Captive power plant insurance qualifies as input service credit when the plant solely supports the manufacturer's unit.

Insurance service tax paid on policies covering a captive power plant used wholly to supply electricity to the manufacturer was treated as admissible Cenvat credit. The power plant, though located separately, was considered a captive generating plant and an integrated unit with the factory because its entire output was supplied only to the assessee's manufacturing unit. On that basis, services used for its protection, including insurance, were regarded as input services connected with manufacture. The disallowance was therefore unsustainable, and the related credit demand, interest and penalty could not be maintained.

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Issues: Whether insurance service tax paid on policies covering a captive power plant, used wholly for supplying power to the manufacturer, qualifies as admissible Cenvat credit.

Analysis: The power plant was undisputedly situated at a separate location, but its entire electricity generation was supplied only to the appellant's manufacturing unit. The concept of a captive plant was treated as one generating power primarily for the owner's use, and the statutory definition of captive generating plant under section 2(8) of the Electricity Act, 2003 supported that approach. Once the power plant was accepted as a captive plant forming an integrated unit with the factory, services used for its protection, including insurance policies, were regarded as input services connected with manufacture.

Conclusion: The insurance service tax relating to the captive power plant was admissible as Cenvat credit, and the disallowance was unsustainable.

Final Conclusion: The appeal succeeded and the credit demand, interest and penalty could not be sustained.

Ratio Decidendi: A captive power plant that wholly serves the assessee's manufacturing unit forms an integrated unit with the factory, and services used for its operation or protection are eligible input services for Cenvat credit.

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