2009 (9) TMI 471 - AT - Central Excise

Tribunal Upholds Denial of Credit for Inputs in Electricity Generation

The Tribunal dismissed the Appeal, upholding the denial of credit for inputs used in electricity generation unrelated to the final product. The decision ... Cenvat Credit- Inputs used partly in exempted goods- The Appellant filed this Appeal against the impugned Order whereby pro-rata credit has been disallowed in respect of inputs used in the captive power plant. Part of the electricity generated is supplied to residential premises and sold to M/s. NESCO. Case of the Revenue is that the Appellant availed credit in respect of the duty paid on certain chemicals used to treat the water which is fed into boilers for generating steam and the steam is used for generation of electricity. The Revenue wants to deny the credit in respect of the inputs which are used in the manufacture of electricity which is supplied to the residential premises and sold outside the factory. Held that- In the light of the decision of Maruti Suzuki Ltd. v. CCE, Delhi-III, the manufacturer is not entitled for the credit in respect of the inputs used in relation to generation of electricity which is sold outside the factory of production. In view of the above decision of the Hon’ble Supreme Court, I find no infirmity in the impugned Order and the Appeal is dismissed. Issues:Disallowed pro-rata credit for inputs used in captive power plant.Analysis:The Appellant contested the disallowance of pro-rata credit for inputs used in a captive power plant, stating that the electricity generated was partly supplied to residential premises and sold outside the factory. The Revenue argued that credit should be denied for inputs used in generating electricity supplied outside the factory. The Appellant, engaged in Sponge Iron manufacturing with a captive power plant using 'Waste Heat Recovery' technology, highlighted the necessity of certain chemicals in the boiler to cool gases emitted from the kiln. The Appellant relied on a Bombay High Court case to support their position.The Revenue referenced a Supreme Court case, Maruti Suzuki Ltd. v. CCE, Delhi-III, asserting that inputs used in generating electricity, not related to the manufacture of the final product, do not qualify for credit. The Appellant tried to distinguish their case from the Maruti Suzuki judgment. The Tribunal noted that gases emitted from the kiln were used to generate steam for electricity production, with a portion used for manufacturing and the rest for residential and external sales. The dispute centered on whether credit for inputs used in electricity generation, not linked to the final product, should be reversed.The Tribunal found that the Appellant's case did not align with the Maruti Suzuki decision, emphasizing the distinction between inputs used directly in manufacturing and those for electricity generation sold outside the factory. Citing the Maruti Suzuki judgment, the Tribunal upheld the denial of credit for inputs used in electricity generation unrelated to the final product. Consequently, the Tribunal dismissed the Appeal, aligning with the Supreme Court precedent and ruling in favor of the Revenue's position.