2016 (10) TMI 68 - AT - Central Excise

Modvat credit - capital goods being used for manufacture of float glass which is not commencing production - capital goods were received into factory and central excise duty was paid on them - capital goods were utilized for the manufacture of final products - C.B.E.C. Circular No. 277/111/96-CX dated 02-12-1996 categorically specified that the restriction in said Rule 57Q was introduced only from 01-01-1996 that the credit is admissible only after installation/utilization of capital goods and in respect of factories in existence such credit is admissible immediately after the receipt of the goods. Held that - it is found that the present case is based only on the understanding of Revenue that the Modvat credit paid on capital goods brought into the factory for manufacture of float glass was not admissible to assessee till such time the manufacture of float glass did not commenced. The said issue has been clarified by C.B.E.C. through said circular dated 02-12-1996. We find that the said circular is squarely applicable in the present case. We therefore set aside both the impugned Orders-in-Original and impugned Order-in-Appeal. - Decided in favour of appellant

Summary

Issues: Admissibility of Modvat credit on capital goods for manufacture of float glass before production commencement.

Analysis:
1. Background: The case involved two appeals arising from a common Order-in-Appeal. The appellants were manufacturing sheet glass and started installing machinery for float glass within the same factory. The Revenue raised concerns regarding the admissibility of Modvat credit on capital goods for float glass production before its commencement.

2. Show Cause Notices: Show Cause Notices were issued proposing to deny credits totaling a significant amount due to the perceived inadmissibility of the credit until the float glass production began. The Notices also included demands for duty payments and penalties based on the alleged misuse of credits.

3. Adjudication: The matter went through various stages of adjudication, including Orders-in-Original and appeals before the Commissioner. The initial Orders-in-Original proposed disallowing credits and confirming duty demands and penalties. The Commissioner (Appeals) upheld these decisions, citing the non-commencement of float glass production as the reason for inadmissibility.

4. Legal Arguments: The appellants challenged the Orders-in-Appeal, emphasizing that the capital goods were received, duty paid, and utilized for manufacturing final products. They relied on a C.B.E.C. Circular from 1996, which clarified the admissibility of credits for capital goods received before 1996, even if not immediately used for production.

5. Tribunal Decision: The Tribunal considered the arguments and the relevant Circular, noting that the issue revolved around the timing of credit admissibility concerning float glass production commencement. Referring to the Circular's applicability, the Tribunal set aside the Orders-in-Original and the Order-in-Appeal, allowing the appeals and granting the appellants consequential reliefs as per the law.

This detailed analysis showcases the progression of the case, the legal arguments presented, and the Tribunal's decision based on the interpretation of the relevant Circular regarding the admissibility of Modvat credit on capital goods in relation to the commencement of float glass production.