2006 (3) TMI 494 - AT - Central Excise

Summary

Issues:
1. Disallowance of Modvat credit on capital goods under Rule 57Q.
2. Interpretation of Rule 57R(5) and (8) of the Central Excise Rules, 1944.
3. Comparison with the earlier decision of Terna Shetkari Sahakari Sakhar Karkhana Ltd.
4. Consideration of claim for depreciation under the Income Tax Act.
5. Application for modification of the order.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Mumbai, involved the issue of disallowing Modvat credit on capital goods under Rule 57Q. The Tribunal examined the provisions of Rule 57R(5) and (8) of the Central Excise Rules, 1944, which were cited as grounds for disallowance. The applicants relied on a previous decision in Terna Shetkari Sahakari Sakhar Karkhana Ltd. to support their case. However, the Tribunal found that the earlier decision did not directly apply to the current situation as the claim for depreciation under the Income Tax Act had been allowed in this case. This led to the conclusion that the applicants were not entitled to take credit on capital goods as per the existing circumstances. Additionally, the Tribunal noted that the Adjudicating Authority had considered the argument that treating Modvat amount as income and depreciation as expenditure neutralized the effect of depreciation on account of Modvat.

The Tribunal further analyzed the comparison with the earlier decision in Terna Shetkari Sahakari Sakhar Karkhana Ltd. The Tribunal highlighted that the previous decision did not discuss Rule 57R(5) and (8) specifically, which were crucial in the current case. The Tribunal addressed the argument that credit could not be disallowed under Rule 57R(8) due to it not being in force during the disputed period by relying on Rule 57R(5) which was in effect at that time. This distinction was essential in determining the applicability of the rules to the present case.

Regarding the application for modification of the order, the Tribunal concluded that no sufficient grounds were presented to warrant a modification. As a result, the application was rejected. However, in the interest of justice, the Tribunal granted an extension of four weeks for the deposit to be made. The compliance with the decision was required by a specified date to ensure adherence to the Tribunal's ruling.