Anuska Motors Ltd., is the manufacturer of automobile parts for the vehicles. It has installed a gas turbine in the factory premises for generation of electricity which is being used in the production process. Naphtha is

In a similar case of Maruti Suzuki Ltd. vs. CCE (2009) the Apex Court had held that electricity generation is an ancillary activity and if it is being used for captive consumption, it also forms part of manufacturing activity. The Apex Court held that the definition of "input" brings within its fold, inputs used for generation of electricity or steam, provided such electricity or steam is used within the factory of production for manufacture of final products or for any other purpose. The important point to be noted is that, in the present case, excess electricity has been cleared by the assessee at the agreed rate from time to time in favour of its joint ventures, vendors etc. for a price and has also cleared such electricity in favour of the grid for distribution. To that extent, the assessee was not entitled to CENVAT credit. In short, assessee is entitled to credit on the eligible inputs utilized in the generation of electricity to the extent to which they are using the produced electricity within their own factory (for captive consumption). They are not entitled to CENVAT credit to the extent of the excess electricity cleared at the contractual rates in favour of joint ventures, vendors etc., which is sold at a price. Applying the decision of Apex Court in the case of Anuska Motors Ltd which has used Naphtha as input for generation of electricity the CENVAT credit on the inputs shall be allowed to the extent of 60% as to this extent the electricity was used in production as captive consumption but on balance 40% sold to other neighboring units, no CENVAT on input shall be allowed because such generated electricity cannot be said to be used in or in relation to manufacture of final product inside the factory. Therefore, CENVAT Credit is not available in respect of fuel used for generation of electricity which has been sold outside to other Units.