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TMI Blog1997 (1) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... of Modvat Credit scheme. On 22-3-1994 they have filed a declaration under Rule 57G to avail Modvat Credit of duty paid on Residual Fuel Oil (RFO) and Low Density Oil (LDO) claiming that the same were being used in or in relation to the manufacture of their final products. The officer who inspected found that the RFO and LDO were used to run the D.G. set to generate the electricity for captive consumption and also they were used in the furnaces at various stages. Both the orders gives the details of the extent by which Modvat credit was utilised and as to how the same is required to be revised by the assessees. The reasons given for denial of the Modvat Credit on these two inputs used to run the D.G. sets or generating electricity are; (a) Such RFO and LDO is not used for manufacture of the final products. The same are used in Diesel Generating sets for generation of electricity; (b) Electricity is mainly supplied by Rajasthan State Electricity Board to the assessee. Such electrical energy is used to generate heat for the manufacture of the final product. By no stretch of imagination, RFO and LDO appears to be the inputs for final products of iron and steel; (c) Further, the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se which states what inputs are included for Modvat Credit and clause (c) of the said explanation clause refers to input used as fuel . It is his contention that this was introduced by Notification No. 4/94, dated 1-3-1994. The Govt. had a clear intention to grant the benefit on the inputs used as fuel. That fuel either utilised directly or for generating electricity as intermediary product which is in turn utilised in the heat furnaces. It is his submission that without utilisation of these two inputs, final product cannot be manufactured. It is his submission that this utilisation of two inputs as fuel comes within the ambit of the term used in or in relation to the manufacture of the final product . It is his further submission because of the said doubt, which was being raised by the department now and then, a clarification in the form of introduction of clause (d) was introduced by adding a conjunctive word and , after the words in clause (c). The clause (d) reads as `inputs used for generation of electricity used within the factory of production in the manufacture of final products or for any other purpose . It is his submission that the word and used after the words i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d DR vehemently supported the order passed by the lower authorities. It is his submission that the inputs have to be directly utilised in the manufacture of the final product. It is his contention that the inputs are not utilised in the present case for the manufacture of final product namely, Iron and Steel product but the same are utilised in the generation of electricity in the D.G. sets. This electricity is utilised by the appellants for other purposes also. It is his contention that the clause (d) which is introduced in 1995 is not clarificatory in nature and for the material period clause (c) cannot be taken to mean that the inputs in question are to be taken as fuel for the purpose of manufacture of Iron and Steel products. It in his contention that the lower authorities have rightly arrived at the conclusion. 8. The Learned Consultant countering the arguments. heavily relied on the Larger Bench judgment rendered in the case of Shri Ramakrishna Industries v. Collector of Central Excise, as reported in 1996 (82) E.L.T. 575, wherein it has been held that sand moulds which although does not directly go into manufacture of the final product but yet as the same is further used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n input used as fuel. This plea cannot be accepted because the final product Iron and Steel is manufactured in an Electric Arc Furnace. For the purpose of operating the Electric Arc Furnace, fuel is required, which is obtained by generating heat by electricity. Therefore, electricity is an essential ingredients, to make the Electric Arc Furnace operational. Although electricity is not an excisable item and it is supplied by the Rajasthan Electricity Board, but that `electricity is not the point for my consideration. The electricity which is generated in the D.G. sets through the inputs utilised in the generating sets is the one which is for my consideration. It is an admitted fact that both RFO and LDO are used as fuel for the manufacture of Iron and Steel products. If this is the position, the generation of electricity and intermediary product cannot come in the way of granting the Modvat Credit in terms of the ratio laid down by the Tribunal in the case of Vam Organic Chemicals. It is further to be noticed that the Hon ble Supreme Court in the case of Rajasthan State Chemical Works have held that if any operation in the course of manufacture is so integrally connected with the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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