MODVAT credit on furnace oil follows the amended credit rule, with retrospective validation governing the covered period.

Furnace oil credit under the MODVAT scheme was treated as allowable only to the extent the amended Rule 57B brought fuel within the credit-allowing provision. The retrospective validation in Section 87 of the Finance Act, 1997 controlled entitlement for the covered period, and the 10% ad valorem restriction did not apply to credit availed under the substituted Rule 57B. Reliance on Rule 57D was considered misplaced, and the impugned order sustaining the credit position only for the later period was maintained.

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Issues: Whether the assessee was entitled to MODVAT credit on furnace oil under Rule 57B of the Central Excise Rules, 1944 and whether Section 87 of the Finance Act, 1997 restricted such credit for the relevant period.

Analysis: The credit was originally taken under Notification No. 5/94-CE (NT) issued under Rule 57A of the Central Excise Rules, 1944. By Notification No. 6/97-CE (NT), Rule 57A and Rule 57B were substituted and fuel was specifically brought within Rule 57B. Section 87 of the Finance Act, 1997 retrospectively validated the notification dated 03.05.1997 for the specified period, but the restriction to 10% ad valorem did not apply to credit availed under Rule 57B as substituted. The Tribunal followed the Supreme Court's view that, for the relevant period, credit on furnace oil was allowable under the amended rule and the assessee's reliance on Rule 57D was misplaced.

Conclusion: The assessee was not entitled to succeed on the challenge to the demand for the earlier period, and the Commissioner (Appeals)' order granting credit only for the later period was upheld.

Final Conclusion: The impugned order was sustained, with the Tribunal declining to interfere and dismissing both appeals.

Ratio Decidendi: Where a statutory amendment specifically places furnace oil within the credit-allowing provision, the retrospective validation under the validating enactment controls the credit entitlement for the covered period, and credit cannot be claimed outside the scope of the amended rule.

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