TaxTMI 
TaxTMI 
2010 (9) TMI 322
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....ly stated, facts necessary for adjudication of this appeal are that the respondent had two factories, one at Durg (Chhattisgarh) and another at Raisen (Madhya Pradesh), the former manufacturing sponge iron and the latter manufacturing graphite electrode. They had a Captive Thermal Power Plant (in short "CPP") of 12.8 MW capacity having three boilers, one steam turbine and a generator. The steam generated in these boilers was used to generate electricity which was used captively for manufacture of sponge iron. The substantial part of the surplus electricity generated from CPP was transmitted to Raisen factory through the Grid of M.P. Electricity Board (MPEB). The respondent availed credit of the duty paid on various components, spares and accessories of CPP between October, 1995 and September, 2000 under Rule 57-Q upto 31st March, 2000 and under Rule 57-AB from 1st April, 2000 of the Central Excise Rules, 1944 and utilized the credit for payment of duty on their final product (sponge iron). 3. The Commissioner of Central Excise, issued show cause notices (16 in number) from time to time and sought to recover the entire duty under Rule 57-U/Rule 57-AH read with Section 11-A o....
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....', as the same is exclusively used for the generation of electricity". 5. The Tribunal dealing with issue No. 1 - whether parts, accessories/spares of CPP qualify the test of "capital goods" under the erstwhile Rule 57-Q/57-AB of the Central Excise Rules, 1944 for availment of capital goods duty credit? - has referred to the arguments advanced by the assessee at length on this issue, wherein it was argued that boilers, turbine and generator and all components/parts thereof were integral parts of CPP, which generated electricity, which was an indispensable requirement for the manufacture of the specified final product - sponge iron. Such component, parts and accessories were covered by the definition of capital goods under Rule 57-Q as amended from time to time by Notification dated16-3-95,23-7-96,1-3-97and so on during the relevant period. Under the new Rules, which came into force w.e.f. 1-4-2000, all goods falling under Chapters 82, 84, 85 and 90 and components, spares and accessories thereof were still within the ambit of the definition of capital goods and therefore, boilers, turbine, generator and all components, spares and accessories were eligible capital goods for M....
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.... goods used in its CPP as substantial part of the generated electricity has been transmitted outside the factory to its sister concern through MPEB Grid. 9. Mr. Kinger further submits that while dismissing the appeal of the revenue in the case of respondent/assessee itself vide order dated 7th November, 2009 passed in the matter of Union of India v. M/s. HEG Ltd. in Tax Case No. 50/2008, the law laid down by the Supreme Court in Maruti Suzuki has not been considered as it was not brought to the notice of this Court. 10. On the other hand, Mr. M.P. Devnath with Mr. Raja Sharma, learned counsel appearing for the respondent/assessee, would argue that from perusal of the impugned order, it would be evident that the Tribunal, after formulating common issues arising from the show cause notices issued by the Commission, has held that the components, spares and accessories used in CPP installed in the factory premises of the assessee were covered by the definition of capital goods under Rule 57-Q as amended from time to time. The above finding is based on the decision of the Hon'ble Supreme Court in the matter of Commissioner of Central Excise, Coimbatore v. Jawahar Mills L....
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....erated electricity, which was an indispensable requirement for the manufacture of specified final product - sponge iron - and thus, they are covered by definition of capital goods under Rule 57-Q. Even under the new Rules, which came into force w.e.f. 1-4-2000, the goods falling under Chapters 82, 84, 85 & 90 and components, spares and accessories thereof fall within the ambit of definition of capital goods, and thus, they were eligible capital goods for Modvat credit. 14. In Ballarpur Industries Ltd. v. Collector of Central Excise, Belgaum, 2000 (116) E.L.T. 312 (Tribunal-LB), the Larger Bench of the CEGAT, Northern Bench, New Delhi, while considering the identical issue, held that the fuel oils such as Low Sulphur Heavy Stock (LSHS), light diesel oil, residual fuel oil, mobil oil and furnace oil for captive generation of electricity, which, in turn, is used for manufacture of final products of assessees, are entitled for Modvat credit even prior to 16-3-1995, whereas learned Single Member (T) in his dissenting order held that inputs, such as fuel, used for generation of electricity were eligible for the benefit of Modvat credit under Clause (c) of explanation to Rule 57-A intr....
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....S. channels used in the fabrication of chimney for the diesel generating set, by treating these items as capital goods in terms of Rule 57-Q of the Central Excise Rules, 1944. Referring to the decision of the Supreme Court in Jawahar Mills Ltd. - 2001 (132) E.L.T. 3 (S.C.) and dismissing the appeal of the revenue, it was held thus : "12. Inter alia observing that capital goods can be machines, machinery, plant equipment, apparatus, tools or appliances, if any of these goods is used for producing or processing of any goods or for bringing about any change in any substance for the manufacture of final product, although this view was expressed in the light of the afore-noted definition of "capital goods" in the said Rule, which is not there in Rule 57-Q, as applicable in the instant case, yet the "user test" evolved in the judgment, which is required to be satisfied to find out whether or not particular goods could be said to be capital goods, would apply on all force to the facts of the present case, in fact, in para 6 of the said judgment, the court noted the stand of the learned Additional Solicitor General, appearing for the Revenue, to the effect that the question whether....
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....rt of electricity generated in the factory to its joint ventures, vendors etc. for price. On these facts, it has been held thus : "20. To sum up, we hold that the definition of "input" brings within its fold, inputs used for generation of electricity or steam, provided such electricity or steam is used within the factory of production for manufacture of final products or for any other purpose. The important point to be noted is that, in the present case, excess electricity has been cleared by the assessee at the agreed rate from time to time in favour of its joint ventures, vendors etc. for a price and has also cleared such electricity in favour of the grid for distribution. To that extent, in our view, assessee was not entitled to Cenvat credit. In short, assessee is entitled to credit on the eligible inputs utilized in the generation of electricity to the extent to which they are using the produced electricity within their factory (for captive consumption). They are not entitled to Cenvat credit to the extent of the excess electricity cleared at the contractual rates in favour of joint ventures, vendors, etc. which is sold at a price." 20. In the matter of Commiss....