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TMI Blog2003 (12) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... n in German Remedies case[ 2002 (4) TMI 140 - CEGAT, MUMBAI] . In the case of Ballarpur Industries [ 1999 (12) TMI 88 - CEGAT, NEW DELHI - LB] , the question was whether Modvat credit of the duty paid on fuels used in diesel generating sets for generation of electricity for manufacture of excisable goods was admissible to the assessees under Rule 57A. A plea was raised by the Revenue that electricity was not excisable goods, and therefore, availment of Modvat credit on the input used for generating electricity was hit by the provisions of Rule 57D(2), which provided that credit of duty on any inputs shall not be denied or varied on the ground that any intermediate products have come into existence during the course of manufacture of the final product and that such intermediate products are, for the time being, exempt from the whole of the duty of excise leviable thereon or are chargeable to nil rate of duty. The Larger Bench held that Rule 57D(2) did not set out any condition precedent for extending Modvat credit to the assessee and that non-fulfilment of any condition could not result in any disentitlement of the assessee to the credit. This ratio of the decision of the Larger Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had a captive thermal power plant (hereinafter referred to as 'CPP') of 12.8 MW capacity having three boilers, one steam turbine and a generator. The steam generated in these boilers was used to generate electricity which was used captively for manufacture of sponge iron. The surplus electricity (which formed a substantial part of the electricity generated from the CPP) was transmitted to the Raisen factory through the Grid of MP Electricity Board. M/s. HEG had availed credit of the duty paid on various components, spares and accessories of the CPP during the aforesaid period (October, 95 to September, 2000) under Rule 57Q (upto 31-3-2000) and under Rule 57AB (from 1-4-2000) of the Central Excise Rules, 1944 and utilised the credit for payment of duty on their final product (sponge iron). The show cause notices sought to recover the entire duty under Rule 57U/Rule 57AH read with Section 11A of the Central Excise Act on the main ground that the credit was not admissible for non-fulfilment of condition set out in the proviso to sub-rule (2) of Rule 57R inasmuch as the electricity generated from the CPP had not been fully utilised within the factory for manufacture of sponge iron as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Electricity? Before us, both the sides have addressed the above issues with reference to the relevant Rules and case law. The learned SDR submitted that as the electricity generated from the CPP fabricated out of the various components, parts and accessories on which the Modvat credit in question was taken by the party was not an excisable product, availment of the credit was hit by the prohibition contained in sub-rule (1) of Rule 57R. He was pressing into service the proviso to the sub-rule. The learned SDR also heavily relied on the provisos to sub-rule (2) of Rule 57R with particular emphasis on the second proviso which was in force during the first half of the period of dispute. He submitted that, as the entire electricity generated by the CPP had not been used within the factory, the condition laid down in the 2nd proviso was not fulfilled for capital goods duty credit. On the other hand, the learned Counsel for the respondents argued that nothing contained in sub-rule (1) or sub-rule (2) of Rule 57R could be relied upon to deny the Modvat credit which was otherwise admissible to the respondents under the substantive provisions of Rule 57Q/Rule 57AB. It was argued that sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bled the party to avail Modvat credit on the capital goods used for generation of electricity even for purposes other than for manufacture of sponge iron. Hence the fact that a part of the electricity generated was wheeled out through MPEB grid to the Raisen factory did not detract from their right to avail Modvat credit on the components, parts, etc., of the CPP. In his rejoinder, the learned SDR submitted that sub-rule (2) of Rule 57R had been enacted with a specific purpose and was not a superfluous provision. Where the conditions set out under that provisions were not fulfilled, the requirements of Rule 57Q also remained unfulfilled. Further, the DR submitted that the cited case of Ballarpur Industries was distinguishable inasmuch as, in that case, what was considered was the input credit scheme and not capital goods credit scheme. He also sought to distinguish the cited case of German Remedies by submitting that sub-rule (2) of Rule 57R was not considered in that case. 5. We have carefully examined the submissions. Only four grounds have been raised in the present appeal. Relying on sub-rule (6) of Rule 57Q, which came into force on 1-3-97, the appellant has, under Ground No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the subsequent period. But it appears to us that the sub-rule (with the relevant proviso) was in force beyond the said date also. This apart, we find, after carefully examining the legislative history of the capital goods credit scheme, that the learned Commissioner has rightly found that, under the provisions of Rule 57Q (up to 31-3-2000) and the new Rule (from 1-4-2000), the respondents were entitled to avail Modvat credit on such capital goods, not affected by the provisions of Rule 57R(2). We are in full agreement with the view taken by the Commissioner and are supported by the Larger Bench decision in Ballarpur Industries case as also the decision in German Remedies case (supra). In the case of Ballarpur Industries, the question was whether Modvat credit of the duty paid on fuels used in diesel generating sets for generation of electricity for manufacture of excisable goods was admissible to the assessees under Rule 57A. A plea was raised by the Revenue that electricity was not excisable goods, and therefore, availment of Modvat credit on the input used for generating electricity was hit by the provisions of Rule 57D(2), which provided that credit of duty on any inputs shal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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