Cenvat credit for captive power plant input services allowed where the plant formed an integrated unit with manufacturing activity.

Cenvat credit on input services used in a captive power plant was held admissible where the plant exclusively supplied electricity to the manufacturer and functioned as an integrated unit with the manufacturing activity. The majority applied the principle that services used for generating power essential to manufacture qualify for credit, and relied on the captive generating plant concept under the Electricity Act, 2003. The dissent viewed the power plant as a separate subsidiary-owned entity and denied credit on that basis, but the majority position prevailed, and the credit claim was allowed.

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Issues: Whether Cenvat credit of duty paid on inputs and input services used in a power plant located outside the manufacturing factory was admissible where the power plant was treated as a captive power plant and part of an integrated unit with the manufacturer.

Analysis: The Majority followed the Tribunal's earlier decision in the assessee's own case and held that the power plant supplying electricity exclusively to the assessee was a captive power plant. It treated the power plant and the manufacturing unit as one integrated unit and applied the principle that input services used for generating power essential to manufacture qualify for credit. The reference to the definition of captive generating plant under Section 2(8) of the Electricity Act, 2003 supported this view. The dissent emphasized that the power plant was a separate legal entity belonging to a subsidiary, that the Cenvat Credit Rules did not provide credit to a holding company for services availed by a subsidiary, and that the cited precedents were fact-specific and not controlling on these facts.

Conclusion: Credit on the input services used at the captive power plant was admissible and the appeals were allowed.

Ratio Decidendi: Where a power plant is found to be a captive plant exclusively supplying the manufacturer and functioning as an integrated unit with the manufacturing activity, input service credit used in that plant is available to the assessee.

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