2004 (98) ECC 55 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(SM)

Shri P.S. Bajaj, Member (J)

HEG Ltd. (Sponge Iron Divn.)

Versus

CCE, Bhopal

Appeal No. E/466/04-NB(SM)

[Arising out of Order-in-Appeal No. 491RPR-II/2003 dated 12.12.2003 passed by the Commissioner of Central Excise (Appeals-II), Raipur]

Final Order No. A/1259/2004/NB(SM), dt. 1.9.04, Certified on 29.9.2004

Modvat Credit

Rule 57G (1) of the Central Excise Rules, 1944 -- Char and Dolochar used in captive power plant for generation of electricity -- Electricity was utilized outside factory as it was being supplied by appellant to another unit through the Grid of MPEB -- Credit allowed on inputs utilized in the generation of electricity to the extent to which they were using so produced electricity within their factory.

Appeal dismissed

PRESENT :

None for the appellants.

Shri Randhir Singh, JDR for the respondent.

Per : P.S. Bajaj

In this appeal, which has been filed by the appellants, the issue relates to the denial of the Modvat credit to them on Char/Dolochar used by them for generation of electricity which is utilized by them for the manufacture of final products (Sponge Iron).

2. The appellants have prayed for decision on merit through their letter received in the Registry on 29.6.2004. They had also submitted summary of the facts alongwith that letter.

3. I have heard Ld. JDR and gone through the record as well as summary of the facts submitted by the appellants.

4. The facts are not much in dispute. The appellants filed Modvat declaration under Rule 57G(1) dated 25.11.97 for claiming Modvat credit on Char and Dolochar, used in their captive power plant for generation of electricity. The electricity so generated by them is partly used by them in their factory and partly they are supplying to their sister concern situated at Pitampur Industrial Estate through MPEB grid i.e. outside the factory of production. The adjudicating authority disallowed the Modvat credit in toto by observing that electricity was not being used by the appellants in or in relation to the manufacture of their final products within their factory premises. But the Commissioner (Appeals) has modified the order by observing that the extent to which the electricity is being used by the appellants within their factory in or in relation to the manufacture of the final products, or even for any other purpose, they are entitled to the Modvat credit on the inputs resulting in the generation of electricity. The stand taken up by the appellants is that in terms of provisions of Rule 57 B (1)(iv) of the Rules, they are entitled to the Modvat credit on the inputs even if these had not been used in or in relation to the manufacture of the final products and as such, non-utilization of the electricity generated by them, within their factory for production of their final products is immaterial and Modvat credit on that account cannot be disallowed to them. But, in my view, their stand totally misconceived and based on the mis-understanding/mis-interpretation of the provisions of the said Rule. Rule 57 B 1 (IV) only enacts that manufacturer of the final products shall be allowed to take credit on specified duty paid eligible notified inputs used in or in relation to the manufacture of final products whether directly or indirectly and whether contained in the final products or not, within the factory of production. The appellants, admittedly are not utilizing the electricity generated by them with the help of the above referred inputs in their captive power plan, in toto, in or in relation to the manufacture of their final products, directly or indirectly or even for any other purposes within their factory premises. They are, as is evident from the impugned order, supplying about 10.5 MW of the electricity out of the installed capacity of 12.8 MW to their sister concern located outside their factory premises through the MPEB grid. Therefore, to that extent, it cannot be said that they are utilizing the electricity directly or even indirectly for the production of their final products or even for any other purpose within their factory. That much electricity is being utilized outside their factory as it is being supplied by them to another unit through the Grid of MPEB. Therefore, they have been rightly disallowed the Modvat credit by the Commissioner (Appeals) through the impugned order to that extent. They are only entitled to claim the credit on the inputs utilized in the generation of the electricity to the extent to which they are using the so produced electricity, within their factory.

5. In the light of the discussion made above, I do not find any illegality in the impugned order and the same is upheld. The appeal of the appellants is dismissed.

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