Input credit on furnace oil used for captive power generation supported full waiver of pre-deposit and stay.

Furnace oil used to generate electricity consumed in the manufacture of dutiable yarn was treated as supporting input credit eligibility. The commentary notes that the scheme also permitted inputs to be sent out of the factory under Rule 4(5)(a) without denial of credit, provided the products were brought back and used in the factory of production. Credit was not to be refused merely because the furnace oil was not first received inside the factory, and the position was said not to be limited by the earlier Rule 57J requirement that intermediate goods fall under a Central Excise chapter heading. On that basis, a strong prima facie case for full waiver of pre-deposit and stay was found.

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Issues: Whether the appellant had made out a prima facie case for full waiver of pre-deposit and stay in respect of the demand.

Analysis: The input furnace oil was stated to have been used for generation of electricity consumed in the manufacture of the dutiable final product, namely yarn. The order treated this as supporting credit eligibility. It further noted that the scheme permitted sending inputs out of the factory under Rule 4(5)(a), with credit not being denied so long as the products were brought back and used in the factory of production. The order also observed that credit could not be denied merely because the furnace oil was not first received in the factory and that the position was not confined by the erstwhile Rule 57J requirement of intermediate goods falling only under a Central Excise chapter heading.

Conclusion: A strong prima facie case was found and full waiver of pre-deposit and stay were granted in favour of the appellant.

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