Modvat credit on captive power plant parts allowed where generated electricity was used in manufacture of the final dutiable product.

Modvat credit was held admissible on parts used to set up a captive power plant where the electricity generated was consumed in manufacturing the final dutiable product. The Revenue's objection that electricity was an intermediate and exempted product was rejected because the parts were used to assemble a plant directly linked to production, and prior Tribunal decisions had already accepted credit in similar circumstances. Credit was therefore allowed on the basis that the power plant supported manufacture or processing of the dutiable final product.

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Issues: Whether Modvat credit was admissible on parts used for setting up a captive power plant when the electricity generated was used in relation to the manufacture of the final dutiable product, notwithstanding the Revenue's objection that electricity was an intermediate and exempted product.

Analysis: The parts were used to assemble the power plant, and the power plant was used to generate electricity for use in the manufacture of the final dutiable product. The Tribunal had already held in similar matters that credit on parts of a power plant is admissible where the plant is used for generation of electricity consumed in producing or processing the final dutiable product. In view of that settled position, no infirmity was found in allowing credit.

Conclusion: Modvat credit on the parts of the power plant was admissible and the Revenue's objection was rejected.

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