2003 (9) TMI 148 - AT - Central Excise

Cenvat/Modvat - Modvat on capital goods - Whether the Modvat credit of the duty paid on capital goods used in power plant is available to M/s. Jindal Steel Power Ltd. - HELD THAT - Following the ratio of the decision in Bhaskar Industries case 2003 (8) TMI 547 - CESTAT NEW DELHI , we hold that the Modvat credit cannot be denied to the Respondents herein as the power plant installed is a part of their expansion plant to enhance the production capacity of sponge iron, steel and ferro alloy for which enhanced power will be required by them. We, therefore, reject the appeal filed by Revenue.

Summary

Issues involved: Whether Modvat credit of duty paid on capital goods used in power plant is available to M/s. Jindal Steel & Power Ltd.

In this appeal, the Revenue argued that Modvat credit is not available as the power plant is used exclusively in the manufacture of steam for generating electricity, which is not excisable. They contended that no credit is permissible for capital goods used in the manufacture of products exempt from duty. The Respondents were accused of selling surplus electricity despite being self-sufficient in power, making the power plant ineligible for credit. The Revenue also claimed that the power plant is not excisable, thus disqualifying Modvat credit for capital goods used.

The Respondents countered by asserting that the power plant and steam generation are integral to manufacturing excisable products. They argued that the plant is within their factory premises, and both steam and final products are excisable goods, allowing for Modvat credit. They highlighted the phased installation of machinery in new projects and the need for increased electricity as production capacity grows. They cited precedents and the Tribunal's decision in similar cases to support their claim for Modvat credit.

The Tribunal considered both arguments and referenced a case involving a composite mill to support the Respondents' position. They noted that the phased setup of the power plant aligns with the expansion plans for increased production capacity of sponge iron, steel, and ferro alloy. Following the precedent set in the composite mill case, the Tribunal ruled in favor of the Respondents, rejecting the Revenue's appeal.