2016 (8) TMI 1057 - AT - Central Excise

Cenvat credit - parts, components and accessories of Turbo Generators-3 purchased for captive power plant - electricity generated from Turbo Generator was used in the manufacturing of dutiable goods for the two years; subsequently the excess electricity was sold to the State Government of Madhya Pradesh as per the contract - Held that - the fact of Turbo Generator-3 being installed in the factory premises and electricity generated from therein having been consumed in the manufacturing of dutiable goods, denying cenvat credit of the Central Excise duty paid on such Turbo Generator-3 is not in consonance with the law. The factum of consumption of electricity generated within the factory partly and sold out partly is an accepted proposition in the law and cenvat credit cannot be denied is also decided by various case laws as cited by the appellant. - Decided in favour of appellant with consequential relief

Summary

Issues:
- Availment of cenvat credit on parts, components, and accessories of Turbo Generators for captive power plant.
- Dispute regarding the purchase of Turbo Generator and availing cenvat credit.
- Consideration of electricity generation and consumption for dutiable goods.
- Interpretation of relevant case laws on cenvat credit denial.

Analysis:
1. The appeal challenged an order-in-original regarding the availing of cenvat credit on Turbo Generator parts for a captive power plant. The Revenue contended the appellant had no need for the Turbo Generator and incorrectly availed the credit, leading to a demand notice.

2. The appellant's counsel argued that the Turbo Generator was rightfully purchased and installed, with electricity generated being used in manufacturing dutiable goods before being sold to the State Government. Citing precedents like CCE vs. HEG Ltd., the counsel emphasized that if electricity generated is used partly for production and partly sold, cenvat credit cannot be denied.

3. The Revenue, represented by the DR, pointed to the appellant's surplus power capacity and procurement of the Turbo Generator for selling electricity to the State Grid. The adjudicating authority's findings highlighted the capital goods' purpose for electricity generation for external sale.

4. The Tribunal reviewed the submissions and records, acknowledging the undisputed installation of Turbo Generator-3 in the factory, with the generated electricity consumed in manufacturing and excess power distributed to the State Grid through a 2006 agreement.

5. Considering the facts, the Tribunal found denying cenvat credit on the Turbo Generator inconsistent with the law. They emphasized that consuming generated electricity internally and selling surplus power aligns with legal principles, supported by cited case laws.

6. Relying on authoritative judicial decisions and the case specifics, the Tribunal overturned the impugned order, deeming it unsustainable. Consequently, the appeal was allowed, and any consequential relief was granted, with the cross objection disposed of accordingly.