2004 (1) TMI 570 - AT - Central Excise

Summary

Issues: Availability of Modvat credit on L.D.O. used in manufacturing confectionery.

The judgment addresses the dispute regarding the availability of Modvat credit on Light Diesel Oil (L.D.O.) used in the manufacturing process of confectionery. The issue revolves around whether the credit can be claimed for L.D.O. used as fuel in boilers for producing steam, considering the latter is an exempted product under Notification No. 7/94. The lower authorities initially rejected the Modvat claim for the period before an amendment to Rule 57D on 18-5-95, which allowed credit for inputs used in generating electricity or steam for manufacturing final products.

The Tribunal analyzed the situation and emphasized that the amendment to Rule 57D was irrelevant to the dispute at hand. It highlighted that L.D.O. is a fuel primarily used for burning to produce heat, which can be utilized in various ways in the production process. In this case, the heat produced from burning L.D.O. is used to generate steam, which is then utilized in the manufacturing process of confectionery. Despite steam being considered an exempt final product, since it contributes to the manufacture of final goods, such as confectionery, the Tribunal concluded that the Modvat credit for L.D.O. is permissible.

Therefore, the Tribunal set aside the orders of the lower authorities, ruling in favor of the appellant and allowing the appeal. The judgment clarifies that the use of L.D.O. in generating steam for manufacturing processes qualifies as an input "used in or in relation to the manufacture of final products," making the appellant eligible for the Modvat credit on L.D.O.