2003 (3) TMI 571 - AT - Central Excise

Summary

Issues: Disallowance of Modvat credit for capital goods received before 1-4-2000, entitlement to Cenvat credit, conversion of Modvat credit to Cenvat credit, applicability of Rule 57Q and Rule 57AG, impact of change in excise duty scheme.

In this judgment, the dispute centered around the disallowance of Modvat credit for capital goods received before 1-4-2000, as the appellant was working under Section 3A of the Central Excise Act, 1944, making them ineligible for the credit under Rule 57Q. The exclusion clause of Rule 57Q specified that Modvat credit on capital goods was not available if the final product was specific types of steel products. The appellant's claim for Modvat credit was rejected by the authorities due to this exclusion. The appellant argued that they should be entitled to the credit upon installation of the machinery on 1-4-2000, which should then be converted into Cenvat credit.

The judge noted that the appellant's capital goods were received before 1-4-2000 when they were not entitled to the credit under Rule 57Q, despite completing installation on 1-4-2000. The introduction of the Cenvat credit provision on or after 1-4-2000 meant that the appellant could not avail of Cenvat credit for goods received before this date. Rule 57AG allowed for the conversion of Modvat credit to Cenvat credit if earned prior to 1-4-2000 and unutilized, which did not apply in this case as the credit was not earned before the specified date.

Additionally, the Commissioner (Appeals) referred to a Board's Circular clarifying that the duty payment basis for certain steel units changed from capacity-based to ad valorem from 1-4-2000, affecting the eligibility of these units to claim credit on capital goods received between 1-9-97 and 31-3-2000. Ultimately, the judge found no merit in the appeal and rejected it based on the above analysis and legal provisions.

Overall, the judgment emphasizes the strict application of rules regarding the timing of credit entitlement, the impact of regulatory changes on credit availability, and the specific exclusion clauses under the Central Excise Act, leading to the dismissal of the appellant's claim for Modvat and Cenvat credit for capital goods received before 1-4-2000.