Capital goods credit for captive power plant upheld where factory records supported receipt and intended installation.

Modvat/Cenvat credit on imported capital goods for a captive power plant was allowed because the turbine components were received in the factory and the record, including declarations, panchanamas and related purchases, supported intended installation. Denial of credit based on an inferred lack of intent to install was rejected as speculative, and Rule 57Q(7) of the Central Excise Rules, 1944 was applied to confirm entitlement to credit on capital goods/components lying in the factory. The associated demand, penalty, interest and confiscation were therefore unsustainable.

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Issues: Whether the appellant was entitled to Modvat/Cenvat credit on imported capital goods/components for the captive power plant, and whether the denial of credit, penalty, interest, and confiscation could be sustained.

Analysis: The imported turbine components were received in the appellant's factory and were supported by contemporaneous declarations, panchanamas, and indigenous purchases for the same project. The finding that the appellant never intended to install the captive power plant was held to rest on presumptions rather than concrete evidence. Rule 57Q(7) of the Central Excise Rules, 1944 was applied to hold that capital goods/components received in the factory could not be denied credit on the basis adopted by the lower authority, and that the appellant was eligible to avail the credit on the goods lying in its factory premises.

Conclusion: The appellant was entitled to the credit, and the demand, penalty, interest, and confiscation were unsustainable.

Ratio Decidendi: Denial of capital goods credit cannot rest on conjecture where the goods are received in the factory and the record supports intended installation there; Rule 57Q(7) governs entitlement to such credit.

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