MODVAT credit on high speed diesel oil for captive power was denied; retrospective validation upheld.

Credit of duty on high speed diesel oil used in diesel generating sets for captive electricity generation was not admissible under the MODVAT scheme because the relevant Rule 57A notifications excluded that input from eligibility. Although Rule 57B and the amended Rule 57D referred to inputs used for electricity generation, the later explanation confined "inputs" to those specifically notified under Rule 57A, confirming the legislative intent to deny credit on high speed diesel oil. The Finance Act, 2000 validation provision was treated as clarificatory and retrospective, so no vested or accrued right could arise in respect of an input excluded from the scheme from the outset. The challenge to retrospective denial therefore failed.

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Issues: Whether credit of duty paid on high speed diesel oil used in diesel generating sets for captive generation of electricity was admissible under the MODVAT scheme during the relevant period, and whether the retrospective denial and validation under the Finance Act, 2000 could be challenged as taking away a vested or accrued right.

Analysis: The relevant notifications issued under Rule 57A of the Central Excise Rules, 1944 specifically excluded high speed diesel oil from the list of eligible inputs. Although Rule 57B and the amendment to Rule 57D referred to inputs used for generation of electricity, the explanation added later made it clear that the term inputs in Rule 57B meant only such inputs as were specified in a notification issued under Rule 57A. Read together, the scheme of the notifications and the rules showed a consistent legislative intention not to grant MODVAT credit on high speed diesel oil. Section 112 of the Finance Act, 2000 was treated as a validating and clarificatory provision, and the claim that the appellants had acquired any vested or accrued right was rejected because no such right could arise where the input itself was excluded from eligibility from the outset.

Conclusion: Credit of duty paid on high speed diesel oil was not admissible, and the challenge to the retrospective denial failed.

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