2007 (9) TMI 191 - AT - Central Excise

Credit on inputs/chemicals for purification of water used in production of molasses & in production of steam for power plant credit not deniable on basis that during off-season electricity is not used in mfg. of sugar because it is used for maintenance of plant etc. during that time

Summary

Issues:
Denial of Cenvat credit for certain inputs used in production of steam and power in a power plant and for water purification.

Analysis:
The appeal arose from an Order-in-Appeal denying the assessee Cenvat credit for inputs used in the production of steam, power in a power plant, and water purification. The Commissioner (Appeals) upheld the denial, stating that the inputs were not used in or in relation to the manufacture of the final product. The learned Counsel argued that previous rulings, such as Rashtriya Ispat Nigam Ltd. v. CCE, Visakhapatnam-I, and CCE, Chennai v. SPIC, supported the eligibility of Cenvat credit for chemicals used in water treatment and purification. The Counsel also cited cases like Sterlite Industries (India) Ltd. v. Commissioner and Synthetics & Chemicals Ltd. v. Collector to bolster the argument. The Counsel contended that without water purification, essential for the production of steam, sugar, and molasses, the chemicals used were integral to the manufacturing process.

The Tribunal noted that the purification of water was crucial for generating steam and manufacturing sugar and molasses. Citing the judgments in RINL v. CCE and CCE v. SPIC, the Tribunal emphasized that the chemicals used for purification were indeed "in or in relation to the manufacture" of the goods. The Tribunal highlighted that various judgments supported this position, making the issue well-established. It was clarified that even during off-seasons when sugar production was halted, the electricity generated was still utilized for plant maintenance, sugar bag stitching, and molasses pumping, all integral to the manufacturing process. The Tribunal dismissed the Revenue's argument that electricity generated during off-seasons was not used for manufacturing goods, stating that the cited judgments did not support such a contention. Consequently, the impugned order denying Cenvat credit was set aside, and the appeal was allowed with any consequential relief deemed necessary.