2015 (12) TMI 1209 - HC - Central Excise

Denial of MODVAT Credit - Whether Tribunal committed error in allowing the Modvat Credit of Goods which were received prior to 16.03.1995 by the Assessee and which were not covered under the definition of Capital Goods prior to 16.03.1995 and whether the said goods were eligible for Modvat Credit under Capital Goods vide Notification No.11/95- CE(NT) dated 16.03,1995 - Held that - there is no legal error in the impugned order passed by the Tribunal in confirming the order passed by the Commissioner (Appeals), who has correctly interpreted the provisions of rule 57Q of the rules. The facts as emerging from the record reveal that even prior to 16th March, 1995, the goods on which the assessee had availed Modvat credit were capital goods as envisaged under rule 57Q of the rules. The subsequent notification dated 16th March, 1995 merely specifies the Chapter Headings and the capital goods. The amended sub-rule (2) of rule 57Q provides that notwithstanding anything contained in sub-rule (1), no credit of the specified duty paid on capital goods (other than those capital goods in respect of which credit of duty was allowable under any other rule or notification prior to the 16th day of March, 1995) shall be allowable if such capital goods were received in the factory before the 16th day of March, 1995. On a plain reading of sub-rule (2) of rule 57Q of the rules, it is evident that credit of duty would be allowable on the capital goods in respect of which the credit of duty was allowable under any other rule or notification prior to 16th March, 1995. Under the circumstances, when the capital goods on which the assessee had claimed credit were capital goods in respect of which credit of duty was allowable under rule 57Q prior to its amendment under 16th March, 1995, such capital goods were entitled to Modvat credit and the amendment of the said rule would not take such goods out of the ambit of the excluded categories even in terms of sub-rule (2) of rule 57Q. - it is not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise to any question of law much less, a substantial question of law so as to warrant interference - Decided against Revenue.

Summary

Issues:
Interpretation of the expression 'capital goods' under rule 57Q of the Central Excise Act, 1944 and Notification No.11/95-CE(NT) dated 16th March, 1995.

Analysis:
The appellant revenue challenged the order passed by the Central Excise and Service Tax Appellate Tribunal regarding the Modvat credit of goods received by the assessee before 16th March, 1995. The Tribunal affirmed the findings of the Commissioner (Appeals) who allowed the appeal based on the interpretation of rule 57Q and the notification. The Commissioner (Appeals) noted that the capital goods received before 16th March, 1995 were entitled to Modvat credit as capital goods. The Tribunal concurred with these findings.

The Commissioner (Appeals) analyzed the provisions of rule 57Q and the notification in detail. He observed that the amended explanation and sub-rule (2) of rule 57Q, along with Notification No.11/95-CE(NT) dated 16.03.1995, specified chapter headings for capital goods received. The Commissioner found that the lower authority misinterpreted the definition of capital goods, leading to the denial of Modvat credit on certain items received before 16th March, 1995. He concluded that all 55 items, including those received before the specified date, qualified as capital goods for Modvat credit.

The court upheld the Tribunal's decision, stating that the goods claimed for credit were capital goods under rule 57Q even before the amendment. The amended sub-rule (2) clarified that credit would be allowable on capital goods as per previous rules or notifications. Therefore, the goods in question were entitled to Modvat credit despite being received before 16th March, 1995. The court found no legal error in the Tribunal's order and dismissed the appeal.

In conclusion, the judgment focused on the correct interpretation of the definition of 'capital goods' under rule 57Q and the impact of the notification dated 16th March, 1995 on Modvat credit eligibility. The court affirmed that the goods in question qualified as capital goods for Modvat credit even if received before the specified date, based on the provisions of the Central Excise Act and relevant notifications.