Cenvat credit is allowed if inputs are wheeled out to the sister company

Last updated: 29 February 2024

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Quick Summary

The Madras High Court has ruled that Cenvat credit is permissible even when electricity generated from a captive power plant is supplied to sister companies. The court found that the electricity was not sold but merely supplied to related units involved in manufacturing the final product, thus qualifying as an 'input'. The judgement highlighted that the substantial cost of setting up a captive power plant should benefit the entire group, including sister concerns.

Court :
Madras High Court

Brief :
The Hon'ble Madras High Court in the case of India Cement Limited v. Commissioner of Customs [C.M.A.(MD) Nos.910 to 914 of 2018 dated January 30, 2024] allowed the appeal filed by the Appellant wherein it was held that the electricity was not sold but only supplied to sister units, all of which were involved in manufacturing of the final product. Therefore, electricity used for manufacturing the final product qualifies as an 'input'. Further, there is a substantial cost in the setting up of a Captive Power Plant for which the benefit must be provided to the Appellant as a whole, including the sister concerns to which supply is made.

Citation :
C.M.A.(MD) Nos.910 to 914 of 2018 dated January 30, 2024

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Judgement posted by

Bimal Jain

Service

FCA, FCS LLB with21 Yrs of Experience inTaxation Indirect and Direct: Education Qualification: B.Com (Hons) Chartered Accountants Company Secretary LLB Qualified SAP FI/CO Consultants Professional Membership: Chairmanof Indirect Tax Committee of PHD Chamber of Commerce Member of Indirec ... Read more

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