Cenvat credit on power plant inputs upheld where incidental electricity supply beyond the factory did not trigger Rule 6.

Cenvat credit on inputs and input services used in a power plant could not be denied merely because electricity generated was partly supplied beyond the factory premises. The Court applied the settled position from the assessee's own earlier case, which the Revenue had not challenged, and held that an inevitable by-product arising in manufacture does not attract Rule 6 of the Cenvat Credit Rules simply because it is generated or used incidentally. It recognised that credit on inputs used for dutiable goods is intended to avoid cascading, and the same input cannot be treated as used twice over because a by-product emerges during the process. The proposed questions were not substantial questions of law, and the Revenue's challenge failed.

---

---

Issues: Whether Cenvat credit on inputs and input services used in the power plant could be denied on the footing that the electricity generated was partly supplied beyond the factory premises, and whether any substantial question of law arose for consideration.

Analysis: The appeal was governed by the settled position that the very same controversy had already been decided in the assessee's own case and the Revenue had not challenged that earlier decision. The Court also relied on its earlier view that where an inevitable by-product arises in the course of manufacture, the mere emergence or use of that by-product does not justify invoking the restriction under Rule 6 of the Cenvat Credit Rules. The reasoning proceeded on the basis that credit of duty on inputs used in the manufacture of dutiable goods is meant to avoid cascading, and that the same input cannot be treated as used twice over merely because a by-product or incidental product emerges during manufacture.

Conclusion: The proposed questions of law were not substantial questions of law, and the Revenue's challenge failed. The assessee's entitlement to relief under the settled legal position was upheld.

---