2009 (3) TMI 109 - HC - Central Excise

Court allows MODVAT credit on Light Diesel Oil for manufacturing final products despite some products cleared without duty payment.

The High Court of Calcutta ruled in the case of CEX-v-23-2007 that the respondent was entitled to claim MODVAT credit on Light Diesel Oil used in ... Cenvat / Modvat Credit – Use of LDO (Fuel) for generation of electricity - manufacturer used the inputs as fuel for generation of electricity which electricity in turn was used in the factory for manufacture of both excisable goods cleared upon payment of duty and Sulphuric Acid without payment of duty cannot be denied the benefit of MODVAT credit because the respondent removed Sulphuric Acid from its factory premises to another factory premises of its own following Chapter X Procedure without complying with the provisions contained in Rule 57CC(1) and (9) of the Central Excise Rules. In fact, those Rules are not applicable when the inputs are used as fuel. – Decision of the Tribunal allowing Modvat credit affirmed. The High Court of Calcutta, in the case of CEX-v-23-2007, heard an appeal against an order by the Customs, Excise and Service Tax Appellate Tribunal. The Tribunal had allowed the respondent's appeal, setting aside an order of the Commissioner of Central Excise. The main question was whether the respondent could claim MODVAT credit on Light Diesel Oil (LDO) used in the manufacture of final products, some of which were cleared without duty payment. The appellant argued that the respondent did not maintain separate inventory for the LDO used in generating electricity for manufacturing products. The respondent contended that since the LDO was used as fuel for electricity generation, no separate inventory was required. The Court examined Central Excise Rules 1944, including Rules 57B, 57C, and 57CC, and concluded that the respondent was entitled to MODVAT credit. The Court dismissed the appeal and set aside the penalty imposed by the Assistant Commissioner of Central Excise. The decisions cited by the Tribunal were deemed inapplicable to the case. The judgment was delivered by Sankar Prasad Mitra, J., with agreement from Pinaki Chandra Ghose, J.