ORDER
P.G. Chacko, Member (J)
1. The appellants are engaged in the manufacture of sugar. They have a co-generation plant which generates electricity, which is partly consumed captively for the manufacture of sugar and partly supplied to Tamil Nadu Electricity Board (TNEB). During the period May, 1996 to December, 1999, they had taken capital goods credit under Rule 57Q of the Central Excise Rules, 1944 on certain parts and components used for the manufacture of the co-generation plant or for the maintenance of the plant. The department issued show-cause notices from time to time denying the credit to the appellants on the ground that the electricity generated by the co-generation plant was not wholly consumed within the sugar factory. The show-cause notices took the view that, as part of the electricity so generated was supplied out of the factory to the TNEB grid, the availment of the above credit was hit by the provisions of Sub-rule 2 of Rule 57R. The notices also proposed penalties on the party. The original authority confirmed the proposal for denying the above credit to the appellants. It, however, did not impose any penalty on the party. Against non-imposition of penalty, the department filed applications with the Commissioner (Appeals), which were treated as appeals and allowed, with the result that penalties came to be imposed on the assessee. The assessee’s appeals against denial of capital goods credit were dismissed by the Commissioner (Appeals). The present Appeal No. E/826/2003 of the assessee is against the appellate Commissioner’s decision on the capital goods credit issue, while their Appeal No. E/1150/2003 is against his decision on the penalty issue.
2. After hearing both sides and considering their submissions, we find that the challenge against denial of capital goods credit on the parts and components of co-generation plant to the appeallants for the period of dispute is well-founded. The Revenue has no case that any capital goods used in the manufacture of capital goods eligible for credit under Rule 57Q during the period of dispute were not so eligible. In other words, the denial of the subject credit to the appellants is not on the ground that the components and parts were used in the manufacture of ineligible capital goods. On the other hand, it is on the ground that a portion of the electricity generated by the co-generation plant was released out of the factory for supply to TNEB. The stand of the Revenue is that, in terms of Rule 57R(2), the entire quantity of electricity generated by the plant should have been captively consumed in the manufacture of sugar. The appellants are contesting this stand of the Revenue on the strength of case law. Their Consultant has cited the following decisions in support of these appeals:
(i) Commissioner of Central Excise, Raipur v. H.E.G. Ltd. 2004 (177) E.L.T.605 (Tri.-Del.).
(ii) Visakhapatnam Steel Plant v. Commissioner of Central Excise, Visakhapatnam 2004 (177) E.L.T.507 (Tri.-Bang.).
(iii) Commissioner of Central Excise, Pondicherry v. EID Parry (India) Ltd. [Final Order No. 699-701/07 dated 12.06.2007 in Appeal Nos. E/78 to 80/2004].
(iv) Kothari Sugars and Chemicals Ltd. v. Commissioner of Central Excise, Trichy [Final Order No. 1494/05 dated 21.11.2005 in Appeal No. E/132/2004].
(v) Kothari Sugars and Chemicals Ltd. v. Commissioner of Central Excise, Trichy [Final Order No. 75/2005 dated 28.12.2004 in Appeal No. E/952/2003].
We find that, in the assessee’s own earlier cases, one of us sitting single allowed similar credit to them by rejecting the Revenue’s stand vide Final Order No. 1494/05 ibid and Final Order No. 75/2005 ibid, the former covering the period September-November, 1995 and the latter covering the period September, 1997 to February, 1998. In one of these cases, the question considered by the Bench was whether, under Rule 57Q ibid, the appellants were entitled to avail capital goods credit on components used in the captive power plant which generated electricity, which was mainly used within the factory of production of final product and partly sold to TNEB. In another case, a similar question arose with regard to components of high pressure boiler, which was used for generating steam, which in turn was used for the manufacture of sugar (final product) as well as electricity. In both the cases, following the decision of the Tribunal in the case of H.E.G. Ltd. (supra), the Bench held that capital goods credit was admissible to the party. The issue arising for consideration in the present case is identical. Learned SDR has not claimed that either Final Order No. 1494/05 or Final Order No. 75/2005 was appealed against. Apparently, the view taken by the appellants has virtually been accepted by the department. There is nothing to indicate that the Tribunal’s decision in H.E.G. Ltd’s case was challenged by the Revenue. The recent decision of this Bench in the case of EID Parry (India) Ltd. also supports the appellant’s case. The view taken consistently by the Tribunal is that Modvat credit on capital goods could not be denied to an assessee under Rule 57Q on the ground of non-fulfilment of any condition set out under Sub-rule 2 of Rule 57R. In other words, the availment of capital goods credit under Rule 57Q by the appellants on the components used in the manufacture of co-generation plant or for maintenance of the plant is not liable to be questioned on the ground that the surplus electricity generated was released out of the factory to TNEB grid.
3. In the result, Appeal No. E/826/2003 is allowed and consequently the remaining appeal filed against imposition of penalty is also allowed.
(Dictated and pronounced in open court)