Captive power plant within factory premises not treated as removal outside the factory despite separate ownership

Goods transferred to a captive power plant located within the factory premises do not amount to removal outside the factory where the premises remain unchanged, no separate excise-licensed premises are created, and the electricity generated is fully captively consumed in manufacture. Ownership of the power plant by a joint venture entity does not, by itself, make the plant a separate factory or defeat the claimed exemption or credit position. The note states that the rule permitting such clearances and the exemption notification supported the assessee's treatment, with the demand and penalty considered unsustainable.

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Issues: Whether inputs and goods transferred to a captive power plant housed within the factory premises, but owned by a joint venture entity, amounted to removal outside the factory so as to deny exemption or require reversal of credit.

Analysis: The factory premises of the assessee remained unchanged and no separate excise-licensed premises were created for the power plant. The electricity generated in the power plant was fully captively consumed in the assessee's manufacturing activity. On these facts, the power plant could not be treated as a separate factory for the purpose of denying the benefit claimed. The assessee's claim was also supported by the rule permitting such clearances and the exemption notification relied upon.

Conclusion: The transfer of inputs and goods to the captive power plant within the factory did not amount to removal outside the factory, and the assessee remained entitled to the benefit claimed.

Final Conclusion: The demand and penalty were not sustainable, and the appeal succeeded with consequential relief.

Ratio Decidendi: Goods transferred to a captive power plant located within the factory premises and used for captive generation of electricity do not constitute removal outside the factory merely because the plant is owned by another entity.

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