2009 (11) TMI 302 - HC - Central Excise

Court rules High Speed Diesel (HSD) not an 'input' for Modvat credit, upholding government's notification authority.

The court ruled that High Speed Diesel (HSD) used for generating electricity did not qualify as an 'input' under Rule 57A and 57B of the Central Excise ... Cenvat-HSD Oil- whether High Speed Diesel (HSD) utilized by the Petitioners Company as a fuel for generating electricity to run their factory which is engaged in the manufacture of yarn is an ‘input’ within the meaning of Rule 57A and 57B of the Central Excise Rules and the petitioners are entitled to claim Modvat on the same? Held that- In any event here we are only considering the question as to what is the effect of notification specifically excluding HSD from the category of inputs. I may be an input but once the Government in its wisdom exercises its powers under Rule 57A and specifically excludes HSD oil from the category of inputs on which the benefit of excise paid can be taken, the petitioner was not entitled to claim Modvat credit on this item. Hence, the petitioner was not entitled to claim credit of the excise paid on HSD oil which had been specifically excluded. Issues:Interpretation of Rule 57A and 57B regarding the eligibility of High Speed Diesel (HSD) as an 'input' for Modvat credit.Analysis:1. Issue of Eligibility of HSD as an 'Input':The central issue in this judgment revolves around determining whether High Speed Diesel (HSD) utilized by a company for generating electricity to run its factory qualifies as an 'input' under Rule 57A and 57B of the Central Excise Rules, thus entitling the company to claim Modvat credit on the excise paid for HSD. The petitioner argued that the notification excluding HSD from eligible inputs was invalid, while the respondent contended that Modvat credit can only be claimed for inputs specified under Rule 57A. The court analyzed the provisions of Rule 57A and 57B, emphasizing that the government has the authority to specify inputs for Modvat credit. The court ruled that since HSD was specifically excluded from eligible inputs, the petitioner was not entitled to claim Modvat credit on HSD.2. Interpretation of Rule 57A and 57B:The court delved into the interpretation of Rule 57A and 57B to resolve the dispute. Rule 57A empowers the government to specify finished excisable goods and inputs for Modvat credit, while Rule 57B allows manufacturers to claim credit on specified inputs, including those used for generating electricity. The court highlighted that Rule 57B clarifies that Modvat credit can only be taken for inputs specified in a notification under Rule 57A. Therefore, the exclusion of HSD from eligible inputs through a notification was deemed valid, and the petitioner's claim for Modvat credit on HSD was dismissed.3. Precedent and Legal Interpretation:The judgment referenced a previous Supreme Court case to distinguish the current scenario. The court noted that the Supreme Court's ruling in a prior case regarding Low Sulphur Heavy Stock as an input did not address the impact of a notification excluding specific inputs. It was emphasized that the language and context of Rule 57A and 57B in the present case differed significantly from the earlier interpretation. Ultimately, the court concluded that even if HSD could be considered an input, the government's exclusion of HSD through a notification under Rule 57A rendered the petitioner ineligible for Modvat credit on HSD.4. Final Decision:After thorough analysis and consideration of legal provisions, precedents, and arguments presented by both parties, the court dismissed the petition, ruling in favor of the respondent. The petitioner's claim for Modvat credit on HSD was rejected, and costs were assessed against the petitioner. The judgment clarified the importance of adherence to specified rules and notifications in claiming Modvat credit, highlighting the government's authority to exclude certain inputs from eligibility based on legislative provisions.