Modvat credit on furnace oil used as factory fuel was admissible under the existing rule framework.

Modvat credit was admissible on furnace oil used as fuel in the factory, because Rule 57A treated fuel as an input with effect from 1-3-1994 and the oil was used to generate heat for melting aluminium and drying sand moulds. The later insertion of clause (d) in the explanation to Rule 57F did not take away credit already available under the existing rule framework. On these facts, the furnace oil qualified as an eligible input and the assessee was entitled to credit.

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Issues: Whether Modvat credit was admissible on furnace oil used as fuel in the factory for the relevant period, including the period before the amendment bringing fuel within the explanation to Rule 57F.

Analysis: Rule 57A, by its explanation, treated fuel as an input with effect from 1-3-1994. The furnace oil was used in the factory as fuel for the burner, and the heat generated was utilised for melting aluminium and drying sand moulds. On these facts, the use of furnace oil as fuel brought it within the eligible inputs for credit. The later insertion of clause (d) to the explanation to Rule 57F did not defeat the entitlement already available on the basis of the existing rule framework.

Conclusion: Modvat credit on furnace oil was admissible and the assessee was entitled to it.

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