2007 (5) TMI 4 - SC - Central Excise

Cenvat/Modvat Appellant imported two second hand generator sets and demanded for 100% credit on it Department contended that only 75% credit allowed on it Authority after considering the fact allow 100% credit to the appellant.

Summary

Issues:
Interpretation of Rule 57AC of the Central Excise Rules, 1944.

Analysis:
The appeal before the Supreme Court of India involved the interpretation of Rule 57AC of the Central Excise Rules, 1944. The case originated from a judgment by the High Court of Gujarat at Ahmedabad in Tax Appeal No. 862 of 2005. The respondent, engaged in the manufacture of excisable goods, imported two generator sets, with the focus on the second set received after 1-4-2000. The relevant rule in operation at that time was Rule 57Q(3), which was later replaced by Rule 57AC. Rule 57AC outlined conditions for allowing Cenvat credit, specifying the immediate credit for inputs and a phased approach for capital goods. The dispute arose regarding the application of the rule to the capital goods not installed before 1-4-2000.

The Court deliberated on the provisions of Rule 57AC, emphasizing sub-rules (2)(a), (2)(b), and (2)(c) concerning the receipt and utilization of Cenvat credit for capital goods. The judgment highlighted the composite scheme provided by the rule, allowing for phased credit utilization based on the possession and use of capital goods. The Court examined the significance of the term "subject to" in limiting the credit to 50% of the duty paid on such capital goods, emphasizing the importance of literal interpretation in statutory provisions.

Furthermore, the Court referenced an illustration under sub-rule (2) of Rule 57AC, clarifying its applicability to capital goods received after 1-4-2000 as opposed to those received earlier. The judgment concluded that the High Court's interpretation allowing 100% Cenvat credit under Rule 57AC was incorrect. The Court highlighted the distinction between clauses (a), (b), and (c) of sub-rule (2) while addressing the Commissioner's oversight in granting relief and the inapplicability of the illustration to the case at hand.

In light of the analysis, the Supreme Court set aside the impugned judgment, allowing the appeal while emphasizing the correct interpretation of Rule 57AC. The Court's decision was based on a thorough examination of the rule's provisions and their application to the specific circumstances of the case.