Tribunal allows Cenvat credit on capital goods for electricity generation in sister units.

The Tribunal allowed the Appeals challenging the denial of Cenvat credit on capital goods used for electricity generation in Unit II but availed in Unit I. The Tribunal held that the location of capital goods in a sister unit should not be a reason for denying credit, emphasizing that electricity or steam generation within the factory qualifies as an intermediate product. Considering the duty-paid nature of the goods and their usage in the manufacturing process, the Tribunal set aside the Orders-in-Appeal and allowed the Appeals with consequential relief, if any.

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Issues:
Appeal against Orders-in-Appeal denying Cenvat credit on capital goods used for electricity generation and alleging inadmissible credit availed at Unit I.

Analysis:
The judgment pertains to four Appeals challenging Orders-in-Appeal passed by the Commissioner (Appeals), Central Excise, Vapi, dated 10.7.2014. The common issue in these Appeals is the denial of Cenvat credit on capital goods, specifically boilers and parts, installed in Unit II for electricity generation, which was exclusively used in Unit I where Cenvat Credit was availed. The show cause notice was issued for recovery of credit amounting to Rs. 4,53,303/- and Rs. 3,19,403/- along with interest and penalty. The Appeals were rejected by the Commissioner (Appeals), leading to the present Appeals before the Tribunal.

In the hearing, the Appellant's Advocate argued that subsequent to the demand notice, the Appellant received centralized registration for both units, emphasizing that the electricity generated in Unit II was captively consumed in Unit I. The Advocate relied on a precedent set by the Tribunal in OPG Metals Pvt. Ltd. Vs. C.C.E., Trichy - 2016 (344) ELT 990 (Tri-Chennai) to support the Appellant's case. Additionally, the Advocate highlighted a separate Tribunal order dated 20.11.2017, where credit on inputs, namely coal used in the boiler, was allowed in the Appellant's own case.

On the other hand, the Revenue's representative reiterated the findings of the Commissioner (Appeals). The Tribunal, after considering the arguments and analyzing the legal principles, referred to the judgment in OPG Metals Pvt. Ltd., where it was observed that the Appellant's capital goods were procured for electricity generation using waste heat recovery process integrated with the existing generator sets. The Tribunal emphasized that the location of the capital goods in the premises of a sister unit should not be a reason for denying credit. The Tribunal also cited legal precedents to support its decision, highlighting that the generation of electricity or steam used within the factory qualifies as an intermediate product, regardless of the location of the capital goods. The Tribunal noted that the duty-paid nature of the capital goods, their usage for electricity generation, and consumption by the Appellant in the manufacturing process were not disputed by the department. Consequently, the Tribunal set aside the impugned order and allowed the Appeals with consequential relief, if any, as per law.

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