2006 (5) TMI 223 - AT - Central Excise

Summary

Issues:
1. Eligibility for exemption from Central Excise Duty on LSHS/RCO used in captive electricity generation.
2. Claim for Modvat credit restricted to 95% of duty paid under Notification No. 14/97.
3. Dispute resolution regarding exemption eligibility.
4. Justification for denying 5% of duty paid as Modvat credit.
5. Applicability of Notification No. 14/97 on Modvat credit availability.

Analysis:
1. The appellant, an oil refinery, utilized LSHS/RCO in captive electricity generation, claiming exemption from Central Excise Duty under various notifications. The jurisdictional authority denied this exemption, leading to an appeal. Despite the appellant's unsuccessful exemption claim, they sought Modvat credit for duty paid on LSHS. The Modvat credit was limited to 95% of the duty paid per Notification No. 14/97 under the impugned order.

2. The appellant's senior counsel argued that previous Tribunal orders, including Final Order No. 337/06 and an earlier decision from 1992, favored the appellant's eligibility for exemption. Since no duty was deemed payable, the denial of 5% of the duty paid as Modvat credit was deemed unjustified by the appellant.

3. The Departmental Representative contended that the restriction on Modvat credit to 95% of the duty paid was justified under Notification No. 14/97, supporting the lower authorities' decision regarding the appellant's Modvat credit claim.

4. Despite the appellant's success in the exemption claim, full duty refund was deemed unnecessary in this case due to specific circumstances. Allowing the erroneously collected duty amounts as Modvat credit eliminated the need for a refund and restored the amounts to the appellant. Applying the restriction from Notification 14/97 to the credit amounts would have reduced the refund to 95%, which was considered unjustified.

5. Consequently, the impugned order was set aside, and the appeal was allowed, providing consequential relief to the appellant. The decision ensured that the appellant received the full benefit of the duty paid on LSHS/RCO used in captive electricity generation, without the unwarranted reduction imposed by Notification No. 14/97.