TaxTMI 
TaxTMI 
2003 (9) TMI 148
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....ively in the manufacture of steam which in turn has been used to generate electricity which is not excisable; that Rules 57R(1) of the Central Excise Rules, 1944 clearly provides that no credit of duty on capital goods is permissible which are used exclusively in the manufacture of final products which are exempt from the whole of the duty of excise or are chargeable to nil rate of duty that steam/electricity cannot also be treated as intermediate products for the manufacture of coal based sponge iron and other iron and steel products. The learned SDR, further, submitted that even before the erection of the power plant in question, the Respondents were having power generation in excess to their requirement; that the entire electricity gener....
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....er plant. 3. Countering the arguments, Shri D.N. Mehta, learned Advocate for the Respondents, submitted that the power plant and the generation of steam by it is an integral process for manufacture of the final excisable products; that the power plant is situated within their factory premises; that both steam and the final products manufactured by them are excisable goods and thus Rule 57R does not stand in the way of availment of credit. He also emphasised that in setting a new project, the installation capacity of the machinery is reached only in phases and cannot be achieved, all at once, with the installation of machinery; that the Respondents would in fact require more electricity than is produced captively when the plant starts funct....
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....ce and that they would require more electricity once the plant starts functioning to optimum capacity. The Commissioner has appreciated this fact and has allowed the Modvat credit of the duty on the capital goods. Similar views were expressed by the Tribunal in the case of Bhaskar industries Limited. In that matter, the assessee had a project to set up a composite mill for spinning, weaving and processing. The first phase related to cotton yarn spinning for which the assessee imported capital goods and availed Modvat credit since the finished product cotton yarn was dutiable. In second phase of manufacturing grey fabrics, non dutiable, they used both imported and indigenous machinery. The Department disallowed the credit on the ground that ....