Modvat credit on diesel used for captive power generation was available under Rule 57B despite exclusion under Rule 57A.

Rule 57B operated as a separate enabling provision for specified inputs and, through its non-obstante clause, had overriding effect to the extent of its language. Modvat credit on high speed diesel oil used for captive generation of electricity could not be denied merely because the same item was excluded from eligible goods under Rule 57A and the notification issued under that rule. Where an input was specifically covered by Rule 57B, duty-paid credit remained available. On that basis, the credit on the disputed diesel oil was treated as valid and the demand and penalty were unsustainable.

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Issues: Whether Modvat credit on high speed diesel oil used for captive generation of electricity was admissible under Rule 57B of the Central Excise Rules, 1944 notwithstanding its exclusion from the eligible goods under Rule 57A and the notification issued thereunder.

Analysis: Rule 57B was introduced to extend Modvat credit to specified inputs outside the scheme of Rule 57A and contained a non-obstante clause. On a plain reading, that clause gave Rule 57B overriding effect to the extent intended by its language. Where a particular input was specifically covered by Rule 57B, credit of duty paid thereon could not be denied merely because the same item stood excluded under Rule 57A or the notification issued under that rule. The rule-making scheme showed that Rule 57B operated as a separate enabling provision for specified inputs, including those used for generation of electricity consumed in manufacture.

Conclusion: Modvat credit on the disputed high speed diesel oil was rightly taken and the demand and penalty could not stand.

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