Modvat credit on captive power fuel was fully admissible before 1-6-1998, then limited to 95% thereafter.

Modvat credit on duty-paid LSHS and furnace oil used to generate electricity captively consumed in manufacture was governed by Rule 57B of the Central Excise Rules, 1944 and the amending notifications of 1997 and 1998. For the period up to 1-6-1998, full credit remained admissible on such fuel inputs used for captive power generation. From 2-6-1998, the amended Rule 57B(1) restricted admissible credit to 95% for the relevant fuel. The departmental challenge therefore succeeded only for the later period, while full credit continued to apply for the earlier period.

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Issues: Whether full Modvat credit was admissible on duty paid fuel used in generating electricity captively consumed in manufacture, and whether the credit was restricted to 10% and later to 95% for the relevant periods.

Analysis: The issue turned on Rule 57B of the Central Excise Rules, 1944, the amending Notification No. 14/97-C.E. (N.T.) dated 3-5-1997 with retrospective effect under Section 87 of the Finance Act, 1997, and the later amendment by Notification No. 21/98-C.E. (N.T.) dated 2-6-1998. For the period up to 1-6-1998, the credit was held to be fully admissible on LSHS and Furnace Oil used for generating electricity captively consumed in manufacture. For the period from 2-6-1998, the amended Rule 57B(1) limited such credit to 95%.

Conclusion: Full credit was admissible up to 1-6-1998, and only 95% credit was admissible thereafter; the departmental challenge therefore failed.

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