Capital goods credit for captive power plants remains admissible when electricity is mainly used in manufacturing, despite partial outside supply.

Capital goods credit under Rule 57Q was treated as admissible for machinery used in a captive power plant where the electricity generated was substantially consumed within the factory for manufacture of final products, even though part of the power was supplied outside. The court relied on the consistent interpretation already accepted in the assessee's earlier matters and similar cases, and found no contrary basis to displace that view under Rule 57R(2). The denial of credit therefore failed, and the Tribunal's allowance of credit was left undisturbed.

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Issues: Whether capital goods credit under Rule 57Q of the Central Excise Rules, 1944 was admissible where the capital goods were used in a captive power plant generating electricity that was partly used within the factory and partly supplied outside, in the light of Rule 57R(2) of the Central Excise Rules, 1944.

Analysis: The capital goods were used in the power generation plant and the electricity generated was mainly consumed within the factory for manufacture of final products, with only a part supplied to the electricity board. The Tribunal had already taken a consistent view in the assessee's own earlier cases and in other similar matters that credit was admissible on such capital goods, and that view had been accepted by the Department in comparable cases. No contrary decision or basis was shown to displace that consistent interpretation of the statutory provisions.

Conclusion: Capital goods credit was admissible. The challenge to denial of credit failed and the issue was decided in favour of the assessee.

Final Conclusion: The appeal had no merit and was dismissed, leaving the Tribunal's allowance of credit intact.

Ratio Decidendi: Capital goods used in a captive power plant remain eligible for credit where the electricity generated is substantially used within the factory for manufacture of final products, even if a part is supplied outside, if the statutory condition is otherwise satisfied.

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