2014 (5) TMI 790 - HC - Central Excise

Cenvat/Modvat - Quantum of credit - Restriction of credit - Penalty whether the assessee can claim Cenvat credit pursuant to the provisions of Rule 57AC of the Rules in respect of the goods received prior to 1-4-2000 and installed after date in view of the inclusion of the provisions of Rule 57AC of the Rules inserted on 3-5-2000 - Held that - capital goods were received by the assessee prior to 1-4-2000, but they had not been installed as on 1-4-2000 and the assessee availed credit of 50% for the assessment year 2000-2001 and availed credit of 50% in the next year which was clearly irregular. In view of the provisions which is clearly contrary to the provisions of Rule 57AC(c) of the Rules, the Hon ble Supreme Court, after considering the provisions of Rule 57Q(3) of the Rules which was in existence prior to 1-4-2000 and also the provisions of Rule 57AC of the Rules which has come into effect from 1-4-2000, has clearly held that in view of the provisions of Rule 57AC(c) of the Rules, Cenvat credit may also be taken in respect of such capital goods having been received in the factory, but have not been installed before 1-4-2000 subject to the condition that during the financial year 2000-2001, the credit shall be taken for an amount not exceeding 50% of the duty paid on such capital goods - in respect of capital goods received prior to 1-4-2000, installed after that date, only 50% credit is eligible and balance of 50% is not eligible to be availed in the subsequent years - Order set aside - Decided in favour of Revenue.

Summary

Issues:
1. Interpretation of Rule 57AC of the Central Excise Rules, 1944 regarding Cenvat credit eligibility for goods received before 1-4-2000 but installed after that date.
2. Validity of penalty imposition on the debt payable upon capital goods.

Analysis:

Issue 1: Interpretation of Rule 57AC of the Central Excise Rules, 1944
The appeal by the Revenue challenges the CESTAT's decision to allow the appeal filed by the assessee regarding irregular Cenvat credit availed on capital goods received before 1-4-2000 but installed after that date. The Revenue contended that the CESTAT erred in applying Rule 57AC to goods installed before its effective date. The appellant relied on previous judgments to support their argument. However, the High Court, after careful consideration, referred to the Supreme Court's decision in a similar case and found that Cenvat credit could be availed for such goods, subject to certain conditions. The Court held that the CESTAT's decision was incorrect, and the Revenue's appeal was allowed.

Issue 2: Validity of penalty imposition on the debt payable upon capital goods
The second substantial question of law involved the levy of penalty on the debt payable upon capital goods. The High Court's analysis of the first issue, which favored the Revenue, led to the conclusion that the penalty and interest imposed on the irregular availment of Cenvat credit were justified. Therefore, the Court set aside the CESTAT's order and restored the Commissioner's original order from 2004. This decision was based on the interpretation of relevant rules and previous legal precedents cited during the proceedings.

In conclusion, the High Court's judgment favored the Revenue's appeal, emphasizing the correct interpretation of Rule 57AC and upholding the penalty imposition related to the irregular Cenvat credit availed by the assessee.