2002 (2) TMI 998 - AT - Central Excise

Summary

Issues:
Admissibility of Modvat credit on inputs used for generation of steam before 16-3-1995.

Analysis:
The appeal was filed by the Revenue against the order of the Commissioner (Appeals) concerning the admissibility of Modvat credit on inputs used for the generation of steam before 16-3-1995. The respondents, engaged in the manufacture of Viscose Staple Fibre, were availing themselves of the Modvat facility under Rule 57A of the Central Excise Rules, 1944. The dispute arose when the Assistant Commissioner disallowed Modvat credit on LSHS oil and furnace oil used for steam generation, prior to 16-3-1995. The Commissioner (Appeals) overturned this decision, allowing the Modvat credit based on the argument that the inputs were eligible for credit before the specified date.

The Revenue contended that Modvat credit on LSHS oil and furnace oil used for steam generation was not admissible before 16-3-1995, as there was no provision for it at that time. They argued that since steam generation was exempt from duty, no credit for specified duty paid on inputs used for steam generation was permissible under Rule 57C of the Central Excise Rules. On the other hand, the respondents relied on the decision of the Larger Bench in the case of Ballarpur Industries Ltd., which held that fuel oils used for captive electricity generation, subsequently used in the manufacture of final products, were entitled to Modvat credit even before 16-3-1995.

The Tribunal, after considering the arguments presented, noted that the issue of Modvat credit on furnace oil had been addressed by the Larger Bench in the Ballarpur Industries Ltd. case. Following the precedent set by the Larger Bench, the Tribunal rejected the Revenue's appeal, affirming that fuel oils used for captive electricity generation, which is further utilized in the production of final products, were eligible for Modvat credit even prior to 16-3-1995. The Tribunal upheld the decision based on the established legal interpretation and application of Modvat rules in similar cases, as highlighted in the detailed explanation provided by the respondents' counsels referencing relevant case laws and precedents.