Cenvat credit and captive power plant status supported interim stay where the plant was not shown to be a separate entity.

Cenvat credit was denied on the premise that the captive power plant was an independent factory because it was described as an undertaking under income-tax law. The record showed that the capital goods and the power plant were located within the same factory, and there was no finding that the power plant was a separate legal entity. On that material, the denial was considered unsound for interim purposes, and a prima facie case was found to exist for stay and waiver of pre-deposit pending appeal.

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Issues: Whether the appellants made out a prima facie case for stay of the demand and waiver of pre-deposit where cenvat credit was denied on the footing that the captive power plant constituted an independent factory.

Analysis: The denial of credit rested on treating the power plant as a separate factory merely because it had been described as an undertaking for income-tax purposes under Section 80-IA of the Income-tax Act, 1961. The record, however, showed that the capital goods and the captive power plant were situated within the same factory and that there was no finding that the power plant was a different legal entity. On that material, the view taken in the impugned order was found to be unsound for the purpose of interim relief, and a prima facie case was held to exist.

Conclusion: The appellants were entitled to stay of the impugned order and waiver of pre-deposit pending disposal of the appeal.

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