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2013 (9) TMI 97 - AT - Central ExciseCenvat Credit on capital goods used in the generation of power Submission of the Revenue is that bulk electricity was being sold to the State Electricity Board and hence the cenvat credit would not be admissible as the machinery has been used for generation of electricity, and that electricity had not been used in the factory Held that - It is not disputed that the respondent was in the process of enhancing their capacity for production of sponge iron and other iron and steel products for which they required more electricity and for this purpose only, their power generation electricity had been enhanced - Just because during the intervening period between installation of power generation machinery for generating additional power and installation of machinery for manufacture of sponge iron and other iron and steel products, the excess power being generated was being sold outside, the capital goods cenvat credit in respect of power generation machinery cannot be denied Relied upon the case of CCE, Raipur Vs. HEG Ltd. 2009 (11) TMI 648 - CHHATTISGARH HIGH COURT , wherein it was held that cenvat credit would be admissible on the capital goods installed in the factory for captive power generation, even if, substantial portion of the electricity generated was being wheeled out to sister concern and was not being used in the factory Decided against Revenue.
Issues:
1. Denial of cenvat credit for power generating machinery due to excess power sold outside the factory. 2. Interpretation of relevant case laws on cenvat credit eligibility for electricity produced in captive power plants. 3. Dispute over whether power generation machinery can be considered exclusively used for manufacturing exempted excisable goods when a portion of electricity is sold outside. --- Issue 1: Denial of cenvat credit for power generating machinery The case involved a dispute where the department sought to deny cenvat credit for power generating machinery installed by the respondents as they sold excess electricity outside the factory. The Commissioner initially dropped proceedings against the respondent, but the Board directed a review appeal. The Tribunal dismissed the Revenue's appeal, emphasizing that the power plant was part of the expansion plan to enhance production capacity, justifying the cenvat credit eligibility. --- Issue 2: Interpretation of relevant case laws The department appealed to the Chattisgarh High Court, raising questions on cenvat credit for electricity produced in captive power plants. The High Court set aside the Tribunal's order, citing specific Supreme Court judgments. The Revenue argued that since the electricity was sold outside and not used for manufacturing excisable goods, cenvat credit should be denied. The respondent contended that the power generation was part of their expansion plan and relied on a High Court judgment supporting cenvat credit eligibility for captive power generation machinery. --- Issue 3: Exclusivity of power generation machinery use The core dispute revolved around whether the power generation machinery could be deemed exclusively used for manufacturing exempted excisable goods when some electricity was sold outside the factory. The Tribunal rejected the department's objection, stating that the excess power sold did not negate the eligibility for cenvat credit. It differentiated the case from relevant judgments involving the liability of residual fuel oil and emphasized that the power generation machinery was integral to the expansion plans for steel production, justifying the cenvat credit eligibility. --- In conclusion, the Tribunal held that the Revenue's appeal lacked merit, dismissing it based on the rationale that the power generation machinery was essential for the expansion of production capacity, warranting cenvat credit eligibility despite the sale of excess electricity outside the factory. The Tribunal differentiated the case from previous judgments and emphasized the integral role of the machinery in the expansion plans, ultimately upholding the eligibility for cenvat credit.
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