Modvat credit on fuel used for captive steam and power generation was admissible even before the 16-3-1995 amendment.

Modvat credit under Rule 57A was held admissible for LSHS oil and furnace oil used as fuel to generate steam and electricity in the manufacturing process prior to 16-3-1995. The Tribunal applied the broader construction that fuel oils used for captive generation of electricity, where that electricity was then used in manufacture of final products, qualified as inputs used in or in relation to manufacture. It treated steam and electricity produced from such fuel as part of the manufacturing chain and read the pre- and post-16-3-1995 explanations consistently with that interpretation. The Revenue's appeal was rejected.

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Issues: Whether Modvat credit was admissible on LSHS oil and furnace oil used as fuel for generating steam and electricity prior to 16-3-1995.

Analysis: The admissibility of credit had to be determined on the true construction of Rule 57A of the Central Excise Rules, 1944 as it stood prior to 16-3-1995. The Tribunal relied on the Larger Bench view that fuel oils used for captive generation of electricity, which was then used in the manufacture of final products, were inputs used as fuel in or in relation to manufacture. The reasoning treated the earlier and later explanations to Rule 57A as supporting the same broad understanding of fuel use, and applied the settled interpretation that steam and electricity generated from such fuel are part of the manufacturing chain.

Conclusion: Modvat credit was admissible even for the period prior to 16-3-1995, and the Revenue's appeal was rejected.

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