Modvat credit on furnace oil used for steam generation remained available despite mixed use for exempted and dutiable goods.

Rule 57C, as amended from 18.05.1995, permitted Modvat credit on inputs used to generate steam within the factory, and the phrase "for any other purpose" was read broadly to cover steam used in production connected with exempted or nil-rated goods as well as dutiable products. On that construction, common use of furnace oil for steam generation did not bar credit for the post-amendment period, and the assessee was not required to reverse the credit taken on furnace oil after 18.05.1995.

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Issues: Whether Modvat credit on furnace oil used for generation of steam was reversible for the period after 18.05.1995 when the inputs were used within the factory for manufacture of exempted or nil-rated goods as well as dutiable products.

Analysis: Rule 57C of the Central Excise Rules, 1944, as amended by the third proviso inserted with effect from 18.05.1995, allowed credit in respect of inputs used for generation of electricity or steam used for manufacture of final products or for any other purpose within the factory of production. The expression "for any other purpose" was read broadly to include use connected with production of goods exempted from duty or chargeable to nil rate, so long as the steam was generated within the factory. The prior view denying credit on the footing that common use of fuel for exempted goods barred the credit was not accepted for the post-amendment period.

Conclusion: For the period after 18.05.1995, the assessee was not liable to reverse the credit taken on furnace oil.

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