denial of credit based on separate registration was unjustified, allowing the appeals and setting aside the denial of credit for the inputs used in power generation supplied to the sister unit.

In summary, the Tribunal found that the denial of credit for LDO fuel and lubricants used in power generation supplied to another unit was unwarranted due to the shared ownership, operation on the same premises, and subsequent single registration of both units. The Tribunal's decision aligned with the precedent allowing credit for inputs used in power generation shared between related units, emphasizing the unified nature of the entities involved.