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TMI Blog2007 (7) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... eal No. 6465-6475 of 2001 - Commr. of Central Excise & others v. M/s. Solaris Chemtech Ltd. and others (earlier known as 'M/s. Ballarpur Industries Ltd.'). 4. Low Sulphur Heavy Stock (LSHS) is used by the assessees as fuel for generating electricity which in turn is captively consumed for the production of caustic soda and cement. 5. Rule 57A (MODVAT Rule) reads as under: "Rule 57A. Applicability. - (1) The provisions of this section shall apply to such finished excisable goods (hereinafter referred to as the "final products"), as the Central Government may, by notification in the Official Gazette, specify in this behalf, for the purpose of allowing credit of any duty of excise or the additional duty under section 3 of the Customs Tariff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aging materials is being availed of for packaging any final products; (iii) packaging materials the cost of which is not included or had not been included during the preceding financial year in the assessable value of the final products under section 4 of the Act; (iv) cylinders for packing gases; (v) plywood for tea (chests; or) (vi) bags or sacks made out of fabrics (whether or not coated, covered or laminated with any other material) woven from strips or tapes of plastics." 6. Explanation clause (c) was added by Notification No. 4/94, dated 1-3-94. This clause is the bone of contention. 7. The assessees contend that LSHS fall within the ambit of Explanation clause (c). The Department's contention is that these inputs are utilized f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that time the Government made it clear that inputs used as fuel were entitled to MODVAT credit. That fuel either utilized directly or for generating electricity, as an intermediary product, is integrally connected with several operations which results in the emergence of the final product, namely, cement/caustic soda. It is important to note that with out utilization of LSHS, it is not possible to manufacture cement/caustic soda. The electrolysis process is dependent on continuous flow of electricity. If there is disruption in the supply of electricity from the Electricity Board then the entire plant of the assessees would fail and the manufacture of cement/caustic soda would not take place. Therefore, LSHS would come within the ambit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is interesting to note that the said expression, namely, "in relation to" also finds place in the extended definition of the word "manufacture" in Section 2(f) of the Central Excises and Salt Act, 1944 (for short, 'the said Act'). It is for this reason that this Court has repeatedly held that the expression "in relation to" must be given a wide connotation. The Explanation to Rule 57A shows an inclusive definition of the word "inputs". There fore, that is a dichotomy between inputs used in the manufacture of the final product and inputs used in relation to the manufacture of final products. The Department gave a narrow meaning to the word "used" in Rule 57A. The Department would have been right in saying that the input must be raw-material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to manufacture". In the present case, the LSHS is used to generate electricity which is captively consumed. With out continuous supply of such electricity generated in the plant it is not possible to manufacture cement, caustic soda etc. Without such supply the process of electrolysis was not possible. Therefore, keeping in mind the expression "used in relation to the manufacture" in Rule 57A we are of the view that the assessees were entitled to MODVAT credit on LSHS. In our opinion, the present case falls in clause (c), therefore, the assessees were entitled to MODVAT credit under Explanatory clause (c) even before 16-3-95. Inputs used for generation of electricity will qualify for MODVAT credit only if they are used in or in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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