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of <h1>Tribunal Allows Modvat Credit for Electricity Production Inputs & Rejects 8% Demand on Milk</h1> The Tribunal ruled in favor of the appellants, allowing Modvat credit on inputs used for steam generation for electricity production and final products. ... Cenvat/Modvat - By-product Issues:1. Modvat credit on inputs used for generation of steam2. Demand of 8% on sale price of milk and ghee3. Transfer of steam between divisions and sale priceModvat Credit on Inputs Used for Generation of Steam:The case involved the applicants availing Modvat credit on inputs used in the generation of super-heated steam for electricity production and manufacturing final products. The Commissioner demanded 8% of the sale price/transfer value of steam and 8% of the sale price of ghee and milk. The applicants argued that Rule 57CC(1) should only apply if Rule 57C is applicable, which is not the case here. They contended that Rule 57B(1)(iv) allows credit for goods used for electricity or steam generation within the factory. The Tribunal agreed, stating that if steam is used for electricity generation within the factory, full credit must be allowed.Demand of 8% on Sale Price of Milk and Ghee:The Commissioner demanded 8% of the sale price of milk and ghee sold by a separate dairy entity. The Tribunal ruled this demand as unsustainable in law since the dairy was not within the appellants' factory. Even if the dairy was considered part of the factory, Rule 57B(1)(iv) covers steam used for any purpose, including pasteurizing milk and producing ghee. The demand was deemed not sustainable, supported by a previous CEGAT decision.Transfer of Steam Between Divisions and Sale Price:Regarding the transfer of steam between divisions, the Tribunal clarified that there was no sale of steam, so no sale price was applicable. Citing previous CEGAT decisions, they emphasized that the demand under Rule 57CC(1) lacked a legal basis. The Tribunal highlighted that the exhausted steam used after electricity generation should not be a reason to deny eligible credits. Ultimately, the Tribunal set aside the order and allowed the appeal, finding no reason to uphold it.In conclusion, the Tribunal's judgment favored the appellants, emphasizing the correct application of Modvat credit rules, rejecting unsustainable demands on milk and ghee sale prices, and clarifying the lack of legal basis for demands related to the transfer of steam between divisions.
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