2006 (11) TMI 464 - AT - Central Excise

Summary

Issues:
- Entitlement to full Modvat credit of duty paid on fuels (LSHS and FO) used in electricity generation for captive consumption in the manufacturing process.
- Interpretation of Rule 57B of the Central Excise Rules, 1944.
- Applicability of Notification No. 14/97-C.E. (N.T.) and Notification No. 21/98-C.E. (N.T.).
- Impact of Supreme Court judgment in Jindal Poly Films Ltd. v. Commissioner of Central Excise, Meerut [2006 (198) E.L.T. 3 (S.C.)].

Analysis:

1. The primary issue in this case revolves around the entitlement of the respondents to take full Modvat credit of duty paid on fuels (LSHS and FO) used in electricity generation for captive consumption in the manufacturing process. The department contended that the credit should be limited to 10% of the duty paid, as per Notification No. 14/97-C.E. (N.T.). However, the learned Commissioner (Appeals) allowed the full credit to the respondents in accordance with Rule 57B of the Central Excise Rules, 1944. The appellant argued that the retrospective effect of Notification No. 14/97-C.E. (N.T.) was not considered by the lower authority. On the other hand, the respondents relied on the Supreme Court's judgment in Jindal Poly Films Ltd. v. Commissioner of Central Excise, Meerut to support their claim that they were entitled to full credit.

2. The Tribunal, after examining the Apex Court's judgment, concluded that up to 1-6-1998, the respondents were indeed entitled to avail full credit of the duty paid on LSHS and FO used in electricity generation as per Rule 57B of the Central Excise Rules, 1944. However, from 2-6-1998 onwards, the credit was restricted to 95% in accordance with Rule 57B(1) as amended under Notification No. 21/98-C.E. (N.T.). This restriction was also confirmed by the Apex Court's ruling, thereby settling the issue in favor of the department.

3. As a result of the above analysis, the Tribunal dismissed both appeals, affirming the restriction on the credit entitlement for the period from 2-6-1998 onwards. The judgment highlights the importance of statutory provisions, notifications, and judicial precedents in determining the extent of Modvat credit available to manufacturers for duty paid on fuels used in captive electricity generation during the relevant periods.