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TMI Blog1996 (2) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed of the benefit of the Modvat credit on the inputs like furnace oil, low sulphur heavy stock and light diesel oil in terms of Rule 57A of the Central Excise Rules for the period from November, 1994 to April, 1995. The aforesaid three inputs are used in the manufacture of final product and in the course of such use, steam emerges at the intermediate stage which is further used by the applicants within the factory for the manufacture of declared final product. The aforesaid three items are also used as fuel directly in the fire heaters for heating DOWTHERM. 4. A show cause notice was issued on 15-5-1995 proposing to deny Modvat credit for the period from November, 1994 to April, 1995 on the said three items used in above manner. Show cause notice read inter alia as under :- "M/s. Reliance Industries has availed Modvat credit on the inputs as shown in the Annexure A as these inputs are used in the manufacture of items falling under Heading No. 28 Which is exempted from payment of central excise duty or chargeable to NIL rate of duty as per Notification No. 217/86-C.E., dated 2-4-1986 and 67/95, dated 16-3-1995. Whereas it also appears that Reliance Industries Ltd. has fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... few sub-heading of chapter ) of the Central Excise Tariff under list of inputs. Chapter 27 pertains to mineral fuels and similar products. In pursuance of these amendments, the assessee started availing of duty period on Chapter 27 products like light diesel oil, low sulphur heavy stock and furnace oil". "The words and phrases "subject to the provisions of this section" in Rule 57A are significant for appreciating the scope of this provision. A glimpse of other provisions of this section (that of Section AA of Chapter V of Central Excise Rule, 1944) , both as prevailing during the material time and thereafter, would reveal that under Notification No. 17/95-C.E. (N.T.), dated 18-5-1995. I also find benefits envisaged under the said notification would be available with perspective effect and not retrospective." "After careful examination of the facts and circumstances of the present proceedings, I therefore, find that the credit of duty paid on imports, mainly the three inputs used as fuel for generation of steam which in turn was used for manufacture of final products by the assessee within the factory of production will not be available for period November, 1994 to April, 1995. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 1989 (39) E.L.T. 72 (Tribunal) = 1989 (20) ECR 131. He would state that in Hardillia Chemical case supra the Tribunal also relied on the judgment of the Supreme Court in the case of Indian Farmers Co-operative Ltd. v. C.C. Ex., Ahmedabad - 1996 (86) E.L.T. 177 (S.C.) = 1996 (15) RLT 498 wherein it was held that Ammonia used in water treatment, steam generation, inert gas generation and effluent treatment plants are to be treated as used in the manufacture of fertiliser were entitled to be fit of Notification 187/61. Shri Sridharan would also urge us to follow the judgment of the Tribunal in the case of Ashwin Vanaspathi Industrial (P) Ltd. v. Collector of Central Excise - 1990 (70) E.L.T. 754 (Tribunal) where Tribunal held that any distinct excisable goods which may come into existence in the course of manufacture of the final product has to be taken as an intermediate product and even if that excisable product is exempt from payment of duty under Rule 57D(2). Tribunal had held in that case also that the input used therefor remains eligible to get Modvat credit. He also invited our attention to the decision of the Tribunal in the case of C.C. Ex., Pune v. Sandvik Asia - Order No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice would challenge the correctness of the appellants of taking the Modvat credit. Shri Sridharan's assessment of the department's case indicated by us in the earlier portion of the order is correct, as it will be clear from the text of the show cause notice reflected in the earlier part of this order. Steam is one of the items mentioned in Modvat scheme for eligibility or input duty credit. 10. Let us examine the question with reference to the decided cases. In the case of Hardillia Chemicals Ltd. v. Collector of C.Ex. Pune, by Order No. 556/96 in Appeal 3709/90-C the Tribunal was concerned with the question of eligibility of phenolic residue used in the manufacture of Pherwal and Acetonic (final products) to the benefit of Notification 217/86, dated 2-4-1986. The benefit of Modvat credit has been denied on the ground that phenolic residue is used in the manufacture of steam which is a final product and which is exempt from duty. The Tribunal following decision :- (a) Tribunal decision in the case of Vam Organic Chemicals - 1989 (39) E.L.T. 72 (Tribunal) = 1989 (20) ECR 131 and (b) the Supreme Court in the case of IFFCO v. C.C. Ex. - 1996 (86) E.L.T. 177 had held that Modva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e available for the period November, 1994 to April, 1995". Then the case of the appellants squarely falls within Rule 57D(2) of the C. Excise Rules. Therefore, this is what it has been argued by Shri Sridharan with which we agree. In the Sandvik Asia Ltd.'s case supra Ld. Single Member of the Tribunal has also held in favour of the assessee in the same manner. In this point also appellant suceeds. One more point needs mention - if the credit can be taken for such inputs after April, 1995, then how can the same be denied earlier? It is because (a) there is no change in the manner of production of final product after April, 1995 and (b) there was no such ground made out in the show cause notice. In all the adjudication proceedings under Central Excise Act the initiation of proceedings are made by issue of show cause notice clearly mentioning the grounds/basis. If the show cause notice does not mention the same, how can the adjudicating authority come to the conclusion against the assessee on that basis. This will go beyond the show cause notice. It was nobody's case that the assessee appellant has changed the manner or method or production. Hence in this point also the assessee app ..... 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