COMMISSIONER OF CUS Vs. H E G LTD

JUDGEMENT

(1.) This excise appeal has been admitted on the following substantial questions of law:

(2.) Briefly stated, facts necessary for adjudication of this appeal are that the Respondent had two factories, one at Durg (Chhattisgarh) and another at Raisen (Madhya Pradesh), the former manufacturing sponge iron and the latter manufacturing graphite electrode. They had a Captive Thermal Power Plant (in short "CPP") of 12.8 MW capacity having three boilers, one steam turbine and a generator. The steam generated in these boilers was used to generate electricity which was used captively for manufacture of sponge iron. The substantial part of the surplus electricity generated from CPP was transmitted to Raisen factory through the Grid of M.P. Electricity Board (MPEB). The Respondent availed credit of the duty paid on various components, spares and accessories of CPP between October, 1995 and September, 2000 under Rule 57-Q upto 31st March, 2000 and under Rule 57-AB from 1st April, 2000 of the Central Excise Rules, 1944 and utilized the credit for payment of duty on their final product (sponge iron).

(3.) The Commissioner of Central Excise, issued show cause notices (16 in number) from time to time and sought to recover the entire duty under Rule 57-Under Rule 57-AH read with Section 11-A of the Central Excise Act (in short "the Act") on the ground that the credit was not admissible for non-fulfillment of condition set out in the proviso to Sub-rule (2) of Rule 57-R because the electricity generated from CPP had not been fully utilized within the factory for manufacture of sponge iron as substantial part of the electricity had been wheeled out of the factory for use elsewhere, and also on the ground that in terms of proviso to Sub-rule (1) of Rule 57-R the credit was not available to the parts, components and accessories of CPP, which was used for generating electricity, which was not an excisable product. Another ground raised for denying the credit was that CPP was not eligible for capital goods under Rule 57-Q as it was not concerned with the manufacture of sponge iron and, therefore, its parts, components and accessories would not fall within the purview of capital goods. Accordingly, the learned Commissioner held that the party was entitled to avail MODVAT credit (Annexure P/4), and the appeal preferred by the revenue has been further rejected by the Tribunal and the order of the Commissioner has been upheld. Hence, this appeal.