2004 (9) TMI 180 - AT - Central Excise

Summary

Issues: Denial of Modvat credit on Char/Dolochar used for electricity generation for manufacturing final products (Sponge Iron).

In this appeal, the issue pertains to the denial of Modvat credit to the appellants on Char/Dolochar used for generating electricity, which is then utilized for the manufacture of final products, specifically Sponge Iron. The appellants filed a Modvat declaration to claim credit on the inputs used in their captive power plant for electricity generation, some of which is used in their factory and some supplied to a sister concern outside the factory premises. The adjudicating authority disallowed the credit entirely, stating that the electricity was not being used in or in relation to the manufacture of final products within the factory premises. However, the Commissioner (Appeals) modified the order, allowing credit for the electricity used within the factory premises. The appellants argued that they were entitled to the credit under Rule 57B(1)(iv) even if the electricity was not directly used for production within the factory. The tribunal disagreed, stating that the appellants were not using the electricity generated by them within the factory for production of final products, as a significant portion was being supplied to a sister concern outside the factory premises. Therefore, the Modvat credit was rightly disallowed to the extent the electricity was not used within the factory for production purposes. The tribunal upheld the decision of the Commissioner (Appeals) and dismissed the appeal of the appellants.

In summary, the key issue in this judgment was the denial of Modvat credit on Char/Dolochar used for electricity generation for the manufacture of final products. The tribunal held that the appellants were only entitled to claim credit on inputs used in generating electricity to the extent it was utilized within their factory for production purposes, and not for electricity supplied outside the factory premises.