Cenvat credit on captive power electricity transferred within the same assessee's units remains admissible, with no reversal required.

Cenvat credit on inputs and input services used in a captive power plant was held admissible where the electricity was transferred free of cost to another unit of the same assessee for manufacture of dutiable final products. The Tribunal treated the intra-assessee transfer as insufficient to require reversal, noting that the power was not sold to outsiders and that the issue had already been decided in the assessee's favour on identical facts, with that view affirmed by the Rajasthan High Court. The demand for reversal was therefore unsustainable.

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Issues: Whether Cenvat credit on inputs and input services used for generation of electricity, which was supplied free of cost to another unit of the same assessee for use in manufacture of final products, was liable to be reversed.

Analysis: The electricity was generated in the assessee's captive power plant and was not sold to outsiders. The disputed quantity was supplied to another unit of the same assessee, which used it in manufacturing dutiable final products. The same issue had already been decided by the Tribunal in favour of the assessee in an identical factual setting, and that view had been affirmed by the Rajasthan High Court. On that basis, the credit attributable to the power transferred to the assessee's sister unit was held to be admissible and not liable to reversal.

Conclusion: The assessee was entitled to retain the Cenvat credit on inputs and input services used for generation of the electricity supplied to its sister unit, and the demand for reversal was unsustainable.

Ratio Decidendi: Where electricity generated from inputs and input services in a captive power plant is transferred to another unit of the same assessee for manufacture of dutiable final products, proportionate Cenvat credit is not to be reversed merely because the power is supplied free of cost within the assessee's own units.

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