1998 (10) TMI 265 - AT - Central Excise

Summary

Issues:
1. Interpretation of Rule 57A and Rule 57B regarding availing Modvat credit on High Speed Diesel oil (HSD).
2. Whether the non-obstante clause in Rule 57B overrides the provisions of Rule 57A.
3. Reversal of Modvat credit and penalty imposition based on the interpretation of rules.

Analysis:
1. The case involved the utilization of High Speed Diesel oil (HSD) by the appellants for generating electricity and claiming Modvat credit. The issue revolved around the eligibility of HSD oil for Modvat credit under Rule 57A of the Central Excise Rules, 1944. Notification No. 5/94 specifically exempted HSD oil from eligible goods. The Commissioner held that HSD oil could not be considered an "input" under Rule 57B as it was not conferred the title of "input" under Rule 57A. Therefore, the credit taken on HSD oil was deemed incorrect, leading to its reversal and penalty imposition.

2. The Tribunal analyzed the interplay between Rule 57A and Rule 57B concerning the Modvat credit facility. Rule 57B, introduced to extend credit to inputs not covered under Rule 57A, contained a non-obstante clause. The Tribunal referred to the Ballarpur Industries Ltd. case, which established that a non-obstante clause in Rule 57B could prevail over Rule 57A. The Tribunal emphasized that the non-obstante clause in Rule 57B was intended to give overriding effect to certain provisions of Rule 57A, specifically related to the credit of duty amount.

3. The Tribunal further examined previous judgments, including the India Cements Ltd. case, to support the interpretation that if a specific input was mentioned in Rule 57B, credit for duty paid on that input could be availed even if excluded under Rule 57A. Relying on these precedents and the interpretation of Rule 57B, the Tribunal concluded that the Modvat credit taken by the appellants was correct. Consequently, the impugned order reversing the credit and imposing a penalty was set aside, allowing the appeals with consequential relief.

This detailed analysis of the judgment showcases the legal intricacies involved in interpreting rules governing the availing of Modvat credit and the significance of non-obstante clauses in resolving conflicts between different provisions of the law.