Modvat credit on LDO used as burner fuel was allowed where it was not used for electricity generation.

LDO used as fuel in the burner for heating iron sheets and rods was treated as an eligible Modvat input because, on the accepted facts, it was not used to generate electricity. The dispute turned on the actual use of the fuel, and the pre-amendment position meant that inputs used for electricity generation were not yet specifically brought within the Modvat scheme. As LDO was used in the manufacturing process itself, Notification No. 4/94-C.E. (N.T.) applied and credit was available. The contrary Revenue premise was rejected.

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Issues: Whether LDO used in the burner as fuel for heating iron sheets and rods was an eligible input for Modvat credit under Rule 57A of the Central Excise Rules, and whether the credit was barred on the premise that the fuel was used for generation of electricity.

Analysis: The period in dispute preceded the amendment that specifically brought inputs used for generation of electricity within the Modvat scheme. The decisive question, however, was factual: whether LDO was in fact being used to generate electricity or was being used as fuel in the burner for heating the goods. On the facts accepted by the lower authorities, LDO was used as fuel in the manufacturing process, and not as an input for electricity generation. The benefit of Notification No. 4/94-C.E. (N.T.) was therefore available, and the Revenue's contrary premise was rejected.

Conclusion: LDO used as fuel for the manufacture of forgings was eligible for Modvat credit, and the Revenue's challenge failed.

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