2006 (10) TMI 363 - AT - Central Excise

Summary

Issues involved:
The appeal challenges the denial of Modvat credit and imposition of penalty on the appellant u/s Rule 57A of Central Excise Rules, 1944 for using furnace oil to generate electricity and supplying it to their residential colony outside the factory premises.

Consideration of Time-barred Notice:
The show cause notice dated 16-10-2002 for the period October 1997 to September 2001 was contested as time-barred by the appellant, as they were filing RT-12 returns indicating furnace oil consumption. However, the notice dated 29-10-2002 was acknowledged as within the time limit. The appellant argued that the electricity supplied to essential quarters within the factory premises, as approved by the Suptd. of Central Excise, qualifies for Modvat credit.

Interpretation of Modvat Rules:
The Tribunal analyzed Rule 57B and Rule 2(f) of Cenvat Credit Rules, 2001 to determine the eligibility of Modvat credit on inputs used for electricity generation within the factory premises. The presence of essential quarters within the factory, manned by technical staff for emergency duties, was crucial in establishing the appellant's entitlement to Modvat credit on furnace oil consumption for electricity generation.

Precedents and Tribunal Decisions:
The Tribunal referred to cases like Indian Organic Chemicals Ltd. v. CCE, Ferro Alloys Corporation, and Kothari Sugar Works v. CCE to support the appellant's claim for Modvat credit. The decisions emphasized that fuel oil used for electricity generation within the factory premises qualifies for credit, irrespective of the electricity's end-use.

Decision and Ruling:
Based on the analysis of Modvat rules, precedents, and the specific circumstances of the case, the Tribunal ruled in favor of the appellant. The denial of Modvat credit on furnace oil consumption for electricity supplied to essential quarters within the factory premises was deemed incorrect. The impugned order was set aside, and the appeal was allowed with consequential relief, if any, pronounced on 4-10-2006.