1996 (11) TMI 170 - AT - Central Excise

Summary

Issues:
- Interpretation of Rule 57A of the Central Excise Rules, 1944 regarding Modvat credit eligibility for inputs used in or in relation to the manufacture of final products.
- Application of previous tribunal decisions and Supreme Court rulings on similar cases to the current scenario.
- Consideration of financial hardship in determining the pre-deposit amount for the appeal.

Analysis:
The judgment revolves around the interpretation of Rule 57A of the Central Excise Rules, 1944 concerning the eligibility of Modvat credit for inputs utilized in the manufacture of final products. The applicant sought waiver of pre-deposit amounting to Rs. 1,02,44,698.07P, asserting that the LSHS and furnace oil used in DG sets for electricity generation, subsequently employed in the production of the final product, should qualify for Modvat credit. The appellant argued that the electricity generated from these inputs is integral to the manufacturing process. Reference was made to a stay order and a Supreme Court case supporting the contention that inputs used for electricity generation within the factory premises are eligible for Modvat credit.

The Respondents, represented by the JDR, upheld the Commissioner's decision disallowing the Modvat credit for LSHS and furnace oil. The Tribunal, after hearing both sides, analyzed the facts of the case in comparison to previous rulings. It differentiated the current scenario from a previous case where direct usage of inputs in the manufacturing process led to a grant of absolute stay. The Tribunal also highlighted a Supreme Court case where the use of certain inputs in ancillary processes was deemed integral to the manufacturing of the final product, thus qualifying for Modvat credit. In the present case, the appellants' use of LSHS and furnace oil in DG sets for electricity generation, followed by the utilization of electricity in the factory, was deemed arguable.

Considering the arguments presented, the Tribunal directed the appellant to deposit Rs. 50 lakhs by a specified date, allowing for the remaining amount of the demand to be stayed until the appeal's disposal. The deposit could be made by debiting the RG 23A Part II account for Modvat purposes. The decision balanced the applicant's plea of financial hardship with the interest of revenue, providing a middle ground for the pre-deposit amount and ensuring compliance reporting by a set date for further proceedings.