SHREE CEMENT LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) IN this group of petitions under Article 226 of the Constitution of INdia, disposed of by this common order, question involved is whether MODVAT credit is available on H.S.D. oil in terms of Rule 57-B of the Central Excise Rules, 1994 even after clarification made by adding Explanation under Notification No.5/98 dated 2.3.1998 to the effect that "inputs" mentioned in Rule 57-B refers only to such inputs as specified in notification under Rule 57-A? Earlier and subsequent to Notification No.5/98 dated 2.3.98, the CEGAT decided the issue in favour of the assessee. Thus, Section 112 of the Finance Act, 2000 has been enacted to validate denial of credit of duty paid on H.S.D. oil. This Validation Act has been challenged by way of amendment in the writ petitions. Thus, now the main question involved is the constitutional validity of Section 112 of the Finance Act 2000 and denial of credit of duty paid on H.S.D. oil used in Diesel Generating Set for generation of electricity for captive consumption i.e. manufacture of final product of cement.

(2.) FOR the convenience, we shall refer the facts of one of the petitions being D.B. Civil Writ Petition No.3635/97 filed by M/s. Shree Cement Limited. The petitioner Company is engaged in the business of manufacturing and selling Portland cement and has installed a Diesel Generating Set for generation of electricity for captive consumption in its factory premises. It is averred that the petitioner Company purchases HSD Oil for generation of electricity from Indian Oil Corporation Ltd./Hindustan Petroleum Corporation Ltd. through their sales Office/Depots in Rajasthan, cleared in sub-heading 2710.90 on payment of Central Excise Duty and the same is used as inputs/goods in the said Diesel Generating Set for generation of electricity which is used in the manufacture of final product cement or for other purposes in the petitioner's factory of production.

(3.) IN INdia Cements Ltd. vs. CC & CE, Hyderabad (1), the credit was denied on the ground that as HSD Oil classifiable under heading 27.10 was excluded from the coverage of goods eligible to the benefits of credit at item No.(iv) of the Table annexed to Notification No.8/95. The Tribunal found contradiction between the two Notifications i.e. No.8/95 and No.11/95. While Notification No.8/95 denied MODVAT credit benefit to HSD oil, without referring to purpose for which it was used, whereas by Noti- fication No.11/95, a second proviso was added to Rule 57-D allowing credit to specified duty 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. IN the opinion of the Tribunal, second proviso to Rule 57-D has been incorporated with specific object of incorporating inputs for generating electricity within the ambit of the MODVAT Scheme, as such, it prevails over exclusion notification No.8/95. The Tribunal held that MODVAT credit benefit shall be available on HSD oil subject to the satisfaction of the conditions provided under second proviso to Rule 57D. This decision was followed by another Bench of CEGAT in U.P. State Textile Corporation vs. CCE, Meerut (2).