Modvat credit on capital goods for in-factory power plants is not denied merely due to immovable-property status or electricity use.

Modvat credit on capital goods used to assemble a power plant inside factory premises cannot be denied merely because the plant becomes an immovable property or because the electricity generated is an intermediate product used in manufacture. The text notes that the show cause notice relied only on the immovable-property objection, while settled precedent also supports credit where the plant is used within the production process and the generated electricity is ultimately consumed in making final products. On that basis, the Revenue's challenge failed and the assessee remained entitled to the credit claimed.

---

---

Issues: Whether Modvat credit on capital goods used to assemble a power plant in the factory premises could be denied on the ground that the plant became an immovable property or on the ground that electricity generated by it was a non-excisable intermediate product.

Analysis: The show cause notice proceeded only on the footing that the goods were used to assemble an immovable property, and no separate basis was laid to deny credit on any other ground. The power plant had been found to be an excisable and marketable product, and the appeal did not successfully assail that finding. In any event, settled precedent held that credit cannot be denied merely because goods are assembled into an immovable property, and that capital goods credit is not barred where electricity generated by the plant is ultimately used in the manufacture of final products.

Conclusion: The Modvat credit was not deniable on either ground, and the Revenue's challenge failed.

Final Conclusion: The appeal was rejected, leaving the assessee entitled to the credit claimed on the capital goods used in the power plant.

Ratio Decidendi: Modvat credit on capital goods cannot be denied merely because the goods are used to assemble an immovable plant or because the electricity generated is an intermediate product ultimately consumed in manufacture, when the plant is used within the factory for the production process.

---