Tribunal grants appeal overturning denial of Cenvat credit for capital goods in Captive Power Plant

The Tribunal allowed the appeal in favor of the appellant, overturning the denial of Cenvat credit on duty paid for capital goods used in their Captive Power Plant for electricity production. The decision was based on the precedent set by the Chhattisgarh High Court, which established that such capital goods were not 'exclusively' used for manufacturing exempted goods. The Tribunal also held that the Show Cause Notice issued invoking a longer period for the alleged wrongful availment of credit was barred by limitation due to the lack of valid reasons provided. Consequential relief was granted to the appellant.

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Issues: Denial of Cenvat credit on duty paid for capital goods used in Captive Power Plant for electricity production; Applicability of precedent set by Chhattisgarh High Court; Invocation of longer period for Show Cause Notice.

Analysis:
1. The appellant was denied the benefit of Cenvat credit on duty paid for capital goods used in their Captive Power Plant for electricity production, where a portion of electricity was used internally for manufacturing dutiable products and another portion was sold. The Tribunal referred to a decision by the Hon'ble Chhattisgarh High Court in a similar case, where it was held that when capital goods are used in such a manner, they are not 'exclusively' used for the manufacture of exempted goods. This decision was also followed by the Tribunal in another case, establishing a precedent in favor of the appellant.

2. The Tribunal noted that the credit was availed by the appellant between March 2006 and December 2006, and was reflected in their books and returns. However, a Show Cause Notice was issued in 2011, invoking a longer period. The Commissioner did not provide any specific reasons for extending the limitation period, merely stating that the appellant wrongly availed Cenvat credit for non-excisable electricity production. The Tribunal found that the demand was barred by limitation, as no valid grounds were raised for invoking the longer period.

3. Considering the above, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant. The decision was based on the established precedent from the Chhattisgarh High Court and the lack of valid reasons for extending the limitation period. The appellant was granted consequential relief as a result of the appeal being allowed.

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