Taking Cenvat Credit on Purchase of Gen set - reg.

[gowri shankar]

Dear sir,

We have planned to purchase a Diesel Generator set for our Paper Industry.  Can we take Cenvat Credit on the Purchase of Generator?.

Is there is any dispute in taking Credit.

Kindly reply.

[rajkumar shukla]

Most probably the gen sets are falling under chapter 85 of the central excise tariff therefore these are eligible for cenvat credit provided it is used in the factory

[Vivek Harsh]

As per Rule 2(a) of CCR, 2004,

Cenvat credit of generator used outside factory for generation of electricity for captive consumption is permissible.

[YAGAY and SUN]

CENVAT credit on Genset will be available to you since it is being used for generation of electricity which inturn will be used in manufacturing of final products.  You will have to avail the CENVAT credit to the extent of 50% in the first financial year and remaining 50% on the next financial year but after installation.

[Mahir S]

Yes, credit on Gen Set is surely available as mentioned above. However, to make U understand about the availability of credit on capital goods, I reproduce below an extract of a widely known Judgment in the case of Central Excise, Coimbatore & Others v. Jawahar Mills Ltd.,wherein the Supreme Court observed as under :  

"4. The definition of "capital goods" is very wide. Capital goods can be machines, machinery, plant, equipment, apparatus, tools or appliances. Any of these goods if used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product would be "capital goods", and, therefore, qualify for availing MODVAT credit. Per clause (b), the components, spare parts and accessories of the goods mentioned in clause (a) used for the purposes enumerated therein would also be "capital goods" and qualify for MODVAT credit entitlement. Clause (c) makes moulds and dies, generating sets and weighbridges used in the factory of the manufacturers as capital goods and thus qualify for availing MODVAT credit. The goods enumerated in clause (c) need not be used for producing the final product or used in the process of any goods for the manufacture of final product or used for bringing about any change in any substance for the manufacture of final product and the only requirement is that the same should be used in the factory of the manufacturer. Thus, it can be seen that the language used in the Explanation is very liberal."  

Hope now the definition of Capital goods is clear and u can yourself decide about its availability.

AI Summary

Cenvat credit on generator sets permitted when used for manufacturing or captive electricity supply; phased availment subject to rules.
Cenvat credit is available on diesel generator sets that qualify as capital goods and are used to supply electricity for manufacturing or captive consumption. Generating sets are treated as capital goods under judicial interpretation even if not directly used in production, provided they are used in the manufacturer's factory. Regulatory rules permit credit for generators supplying electricity for captive consumption outside the factory, and credit may be availed in a phased manner after installation subject to compliance with procedural requirements.