2007 (2) TMI 530 - AT - Central Excise

Summary

Issues involved: Appeal against OIO 19/04-Commr dated 1-10-04 regarding availing irregular credit under Cenvat scheme u/s Rule 57AC(2)(c) and imposition of penalty u/s 11AC.

Summary:

1. Background and Remand Order: The appellants received capital goods before 1-4-2000 but could not install them, leading to a dispute over availing Modvat credit. The matter was remanded by CESTAT to the adjudicating authority for re-examination based on Rule 57AC(2)(c) applicability.

2. De Novo Order: Following the remand, the Commissioner passed a de novo order confirming the demand and imposing equal penalty under Section 11AC, which the appellants contested.

3. Appellants' Arguments: The appellants argued that they were entitled to Cenvat credit under Rule 57AB read with Section 57AC(2)(c) for goods installed after 1-4-2000, not Modvat credit. They challenged the Commissioner's reliance on a Board Circular not mentioned in the show cause notice, alleging a violation of natural justice.

4. Legal Interpretation: The Tribunal analyzed the rules governing Modvat and Cenvat schemes, emphasizing Rule 57Q(7) prohibiting credit before capital goods installation. It concluded that the appellants rightfully availed Cenvat credit in two stages as per Rule 57AC(2)(c), rejecting the Commissioner's attempt to restrict credit to 75%.

5. Precedents and Decision: The Tribunal distinguished the present case from Grasim Industries Ltd. v. CCE, Trichi, highlighting the applicability of Rule 57AC(2)(c) in the Cenvat scheme. It set aside the impugned order, finding no legal basis for the penalty imposed.

6. Conclusion: The Tribunal ruled in favor of the appellants, allowing the appeal and emphasizing the correct interpretation of the Cenvat scheme rules.