[Order per : Justice U.L. Bhat, President]. - Appellant engaged in manufacture of cement, has a captive power generation plant for the user of which HSD oil is necessary. Appellant filed declaration under Rule 57G of the Central Excise Rules, 1944 seeking to avail Modvat credit on HSD oil. Assistant Commissioner held that HSD oil is not eligible to the benefit of the Modvat Scheme in view of the Notification No. 8/95, dated 16-3-1995 which specifically excluded HSD oil from the purview of specified inputs. This order having been affirmed by the Commissioner (Appeals), the assessee has filed the present appeal.
2. Rule 57A of the Rules deals with applicability of the Modvat Scheme. It says that the provisions of Section AA shall apply to such finished excisable goods as the Government may specify in this behalf for the purpose of allowing credit of any duty of excise or additional duty as may be specified in such Notification paid on the goods used in or in relation to the manufacture of the said finished goods and for utilising the credit so allowed towards payment of duty of excise leviable on finished products, as may be specified in the Notification. In other words, as Rule 57A stood at the relevant time, Modvat Scheme would be applicable only if the relevant inputs and the relevant finished products are specified by the Government in the relevant Notification. The earliest Notification was 177/86 which did not specify HSD oil as an input eligible for Modvat credit. This position continued until Notification No. 8/95 came to be issued on 16-3-1995. Under this Notification, the modality of specification was altered; instead of listing the inputs eligible for Modvat, this Notification specified all eligible goods as eligible for the benefit except those specifically excluded in the Notification. It is pointed out that exclusion Clause 4 in the table to the Notification No. 8/95 took in HSD oil classifiable under Heading No. 27.10. It is not disputed that Notification No. 8/95 continues to hold the field even today. It is therefore contended for the Department that during the period in question in this case viz., 1995-96 HSD oil cannot be regarded as a specified input eligible for Modvat credit.
3. It is pointed out on behalf of the Appellant that this position cannot be accepted in view of the amendment introduced in Rule 57D of the Rules by the Notification No. 11/95, dated 16-3-1995. Rule 57 of the Rules, as it stood before the amendments, dealt with allowability of credit in respect of the inputs contained in waste or refuse or by-product. It is also clarified that credit shall not be disallowed, denied on the ground that any exempted material arises during the course of the manufacture of the final product. By Notification No. 11/95, two provisos were introduced. The 2nd proviso reads this :
“provided further that credit of specified duty shall be allowed in respect of the inputs which are used for generation of electricity used within the factory of production for manufacture of final products or for any other purpose.”
4. We have to consider the impact of this proviso on the specification made in Notification No. 8/95, both having been notified on the same day i.e. 16-3-1995. According to Shri Victor Tyagaraj, SDR, the second proviso to Rule 57D can be regarded as referring only to those inputs used in generation of electricity which are otherwise inputs specified in Notification No. 8/95. According to Shri M. Chidananda Rao, the purpose of the 2nd proviso to Rule 57D is only to carve out from the general pattern of the eligibility under Notification No. 8/95, certain inputs used for the purposes specified in the proviso and subject to the conditions prescribed by the proviso.
5. There is an apparant contradiction between Notification Nos. 8/95 and 11/95. Notification No. 8/95 denies Modvat benefit of HSD oil, but without referring to the purpose for which shall oil is to be used. In other words, HSD oil used for any purpose or manufacture of any product is rendered ineligible for the benefit of Modvat Scheme by virtue of specification in Notification No. 8/95. The effect of the 2nd proviso to Rule 57D is quite distinct and contrary viz., to affirm that credit of specified duty shall be allowed in respect of inputs used for generation of electricity, used within the factory of production for manufacture of final products or for any other purposes. It is clear that 2nd proviso to Rule 57D has been incorporated with the specific object of incorporating inputs for generation of electricity (subject to the conditions in proviso) within the ambit of the Modvat Scheme, though one of the inputs, HSD oil as such is not specified for that purpose of Rule 57A. In our opinion the proviso incorporated in Rule 57D must, insofar as the inputs used for generation of electricity are concerned, must prevail over the non-specification or exclusion in Notification No. 8/95. In this view, we hold that HSD oil referred to in the Declaration submitted by the Appellant, if it satisfies the conditions in 2nd proviso of the Rule 57D, would be eligible for benefit of Modvat credit. The impugned order is set aside and appeal is allowed.