2015 (10) TMI 684 - HC - Central Excise

Court Denies Modvat Credit for High-Speed Diesel Used in Power Generation at Cement Plant

The court held that the petitioner was not entitled to Modvat credit for high speed diesel oil used in generating captive power for its cement plant. The ... Denial of CENVAT Credit - whether the petitioner, i.e., assessee is entitled to the Modvat credit for the high speed diesel oil used by it for generation of captive power for its cement plant. - Held that:- Assessing Officer, the Appellate Commissioner and the Tribunal took uniform view that the petitioner is not entitled to the Modvat credit. - high speed diesel utilized by the petitioner in generating power can be treated as one of the inputs for manufacture of the end product, viz., cement. However, not every item, which suffered Excise duty, which goes into the manufacture of item, would qualify for the Modvat credit. Rule 57B of the Central Excise Rules, 1944 enlists the goods or items, which qualify for the credit. The high speed diesel oil was never mentioned in the Rule and, by process of interpretation, in certain cases, it was allowed. - Clause 108 of the Act, in its legislated form, was challenged in several matters. In Sangam Spinners Ltd. v. Union of India - [2011 (3) TMI 4 - Supreme Court], the Hon’ble Supreme Court upheld the validity of the Act. - Decided against assessee. Issues:1. Entitlement to Modvat credit for high speed diesel oil used for generating captive power for a cement plant under the Central Excise Act, 1944.Analysis:The judgment involved a batch of Central Excise Reference Cases under Section 35H(1) of the Central Excise Act, 1944, addressing the issue of whether the petitioner, an assessee, is entitled to Modvat credit for high speed diesel oil used in generating captive power for its cement plant. The Assessing Officer, Appellate Commissioner, and the Tribunal held that the petitioner is not entitled to the Modvat credit, citing Section 112 of the Finance Act, 2000, as clarificatory and not having retrospective effect.The court considered the argument that high speed diesel used for power generation could be treated as an input for manufacturing cement but clarified that not every item subject to Excise duty qualifies for Modvat credit. Rule 57B of the Central Excise Rules lists the goods eligible for credit, and high speed diesel oil was not explicitly included. The court noted that while there were interpretations allowing such credit in the past, the Act aimed to eliminate uncertainty by denying credit for duty paid on high speed diesel oil used in manufacturing excisable goods.The relevant clause of the Act, Clause 108, was highlighted, which denied credit for duty paid on high speed diesel oil used in manufacturing excisable goods retrospectively from March 16, 1995. The legislative intention was to disallow such credit and validate past actions based on this amendment to address conflicting judicial decisions. The Act's validity, including Clause 108, was upheld by the Supreme Court in a previous case, Sangam Spinners Ltd. v. Union of India.Ultimately, the court dismissed the Central Excise Reference Cases and declined to answer the questions framed therein, affirming the denial of Modvat credit for high speed diesel oil used in manufacturing excisable goods for power generation in a cement plant.