1997 (8) TMI 175 - AT - Central Excise

Summary

Issues:
- Interpretation of Central Excise Rules regarding Modvat credit on light diesel oil used as fuel in the manufacturing process.
- Classification of steam generated as an intermediate product for availing Modvat credit.
- Application of Notification No. 4/94-C.E. (N.T.) in determining eligibility for Modvat credit.

Analysis:
The appeal involved a dispute over the eligibility of Modvat credit on light diesel oil used as fuel in the manufacturing process of Butyl Tubes. The appellants argued that light diesel oil was a valid input under Rule 57A of the Central Excise Rules, 1944, as per Notification No. 4/94-C.E. (N.T.). The appellants had availed Modvat credit on light diesel oil based on this interpretation. However, the Assistant Collector contended that the steam, considered as the final product, was exempt, leading to a denial of the Modvat credit. The Commissioner upheld this decision, prompting the appeal before the Tribunal.

The appellants emphasized that light diesel oil was used solely as fuel for the boiler, not for power generation, as alleged by the authorities. They argued that steam, generated as an intermediate product for the manufacturing process, qualified for Modvat credit under Rule 57D(2). The appellants also pointed out an error in referencing the wrong notification by the lower authorities, highlighting the importance of Notification No. 4/94-C.E. (N.T.) in defining inputs.

The Tribunal, after considering the submissions, found merit in the appellants' arguments. It acknowledged that light diesel oil was indeed used as fuel in the manufacturing process of Butyl Tubes, making it eligible for Modvat credit as per the relevant notification. Additionally, the Tribunal agreed with the appellants' interpretation of Rule 57D(2) and cited a previous order in support of their position. Consequently, the Tribunal set aside the impugned orders, allowing the appeal in favor of the appellants.

In conclusion, the Tribunal's judgment clarified the eligibility of Modvat credit on light diesel oil used as fuel in the manufacturing process, emphasizing the importance of correct interpretation of Central Excise Rules and relevant notifications. The classification of steam as an intermediate product played a crucial role in determining the appellants' entitlement to the credit, ultimately leading to a favorable outcome for the appellants based on the Tribunal's analysis and interpretation of the legal provisions.