Modvat credit restriction under Rule 57A did not extend to fuel inputs notified under Rule 57B before express amendment.

A Modvat credit ceiling under Notification No. 5/94-C.E. (N.T.), issued under Rule 57A, was treated as inapplicable to petroleum fuels notified under Rule 57B. The reasoning was that Rule 57B operated notwithstanding Rule 57A, so credit admissible for fuel inputs such as light diesel oil, LSHS and furnace oil could not be curtailed by a restriction attached only to Rule 57A unless the law was expressly amended. Later amendments aligning Rule 57A and Rule 57B to impose a 95% cap were viewed as confirming that the earlier 10% restriction did not extend to Rule 57B fuels during the disputed period.

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Issues: Whether the restriction of Modvat credit to 10% under Notification No. 5/94-C.E. (N.T.) applied to petroleum products used as fuel and notified under Rule 57B of the Central Excise Rules, 1944.

Analysis: Notification No. 5/94-C.E. (N.T.) was issued under Rule 57A of the Central Excise Rules, 1944 and prescribed a ceiling on credit. The disputed goods were fuels such as light diesel oil, LSHS and furnace oil. The reasoning adopted was that goods notified under Rule 57B stood on a different footing because that rule operated notwithstanding Rule 57A, and the credit allowed under Rule 57B could not be curtailed by a restriction attached to Rule 57A unless the law was expressly amended. The later amendments, by which both the notification under Rule 57A and Rule 57B itself were brought in line to impose a 95% cap, reinforced the view that the earlier restriction did not validly extend to fuel inputs under Rule 57B before that amendment.

Conclusion: The restriction of credit to 10% on the fuels was not applicable, and full credit was allowable for the period in dispute.

Ratio Decidendi: A credit restriction attached to a notification issued under Rule 57A cannot be automatically extended to inputs specifically notified under Rule 57B unless the statute or the rule is expressly amended to impose that restriction.

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