Proportionate CENVAT credit for captive power plant services supported waiver of pre-deposit and stay of recovery.

Waiver of pre-deposit was granted where the assessee availed only proportionate credit of service tax on input services used for generation of electricity in a captive power plant, and part of that electricity was used in manufacturing dutiable goods. The Tribunal noted that the demand arose from denial of credit linked to electricity generated in the plant, including power sold outside the factory, but the record showed proportionate availment relatable to manufacture. On the materials before it, the Tribunal found a prima facie case for interim relief and stayed recovery during the appeal.

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Issues: Whether waiver of pre-deposit was justified where credit of service tax on input services used in or in relation to generation of electricity in a captive power plant was availed proportionately and part of the electricity was used in manufacture of dutiable goods.

Analysis: The demand was based on denial of credit on services used for generation of electricity in a captive power plant, including electricity sold outside the factory. The applicants contended that they had availed only proportionate credit relatable to the electricity used in manufacture of excisable goods, and the record showed such proportionate availment. The objections advanced by the Revenue during hearing were not the basis of the impugned order. On the materials before it, the Tribunal found that the applicants had made out a case for interim relief.

Conclusion: Waiver of pre-deposit was granted and recovery of the dues was stayed during pendency of the appeal.

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