28 May 2008
A large manufacturing company (A) buys nitrogen from a third party (B) and uses that nitrogen for its manufacturing purposes. ‘A’ has a captive power plant and uses Naphtha for generation of power which is used by ‘A’ for its own manufacturing purposes. Now, ‘A’ supplies a portion of this power free of cost to ‘B’ who uses this power for making Nitrogen which is sold by ‘B’ to ‘A’. Now, since A supplies this power to 'B' free of cost , B's selling price of Nitrogen to A also does not include any cost on account of power.
Now, the issue is whether A is at all required to reverse proportionate cenvat credits on Naphtha which is used for generating power that is supplied to B for making nitrogen. If there any precedences (legal decisions) resembling similar situations, please state that also. A & B are independent parties and operate at arm's length basis.
06 August 2008
A large manufacturing company (A) buys nitrogen from a third party (B) and uses that nitrogen for its manufacturing purposes. ‘A’ has a captive power plant and uses Naphtha for generation of power which is used by ‘A’ for its own manufacturing purposes. Now, ‘A’ supplies a portion of this power free of cost to ‘B’ who uses this power for making Nitrogen which is sold by ‘B’ to ‘A’. Now, since A supplies this power to 'B' free of cost , B's selling price of Nitrogen to A also does not include any cost on account of power.
Now, the issue is whether A is at all required to reverse proportionate cenvat credits on Naphtha which is used for generating power that is supplied to B for making nitrogen. If there any precedences (legal decisions) resembling similar situations, please state that also. A & B are independent parties and operate at arm's length basis.
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