2005 (5) TMI 384 - AT - Central Excise

Summary

Issues:
Modvat credit denial for capital goods; Retrospective effect of amendment to Rule 57Q of Central Excise Rules, 1944.

Analysis:
The case involved the denial of Modvat credits amounting to Rs. 5,20,611/- for a range of capital goods installed in the factory during a specific period. The main issue was whether the amendment to clause (i) of Explanation to Sub-rule (1) of Rule 57Q, brought by Notification No. 25/96-C.E. (N.T.) on 31-8-1996, had a retrospective effect. If the amendment was considered clarificatory and retrospective, the Modvat credit benefit could be claimed for certain capital goods falling under Heading 84.74 of the CETA Schedule. Conversely, if the amendment was deemed prospective only, Heading 84.74 would be excluded from the Modvatable capital goods category, thereby disallowing the credit for goods under this heading during the relevant period.

The appellant contended that Notification 25/96-C.E. (N.T.) was clarificatory and thus retrospective, citing a Tribunal judgment in a similar case. The Tribunal's order in the referenced case supported the view that certain items were covered by the definition of capital goods even before the amendment to Rule 57Q. The appellant also presented a copy of another decision supporting their argument.

On the contrary, the JDR argued that since Notification 25/96-C.E. (N.T.) did not explicitly mention retrospective operation, it should not be considered retrospective. The JDR highlighted that the legislative intent behind the amendment was clear in removing Heading 84.74 from the excluded category of capital goods and including it for Modvat credit, indicating a definitive rather than clarificatory nature of the amendment.

After careful examination, the judge found that the amending Notification did not suggest retroactive intent, especially with the removal of Heading 84.74 from the excluded category. The judge concluded that the appellants could not rely on the cited decision to support their claim. Additionally, the appellants failed to establish that other capital goods falling under a different heading were specified for Modvat benefit during the disputed period. Consequently, none of the capital goods in question were deemed eligible for Modvat credit under Rule 57Q, leading to the dismissal of the appeal.