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Issues: Whether Cenvat credit on capital goods used in a captive power plant located outside the factory, but supplying electricity for manufacture within the factory, could be denied merely because the goods were procured before 01.04.2011 and credit was availed later.
Analysis: The capital goods were used in a captive power plant meant for generation of electricity for consumption in the manufacturing factory. The earlier judicial view recognised entitlement to credit where the power plant and factory function as one integrated unit and electricity is used captively in the factory. The amendment introduced by Notification No. 3/11-C.E. (N.T.) dated 01.03.2011 did not create a bar against credit where the goods had already been put to use for captive generation of power, and the credit was in fact availed when Rule 2(a) of the Cenvat Credit Rules, 2004 was in force. The denial based solely on the date of procurement was therefore unsustainable.
Conclusion: The appellant was entitled to the Cenvat credit and the demand, interest and penalty could not be sustained.
Ratio Decidendi: Capital goods used in a captive power plant outside the factory are eligible for Cenvat credit where the plant and factory constitute one integrated unit and the electricity generated is captively used in manufacture.
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