2003 (11) TMI 527 - AT - Central Excise

Summary

Issues:
Application for waiver of pre-deposit of Central Excise duty based on denial of Modvat credit due to amendment in Rule 57Q of Central Excise Rules.

Analysis:
The case involves an application by M/s. Flex Industries Ltd. for waiver of pre-deposit of Central Excise duty amounting to Rs. 13,19,217.00 due to the denial of Modvat credit. The appellant had availed Modvat credit on duty paid for capital goods between January 1996 to June 1996. The Commissioner (Appeals) denied the credit citing an amendment to Rule 57Q of the Central Excise Rules through Notification No. 14/96 dated 23-7-96. The denial was based on the amended rule not covering the classification of goods in question. The appellant argued that the amended rule should not apply to capital goods received before the amendment date as those goods were covered under the previous definition of capital goods. The appellant contended that the amended rule should not retroactively affect their eligibility for Modvat credit.

The Joint Executive Manager for the appellant presented the case, emphasizing that the goods in question fell under the definition of capital goods as per the previous Rule 57Q. On the other hand, the learned DR opposed the appellant's prayer for waiver of pre-deposit, reiterating the grounds stated in the impugned order. After considering the submissions from both sides, the Tribunal found merit in the appellant's argument. The Tribunal observed that prima facie, the appellant's contention that the amendment should not apply to goods received before the effective date of the amendment appeared to be correct. Consequently, the Tribunal granted a stay on the recovery of the entire duty amount during the appeal's pendency. The case was scheduled for regular hearing on 19-12-2003, indicating that a detailed examination of the matter would take place at the next hearing.

This judgment highlights the importance of the timing of regulatory amendments concerning tax credits and the interpretation of rules governing such credits. It underscores the principle that changes in rules should not adversely affect parties who have already complied with the regulations in force at the time of their transactions. The decision to stay the duty recovery pending appeal demonstrates the Tribunal's recognition of the appellant's prima facie case and the need for further examination of the issues raised regarding the applicability of the amended rule to the appellant's situation.