1997 (12) TMI 428 - AT - Central Excise

Summary

Issues:
Dis-allowance of Modvat credit on Low Sulphur Heavy Stock (LSHS) and furnace oil used in DG Sets for electricity generation for electrolysis process.

Analysis:
The judgment involves three appeals challenging the dis-allowance of Modvat credit on LSHS and furnace oil used in DG Sets for electricity generation. The Collector disallowed the credit, stating that electricity is not considered a good or intermediate product for Modvat purposes. The Collector noted that the power generated was not exclusively used for the final product but also for other purposes in the plant. The Collector emphasized that prior to Notification No. 11/95, inputs used for electricity generation in DG Sets were not eligible for Modvat credit.

The appellants argued that petroleum products like furnace oil and LSHS were covered under Rule 57A, making them eligible for Modvat credit. They contended that the electricity generated was mainly used in the electrolysis process for manufacturing caustic soda, an intermediate product. The appellants highlighted that electricity was considered a good under the tariff and that amendments to Rule 57A and 57D allowed credit for electricity generation within the factory for any purpose.

In contrast, the Departmental Representative referred to a Tribunal decision where fuel oil used for electricity generation was deemed ineligible for Modvat credit as it was not directly related to manufacturing the final product. Due to conflicting decisions among Tribunal benches, the Departmental Representative suggested referring the matter to a Larger Bench.

The Tribunal acknowledged the inconsistency in Tribunal decisions regarding the admissibility of fuel oil used for electricity generation as a Modvat credit input. Consequently, the Tribunal agreed to refer the issue to a Larger Bench for resolution. The matter was directed to be placed before the Honorable President for further action.