Denial of capital goods credit upheld for co-generation plant under Rule 57Q.

The High Court dismissed the appeals against the denial of capital goods credit under Rule 57Q of the Central Excise Rules, 1944 for a co-generation plant. The Tribunal's decision in favor of the assessee was upheld, emphasizing that the denial was based on electricity supply outside the factory and not on the non-use of capital goods within the plant. The Court found the department's acceptance of similar cases and lack of contradictory evidence as supporting the Tribunal's ruling, leading to the dismissal of the appeals without costs.

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Issues Involved: Appeal against order of Customs, Excise and Service Tax Appellate Tribunal regarding denial of capital goods credit under Rule 57Q of the Central Excise Rules, 1944 for a co-generation plant generating electricity partly consumed captively and partly supplied to Tamil Nadu Electricity Board (TNEB).

Denial of Capital Goods Credit: The department issued show cause notices denying the credit to the appellant under Rule 57R(2) on the grounds that part of the electricity generated at the co-generation plant was supplied to TNEB, impacting the captively consumed requirement. The original authority confirmed the denial, but no penalty was imposed. The Commissioner of Appeals imposed a penalty against which the assessee appealed to the Tribunal. The Tribunal found that the denial was based on electricity supply outside the factory, not on the non-use of capital goods in the power generation plant. The Tribunal considered similar cases and granted relief, allowing the appeal against denial of credit and penalty imposition.

Question of Law: The department appealed questioning the applicability of the second proviso to Rule 57R(2) allowing credit on capital goods used for electricity generation within the factory, when part of the electricity was sold outside. The Tribunal had previously ruled in favor of the assessee on similar grounds, citing consistency in decisions and the department's acceptance of such rulings in other cases. The department failed to provide contrary decisions or show inconsistency with statutory provisions.

Judgment: The High Court dismissed the appeals, citing the department's consistent acceptance of similar cases and the Tribunal's decisions in favor of the assessee as in line with statutory provisions. The lack of contradictory decisions or evidence against the Tribunal's ruling led to the dismissal of the appeals without costs.

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