2014 (9) TMI 1089 - AT - Central Excise

MODVAT credit - denial on the ground that the same were covered under compounded levy scheme upto 31-3-2000 - credit in question was availed on 28-3-2000 - Held that - as the respondent unit was under gestation stage, and had not commenced/produced before 2-5-2000, there can be no applicability of Rule 3A provisions - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Availment of Modvat credit on inputs and capital goods during the compounded levy scheme period.
2. Interpretation of Circulars issued by the Central Board of Excise and Customs regarding Modvat credit eligibility for manufacturers of hot re-rolled products.

Analysis:

Issue 1: Availment of Modvat credit during the compounded levy scheme period
The respondent, engaged in manufacturing re-rollable products, claimed Modvat credit for inputs and capital goods during the period when the compounded levy scheme was in operation. The Dy. Commissioner denied the credit, citing the scheme's disallowance of credit on inputs or capital goods. The Order-in-Original confirmed the demand and imposed penalties. The Commissioner (Appeals) set aside the order, emphasizing the respondent's intention to manufacture re-rollable products and the commencement of factory construction. The Tribunal noted that the respondent had not commenced production before 2-5-2000, ruling out the applicability of Rule 3A provisions. Consequently, the Tribunal upheld the Commissioner's decision, dismissing the Revenue's appeal.

Issue 2: Interpretation of Circulars on Modvat credit eligibility
The Revenue contended that the Commissioner overlooked Circulars clarifying the ineligibility of Modvat credit for manufacturers of hot re-rolled products during specific periods. Specifically, the Revenue highlighted Board Circulars stating the inadmissibility of Modvat credit on capital goods for such manufacturers. The Tribunal, however, found that the respondent's situation, being in the gestation stage without production before 2-5-2000, did not fall under the Circulars' restrictions. Therefore, the Tribunal upheld the Commissioner's decision based on this analysis.

In conclusion, the Tribunal's judgment focused on the respondent's entitlement to Modvat credit during the compounded levy scheme period and the interpretation of relevant Circulars regarding Modvat credit eligibility for manufacturers of hot re-rolled products. The decision emphasized the gestation stage of the respondent's unit and the absence of production before a specified date as key factors in determining the applicability of Modvat credit rules.