Issue:- Whether cables used to transmit power from main grid to factory entitled for credit as capital goods?
Brief Facts: - Electric transmission cables were used to transmit power from the main grid to the factory and then distribute it to various points within the factory and to the office building. The assessee took Cenvat Credit of these cables as capital goods. The Commissioner (A) held that the appellant was entitled for credit in respect of the cables used within the factory and for credit in respect of the cables used outside the factory for supply of power for the office building.
Appellant’s Contentions: - The cable is used to draw electricity from the main grid to the factory, which is used further within the factory. Therefore the Appellant is entitled to the credit. The assessee agreed that the he was not entitled to credit of cables used for transmission in office building. The appellant relied on following decisions of tribunal:-
1. CCE, Chennai v. PepsiCo India Holdings Ltd.
2. Jaypee Bela Plant v. CCE, Bhopal
3. Indorama Cement Ltd. V. CCE, Mumbai-II
Respondent’s Contentions: - Cable is not specified goods under the definition of ‘Capital Goods’. So credit is allowed only if cable is a component of the specified goods as definition of capital goods includes components, spares and accessories of the specified goods used in the factory for the manufacture of final products but does not include any equipment or appliance used in the office. Contention was that cable is used outside the factory and is also used for supply of electricity to the office premises and other areas where no production is being carried out. Factory means any premises, including the precincts thereof, wherein or in any part of which excisable goods other than salt are manufactured, or wherein or in any part of which any manufacturing process connected with these goods is being carried on or is ordinarily carried on. So, the cables used in no production or in office are not entitled for credit.
Reasoning of the Judgment: - The only issue to be decided was whether the cable used to transmit power from the main grid to the factory is entitled for credit as capital goods. First the matter was referred to the adjudicating authority to re- quantify the amount of credit. The cases of Jaypee Bela Plant where credit was allowed in respect of the pipeline used for drawing water from reservoir situated 5-6 kms away from factory for manufacture of finished goods within factory and Indorama Cement Ltd. where for transporting inputs conveyor belt was installed between appellant’s factory and input supplier’s factory were referred, so the matter was referred to the Adjudicating Authority to reconsider the matter.
Decision: - The order was modified to the extent and was remanded back.
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