Capital goods credit for captive power plant upheld where electricity supported manufacturing, and consequential penalty was deleted.

Capital goods credit was treated as admissible for machinery installed in a captive power plant situated outside the coke oven plant premises, because the power facility formed part of the assessee's manufacturing arrangement and was used to generate electricity for its own manufacturing operations. The statutory concept of factory, the registration guidelines and ground plan details, and the operational necessity of power generation supported eligibility; intended supply of some power to a sister unit did not, by itself, defeat credit. As denial of credit was unsustainable on the facts, the consequential penalty was also set aside. The claim for input credit was not pressed and remained undecided.

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Issues: Whether capital goods credit was admissible for machinery installed in a captive power plant located outside the coke oven plant premises but used to generate electricity for the assessee's manufacturing operations, and whether the penalty based on denial of such credit could survive.

Analysis: The plant and the power generation facility were treated as part of the assessee's manufacturing arrangement. The decision turned on the statutory concept of factory, the departmental guidelines governing registration and ground plan details, and the fact that the power plant was installed to support manufacture in the assessee's own unit. The generation and use of power was treated as an operational necessity, and the circumstance that part of the power was also intended for a sister unit did not, by itself, defeat eligibility for credit on capital goods used in setting up the power plant. Since the denial of credit was not sustainable on the facts, the consequential penalty could not stand.

Conclusion: Capital goods credit was held admissible and the penalty was set aside. No finding was returned on input credit because that claim was not pressed.

Final Conclusion: The appeal succeeded to the extent of recognition of capital goods credit for the captive power plant and consequential deletion of penalty, while the question of input credit was left undecided.

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