CCE Vs. H.E.G. LTD.

JUDGEMENT

(1.) THIS appeal is against a common order -in -original dated 27.9.2001 passed by the Commissioner of Central Excise, Raipur in adjudication of 16 show - cause notices issued from time to time during July 1997 to April, 2001. The show -cause notices had proposed to disallow capital goods duty credit to the respondents for successive periods comprised in October, 1995 to September, 2000. The total Modvat credit so proposed to be denied to the respondents was Rs. 1,93,42,097/ -.

(2.) M /s. H.E.G. Ltd (respondents) had two factories one at Durg (Chattisgarh) and the other one at Raisen (Madhya Pradesh) the former manufacturing sponge iron and the latter manufacturing graphite electrode. In their Durg factory premises, they had a captive thermal power plant (hereinafter referred to as 'CPP') of 12.8 MW capacity having three boilers, one steam turbine and a generator. The stem generated in these boilers was used to generate electricity which was used captively for manufacture of sponge iron. The surplus electricity (which formed a substantial part of the electricity generated from the CPP) was transmitted to the Raisen factory through the Gride of MP Electricity Board. M/s HEG had availed credit of the duty paid on various components, spares and accessories of the CPP during the aforesaid period (October 95 to September 2000) under Rule 57 -Q (upto 31.3.2000) and under Rule 57 -AB (from 1.4.2000) of the Central Excise Rules, 1944 and utilized the credit for payment of duty on their final product (sponge iron). The show -cause notices sought to recover the entire duty under Rule 57 -U/rule 57 -AH read with Section 11 -A of the Central Excise Act on the main ground that the credit was not admissible for non -fulfillment of condition set out in the proviso to sub -rule (2) of Rule 57 -F inasmuch as the electricity generated from the CPP had not been fully utilized within the factory for manufacture of sponge iron as a part of the electricity has been wheeled out of the factory for use elsewhere. Another ground raised by the Department was that, in terms of the proviso to sub -rule (1) of Rule 57 -R, the credit was not available to the part, components and accessories of the CPP which wa used for generating electricity which was not an excisable product. Yet another ground raised for denying the credit was that the CPP was not eligible 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. Certain order technical grounds were also raised in some of the show -cause notice, which we need not consider in this appeal as the Revenue -appellant's challenge in this appeal is only with reference to the show -cause notices.

(3.) AFTER examining the allegations in the show -cause notices and M/s HEG's response to the allegations, and after hearing both the sides, the learned Commissioner held that the party was entitled to avail the Modvat credit. Hence the present appeal of the Revenue.