Modvat credit for diesel used to generate factory electricity upheld despite input-list exclusion and later notification objection.

High speed diesel oil used within the factory to generate electricity for manufacture of final products was treated as eligible for Modvat credit. The Tribunal held that the second proviso to Rule 57D governed inputs used for electricity generation in the factory and prevailed over a contrary exclusion in the notification framework. It rejected the argument that diesel oil was ineligible merely because it was not specifically listed as an input under Rule 57A or 57B, and also declined the contention that a later notification operated retrospectively to bar credit, as the notification was stated to take effect from its publication date.

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Issues: Whether high speed diesel oil used as fuel for generation of electricity for manufacture of final products was eligible for Modvat credit.

Analysis: The credit claim was rejected below on the footing that high speed diesel oil was not specified as an input under Rule 57A and therefore could not qualify under Rule 57B. The Tribunal applied its earlier ruling that the second proviso to Rule 57D governs inputs used for generation of electricity within the factory for manufacture of final products or for any other purpose, and that this entitlement prevails over a contrary exclusion in the notification framework. Since the diesel oil was used for generation of electricity within the factory for manufacture of final products, the same principle applied. The contention that a later notification was retrospective and barred credit was not accepted because the notification itself was stated to operate from its publication date.

Conclusion: High speed diesel oil used for generation of electricity within the factory for manufacture of final products was eligible for Modvat credit, and the assessee succeeded.

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