2008 (2) TMI 162 - AT - Central Excise

Electricity produced from power plant used in manufacture of sugar and molasses & also sold out - Dept. allege that Co-Generation Power Plant produces electricity which is not excisable and therefore as per rule 6(i), credit is not admissible when the capital goods are used exclusively for the manufacture of exempted products SCN issued beyond the normal period no suppression of facts credit not deniable u/r 6(i) - both on merits and on limitation, the appellants succeed

Summary

Issues: Availment of Cenvat Credit on capital goods used for Co-Generation Plant.

Analysis:
1. The appeal was filed against the Order-in-Original passed by the Commissioner of Central Excise, Hyderabad, disallowing Cenvat Credit on capital goods used for the Co-Generation Plant.
2. The appellants manufacture excisable goods like Sugar, Molasses, and Spirit. The dispute arose over the admissibility of Cenvat Credit on capital goods used for the Co-Generation Plant, which produces electricity not considered excisable.
3. The Adjudicating Authority disallowed the credit, demanded a significant amount, imposed interest, and levied penalties, leading the appellants to approach the Tribunal.
4. The appellants argued that the Co-Generation plant generated power using by-products, sold excess power to the Electricity Board, and the capital goods were not exclusively used for exempted products. They also raised a time-bar defense due to delayed show cause notice issuance.
5. The appellants cited various case laws to support their entitlement to Cenvat Credit on capital goods used for electricity generation.
6. The Revenue contended that the Co-Generation plant was independent, selling a major portion of electricity, thus challenging the appellants' eligibility for modvat credit.
7. The Tribunal considered the appellants' letter informing the Central Excise Authority about the Co-Generation Plant within the factory for power use in sugar and molasses production. The letter indicated the planned use of power for manufacturing purposes, negating the Revenue's claim of exclusivity for exempted products.
8. The Tribunal found the show cause notice time-barred, as the appellants had informed the department in advance about the Co-Generation Plant. Additionally, the power generated was used partially for manufacturing sugar and molasses, making the capital goods eligible for Cenvat Credit.
9. Consequently, the Tribunal ruled in favor of the appellants, setting aside the impugned order and allowing the appeal with consequential relief.