Modvat credit on fuel used for captive electricity generation was treated as prima facie admissible, supporting waiver of pre-deposit.

Modvat credit was examined in relation to Light Diesel Oil used as fuel for generating electricity consumed within the factory. The applicable amended notification restricted credit to 10% ad valorem, but the analysis relied on Rule 57D(2), which allows credit on inputs used for generation of electricity or steam used in manufacture of final products or for other purposes within the factory. The text notes that from 01.03.1997 Rule 57B expressly recognized such credit, and that a similar claim had already been accepted for the later period. On that basis, the position for the earlier period was treated as prima facie supportable, and interim relief was granted by way of waiver of pre-deposit and stay of recovery.

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Issues: Whether the appellants were entitled, for the relevant period, to Modvat credit at 15% ad valorem on Light Diesel Oil used as fuel for generation of electricity consumed within the factory, and whether this entitled them to waiver of pre-deposit and stay of recovery.

Analysis: The applicable notification regime restricted credit to 10% ad valorem after amendment, but the claim was examined with reference to Rule 57D(2), which permits credit on inputs used for generation of electricity or steam used for manufacture of final products or for any other purpose within the factory. It was noted that from 01.03.1997 Rule 57B expressly recognized credit for inputs used in generation of electricity for manufacture of final products, and that position had already been accepted in the appellant's favour for the later period. On that basis, the Revenue was held not to have a basis to deny the benefit for the earlier period, at least prima facie.

Conclusion: The appellants made out a prima facie case for the disputed credit and were entitled to waiver of pre-deposit and stay of recovery.

Final Conclusion: Interim relief was granted in favour of the assessee on the strength of the prima facie admissibility of Modvat credit on inputs used for generation of electricity within the factory.

Ratio Decidendi: Where credit on inputs used for generating electricity within the factory is expressly recognized for one period and the same legal principle is available in the governing proviso, a prima facie entitlement to similar credit may justify waiver of pre-deposit and stay.

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