2002 (1) TMI 1122 - AT - Central Excise

Summary

Issues:
1. Denial of Modvat credit for capital goods received in 1994.
2. Interpretation of Rule 57Q regarding Modvat credit utilization.
3. Application of Board's Circular No. 88/88/94-CX.
4. Tribunal decisions on Modvat credit utilization before installation.
5. Reversal of Modvat credit by the appellants.

Analysis:
The appellant's appeal before the Appellate Tribunal CEGAT, Kolkata concerned the denial of Modvat credit for capital goods received in 1994. The appellant contended that they were denied the benefit of Modvat credit due to entries in their RG 23C records before the installation and utilization of the capital goods in the manufacture of final products. The appellant argued that Rule 57Q, as amended, should not apply retroactively before 1-1-96. They clarified that although the credit was entered into the Modvat account in 1994, it remained unutilized until the actual installation and utilization of the capital goods in their factory.

The appellant's representative argued that the authorities wrongly relied on Board's Circular No. 88/88/94-CX, which, according to the appellant, only debars the utilization of credit. Referring to Tribunal decisions in similar cases, the appellant contended that Modvat credit could be taken and utilized before the installation of machinery. The appellant had already started production using the capital goods in question, supporting their claim for the Modvat credit.

The Revenue, represented by a JDR, insisted that the appellant contravened Modvat rules by taking credit in 1994 when the machinery was not installed and used until 2000. The Revenue argued that as per Rule 57Q, credit should only be taken after the installation of machinery, and thus, the credit availed by the appellant should be reversed.

After considering the arguments from both sides, the Tribunal found that the Revenue's objection was primarily about the timing of taking credit in the Modvat account. The Tribunal concluded that even if the credit entry in 1994 was to be reversed, the appellant could re-avail the credit in 2000 when the capital goods were actually installed and used. Since the credit remained unutilized until the production of final products in the factory, the Tribunal set aside the impugned order denying credit to the appellant. The appeal was allowed with consequential relief to the appellants.