2009 (3) TMI 695 - AT - Central Excise

Summary

Issues:
1. Incorrect availing of MODVAT credit on furnace oil used for manufacturing exempted newsprint paper.
2. Applicability of Rule 57C(1) of the Central Excise Rules, 1944.
3. Interpretation of Rule 57C(2) proviso regarding inputs intended to be used as fuel.
4. Examination of Rule 57B allowing MODVAT credit on inputs used for generation of steam.
5. Reference to legal provisions examined by the Supreme Court in a similar case.
6. Dismissal of the appeal.

Analysis:
The case involves the incorrect availing of MODVAT credit on furnace oil used for manufacturing exempted newsprint paper. The Respondents used furnace oil for steam generation, which was then used in the drying process of paper. The Range Officer alleged that MODVAT credit was wrongly taken on furnace oil as the final product, newsprint paper, was exempt from duty payment. The original authority dropped the proposal for recovery of the credit, a decision upheld by the Commissioner (Appeals), leading to the Revenue's appeal.

The key issue revolves around the interpretation of Rule 57C(1) of the Central Excise Rules, 1944, which was the basis for the allegation against the Respondents. The lower appellate authority relied on a Tribunal decision in a similar case, but the learned DR argued that the decision was not applicable to the present case. However, the applicability of another decision was not ruled out, where the Tribunal held that credit of duty paid on furnace oil was not liable to be denied based on the proviso to Rule 57C(2) regarding inputs intended to be used as fuel.

Further analysis delves into Rule 57B of the Central Excise Rules, 1944, which allows MODVAT credit on inputs used for steam generation and final product manufacture within the factory. The Hon'ble Supreme Court's examination in a related case emphasized the admissibility of MODVAT credit on duty paid on inputs used for exempted final products, citing a case law precedent against the appellant.

Ultimately, the appeal was dismissed, indicating a clear decision by the Tribunal on the matter, as dictated in court. The judgment underscores the importance of correctly applying excise duty credit provisions and the interpretation of relevant rules and legal precedents to determine the admissibility of such credits in manufacturing processes involving exempted final products.