Per Jyoti Balasundaram :
The issue in this case is whether CENVAT credit taken on turbine, boiler, electrostatic precipitator, water treatment plant equipments etc., used to set up captive power plant in the sugar factory of the appellants, which plant in turn generates electricity, which in turn goes to manufacture sugar, dutiable final product, and has been availed by the appellants is available to them. Credit has been denied by the Commissioner on the ground that the captive power plant is immovable property and therefore not excisable. The contention of the appellants is that the fact that the captive power plant is not excisable goods is not a ground on which credit could be denied for the reason that even though the capital goods namely, captive power plant become immovable property and hence not excisable, one cannot run away from the fact that the plant generates electricity which in turn is used for the manufacture of dutiable final product manufactured and cleared.
2. We have heard both sides. We find that the appellants have cited a plethora of decisions before us to support their claim. However, it is sufficient for the purpose of disposal of this appeal to rely upon the Tribunal's order in Tata Engineering and Locomotive Co. Ltd. Vs Commissioner of Central Excise, Pune-I reported in 2004(11)LCX0303 Eq 2005 (191) ELT 0209 (Tri.-Mumbai) wherein credit has been held to be admissible in respect of machine parts used for production of motor vehicles and parts thereof since the capital goods in turn are used in or in relation to the manufacture of dutiable products viz. motor vehicles and parts thereof. The relevant portion of the Tribunal's order is reproduced herein below:-
"In so far as merits go, we observe that the machine parts on which exemption under Notification No.67/95 is availed were used in the maintenance or capita goods captively. The capital goods in turn were used in or in relation' to manufacture of final products i.e., motor vehicles/parts which are dutiable. The Supreme Court in the case of Escort Ltd. v. CCE, 2004 (171) ELT 145 has decided as to what constitute final product. The ratio of this decision applies to the present case even though the Supreme Court was interpreting the provisions of Notification No.217/86-C.E. We hold that the final products in the present case are motor vehicles/parts and since they are not exempt from payment of duty, the appellant is entitled to take credit of duty paid on the inputs that have gone into the manufacture of intermediate goods (machine parts) which have been captively consumed."
We also note that in the assessee's own case reported in 2007-TIOL-1163-CESTAT-MAD, the Tribunal has dismissed the appeals of the Revenue against the order of the Commissioner (Appeals) extending MODVAT credit on parts and components of co-generation plant.
3. Following the ratio of the above decision, we set aside the impugned order by which credit of Rs.7,11,18,829/- has been disallowed and penalty of equal amount imposed, and allow the appeal.
