2004 (4) TMI 335 - AT - Central Excise

Summary

Issues: Denial of Modvat credit on capital goods and imposition of penalty

Analysis:
1. The appeal was filed against the denial of Modvat credit amounting to about Rs. 2 crore on capital goods, specifically Band Building Machine and Triplex Extrusion Line Machine, along with the imposition of an equal amount as a penalty. The denial was based on the ground that the credit was taken before the machines were put to use, as determined by the Adjudicating Authority based on the 3CD report.

2. The appellants argued that the impugned order contradicted the relevant rule, Rule 57Q, and Circular No. 167/1/96-CX. dated 3-1-1996. They highlighted Clause 7 of Rule 57Q, which states that the credit on capital goods should not be taken before the date of installation or use for manufacturing excisable goods, as certified by the manufacturer or a designated person.

3. The rule specifies that the credit should be availed only after the installation or use of capital goods for manufacturing excisable goods, as certified by the manufacturer or a designated person. This requirement ensures that the date of installation or use is verified by an authorized entity.

4. The Circular further clarifies the definition of "installed" or "used in the manufacture of" goods. It distinguishes between capital goods like weigh bridges and generating sets, which can have credit taken after installation, and machinery used for manufacturing intermediate or final products, where credit cannot be taken until installation or actual use for manufacturing purposes.

5. The facts presented in the adjudication order revealed that the appellant had taken credit for the Band Building Machine after its installation on 16-5-1998 and for the Triplex Extrusion Line Machine after its installation on 18-9-1998. The installation certificates supported these dates, demonstrating compliance with the rule and the Board's clarification. The Tribunal found the Commissioner's reliance on provisions of the Income Tax Act to be improper and set aside the order, allowing the appeal.

This detailed analysis of the judgment provides a comprehensive understanding of the issues related to the denial of Modvat credit on capital goods and the subsequent decision by the Appellate Tribunal CESTAT, New Delhi.