Fuel
used for generation of electricity, a part of which is also supplied to another
unit of same manufacturer, is eligible
for credit as input; assessee is not required to have two separate power
facilities for two different units.
Facts:
a) The
Assessee was availing of Cenvat credit of duty paid on Furnace Oil used as fuel
in DG sets for generation of electricity. A part of electricity so generated
was supplied to another unit engaged in manufacture of Polymer Chips, which was
main input of the assessee;
b) The Department
denied proportionate credit on Furnace Oil used in generation of electricity
consumed by the other unit.
The
High Court held in favour of assessee as under:
1) Tax law
should be interpreted in conformity with normal commercial practice. Therefore,
the manner of 'use' , should be accepted as to economical, efficient and
convenient manner of 'use' because a contrary interpretation would lead to
frustrating purpose of law in granting credit;
2) Generation
of electricity in one unit for use in all neighbouring units of a manufacturer
is more efficient and economical than setting-up generating facility at each
and every factory;
3) So long
as factory and manufacturer are one, credit cannot be denied merely because of
separate registration and/or different line of production as there is no such
statutory regulation or rule;
4) It is
logical that if two units are being run at one place, producing two different
items and electricity is supplied to both of them by a common generator; credit
benefit shall be available in respect of both the manufacturing units, unless
statutorily provided otherwise; and
5)
It was neither expedient nor desirable
unless provided otherwise statutorily to have separate electricity generating
sets for different manufacturing units. Accordingly, credit was to be allowed.
- Commissioner of Customs & Central
Excise, Noida, U.P v. Jindal Polyester [2014] 41 taxmann.com 173 (Allahabad)
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