2026-VIL-745-PAT-CE
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CENTRAL EXCISE High Court Cases

Central Excise – CENVAT credit on capital goods installed in Captive Power Plant – Appellant installed a Captive Power Plant within its factory premises where electricity was generated using bagasse as fuel; the electricity generated was substantially consumed within the factory for manufacture of dutiable final products while surplus electricity was supplied to State Electricity Board - Department denied CENVAT credit on capital goods installed in the Captive Power Plant on the ground that electricity is exempted goods and the capital goods were used for generation of exempted goods – Whether capital goods installed in a Captive Power Plant qualify for CENVAT credit where electricity generated is predominantly consumed in manufacture of dutiable goods but surplus is supplied outside the factory – HELD – Rule 6(4) of CENVAT Credit Rules, 2004 prohibits availment of CENVAT credit only where capital goods are used exclusively in manufacture of exempted goods, thus, the statutory embargo requires exclusive use to the exclusion of dutiable final products. In the present case, the admitted factual position is that electricity was predominantly consumed in manufacture of dutiable final products and only surplus was supplied outside the factory. Once the admitted position is that the Captive Power Plant formed an integral part of the respondent’s manufacturing unit and the electricity generated therein was substantially utilized in the manufacture of dutiable final products, the requirement of exclusive use contemplated under Rule 6(4) cannot be said to have been satisfied - The Circular No. 665/56/2002-CX dated 25.09.2002 clarifies that CENVAT credit on capital goods used in manufacture of exempt intermediate goods cannot be denied where such intermediate goods are captively consumed in manufacture of final products chargeable to duty. The Tribunal was justified in holding that denial of CENVAT credit was unsustainable – The Revenue appeal is dismissed and the CESTAT order allowing CENVAT credit on capital goods is affirmed - Central Excise – CENVAT credit on specified taxable services under Rule 6(5) – Appellant availed CENVAT credit on seventeen specified taxable services covered under Rule 6(5) of CENVAT Credit Rules, 2004 in relation to Captive Power Plant - Department denied credit on ground that services were related to generation of electricity which was partly supplied as exempted goods outside the factory – Whether specified taxable services qualify for CENVAT credit where electricity generated is part captively consumed in dutiable manufacturing – HELD – Rule 6(5) of CENVAT Credit Rules, 2004 carves out exception in respect of specified taxable services and permits availment of full credit unless such services are used exclusively for manufacture of exempted goods or provision of exempted services; the legislative intent recognizes that certain common input services are incapable of precise segregation between dutiable and exempted activities - The admitted factual position is that electricity generated was substantially consumed in manufacture of dutiable products and only surplus was supplied outside; it cannot be held that specified services were used exclusively for exempted goods; the finding recorded by Tribunal is consistent with plain language of Rule, CBEC circulars and admitted facts – CENVAT credit on specified input services is admissible - Central Excise – CENVAT credit on iron and steel items used for repair and maintenance – Department denied CENVAT credit on iron and steel items such as M.S. angles, channels, joists and plates on ground that after amendment with effect from 07.07.2009 such goods ceased to be eligible for credit as they were used for fabrication of supporting structures and did not qualify as capital goods or inputs – Whether iron and steel items qualify for CENVAT credit where used for repair and maintenance of existing plant and machinery – HELD – Admissibility of CENVAT credit on iron and steel items depends upon purpose for which goods have been used and not merely nomenclature; where used for construction of buildings or fabrication of immovable supporting structures credit is ordinarily unavailable; where established to have been used in repair, replacement or maintenance of existing plant and machinery directly connected with manufacturing process, claim is required to be examined in light of actual use - Tribunal recorded categorical finding of fact that items were used for repair and maintenance of existing capital goods forming part of manufacturing unit. Revenue failed to demonstrate that finding is either unsupported by evidence or suffers from perversity. The actual use of goods constitutes determinative test while examining admissibility of credit – Denial of credit on iron and steel items is set aside - Central Excise – Duty liability on waste and scrap arising from capital goods – Department confirmed demand for duty on waste and scrap arising from capital goods on premise that Appellant cleared such waste and scrap and under Rule 3(5) of CENVAT Credit Rules, 2004 is liable to discharge duty – Whether waste and scrap arising from capital goods attract duty liability – HELD – Revenue failed to point out any specific statutory provision or material on record demonstrating that finding suffers from legal infirmity; appeal under Section 35G of Central Excise Act, 1944 lies only on substantial question of law; where Tribunal upon appreciation of evidence records findings of fact which are neither shown to be perverse nor contrary to statutory provisions, Court would be slow to interfere merely because another view is possible. The jurisdiction under Section 35G is confined to examination of substantial questions of law and does not extend to fresh re-appreciation of factual issues – Demand for duty on waste and scrap is set aside.
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