2025-VIL-1302-GUJ-CE
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CENTRAL EXCISE High Court Cases

Central Excise - Eligibility for CENVAT credit on use of Naphtha as fuel for generation of electricity within the factory - Appellant used Naphtha and furnace oil for generating electricity through gas turbine generators and steam turbine generators. The entire electricity generated from the gas turbine generator was used within the factory, while a small portion of the electricity generated from the steam turbine generator was wheeled out to the company's sister concerns - Whether the appellant is eligible for CENVAT credit on the Naphtha used as fuel for generation of electricity, including the portion wheeled out to sister concerns - HELD - It is not disputed by the Department that the electricity generated through the steam turbine is used for manufacture of final products within the factory premises. The definition of "input" under the CENVAT Credit Rules, 2001 includes goods used as fuel within the factory of production - Naphtha, when used in the first instance for generating electricity in the gas turbine generator, would fall within the contours of the definition of “input,” which includes goods used as fuel within the factory of production. However, the waste emerging from such usage viz. steam, which is again used for generating electricity, and a small quantity of which is wheeled outside the premises, would not attract the said definition - The emergence of by-products or waste products during the manufacturing process does not disentitle the manufacturer from availing CENVAT credit on the inputs used. Accordingly, the small quantity of electricity wheeled out to sister concerns was generated from the steam turbine, which was run on the waste steam generated during the use of Naphtha in the gas turbine generator, and hence, the credit on Naphtha cannot be denied on this ground - The CESTAT was incorrect in denying the CENVAT credit on Naphtha used as fuel for electricity generation within the factory – The Tribunal order is set side and the appeal is allowed
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