Tribunal Grants Cenvat Credit for Capital Goods in Electricity Generation

The Tribunal allowed the Appeals, setting aside the Orders-in-Appeal that denied Cenvat credit for capital goods used in electricity generation. Relying on legal precedents, the Tribunal held that the goods were eligible for credit as they were used in a Waste Heat Recovery System for manufacturing processes. Emphasizing that the location of the goods outside the factory did not affect their eligibility, the Tribunal granted relief to the Appellants based on the duty-paid nature and usage of the goods for electricity generation consumed in manufacturing.

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Issues:
Appeal against Orders-in-Appeal regarding admissibility of Cenvat Credit for boiler and parts installed in Unit II, used for electricity generation and exclusively used in Unit I.

Analysis:
The Appeals were filed against Orders-in-Appeal dated 18.10.2017 passed by Commissioner (Appeals) of Central Excise and Service Tax-Surat-I. The common facts stated were that the boiler and its parts were installed in Unit II, used for electricity generation, and exclusively used in Unit I where Cenvat Credit was availed. A show cause notice was issued alleging inadmissible credit at Unit I, leading to confirmation of the demand with interest. The Appellants, aggrieved by this order, filed Appeals before the Commissioner (Appeals) who rejected them, resulting in the present Appeals.

The Appellant's Advocate argued that subsequent to the demand notice, centralized registration for both units was received on 26th April 2013. It was contended that electricity generated in Unit II was captively consumed in Unit I, citing a Tribunal judgment in OPG Metals Pvt. Ltd. vs. C.C.E., Trichy. Additionally, the Advocate mentioned that in their own case, the Tribunal allowed credit on inputs like coal used in the boiler. On the other hand, the Revenue's representative reiterated the findings of the Commissioner (Appeals).

The Tribunal found the issue covered by the judgment in OPG Metals Pvt. Ltd., where it was observed that the Appellants were eligible for Cenvat credit on capital goods used for electricity generation. The Tribunal emphasized that the capital goods were used for electricity generation in a Waste Heat Recovery System, with the generated electricity being used in the manufacturing process. Citing legal precedents, the Tribunal highlighted that the location of capital goods outside the factory premises was not a valid reason for denying credit. As the department did not dispute the duty-paid nature of the capital goods or their usage for electricity generation consumed in the manufacturing process, the Tribunal set aside the impugned order, allowing the Appeals with consequential relief as per law.

In conclusion, the Tribunal's decision was based on the application of legal principles and precedents related to the admissibility of Cenvat credit on capital goods used for electricity generation, ultimately setting aside the impugned order and allowing the Appeals.

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