Modvat credit for boiler fuel used to generate steam in manufacture was admissible under the amended input rules.

Modvat credit on light diesel oil used as boiler fuel to generate steam in the manufacture of butyl tubes was admissible because the amended input definition covered fuel used in manufacture and the notifications treated light diesel oil as an input. The steam generated was only an intermediate product, and Rule 57D(2) protected credit entitlement notwithstanding that stage of production. As the relevant period fell after the amendment, the amended regime applied, making denial of credit unsustainable and entitling the assessee to credit.

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Issues: Whether Modvat credit on light diesel oil used as fuel in the boiler for generating steam employed in the manufacture of butyl tubes was admissible under the Central Excise Rules, 1944.

Analysis: Light diesel oil was used as boiler fuel to generate steam for use in the manufacturing process of the final product. The relevant amendment had inserted "inputs used as fuel" within the scope of the definition of input, and the notifications specifically treated light diesel oil as an input. The steam generated in the course of manufacture was an intermediate product, and Rule 57D(2) protected credit entitlement notwithstanding the nature of that intermediate stage. The relevant period was after the amendment, so the amended regime applied.

Conclusion: Modvat credit on light diesel oil was admissible, and the denial of credit was unsustainable.

Final Conclusion: The assessee was entitled to Modvat credit on light diesel oil used for generating steam in the manufacture of butyl tubes, and the impugned orders were set aside.

Ratio Decidendi: Fuel used in the manufacture process falls within the input scheme where the governing rules and notifications so provide, and credit cannot be denied merely because the fuel is used to generate an intermediate product employed in manufacture.

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