CENVAT credit on captive power plant components upheld where goods were received in factory and used for manufacture.

CENVAT credit was admissible on components, spares and accessories received in the factory under duty-paid invoices and used to assemble a captive power plant for generating electricity consumed in manufacture of the dutiable final product. For capital goods, receipt in the factory and use in the manufacturing process were the material requirements; the fact that a contractor carried out erection, or that the appellant did not own the installed plant, did not defeat entitlement. The goods were treated as components, spares and accessories of capital goods within the relevant tariff chapters and the credit scheme, so denial of credit was unsustainable.

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Issues: Whether CENVAT credit was admissible on components, spares and accessories received in the factory and used through contractors for setting up captive power plant / KPTA plant for generation of electricity used in manufacture of the final product.

Analysis: The credit was taken on goods received in the appellant's factory under duty-paid invoices and used for assembling the captive power plant / KPTA plant within the factory. The plant was used for generation of electricity for manufacture of the dutiable final product. The governing principle applied was that, for capital goods, receipt in the factory and use in the manufacture of the final product are the material requirements, and ownership of the installed plant or the fact that a contractor carried out the erection does not defeat entitlement. The goods in question were treated as components, spares and accessories of capital goods falling within the relevant tariff chapters and within the scope of the credit scheme.

Conclusion: CENVAT credit was held admissible and the denial of credit was unsustainable.

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