2007 (8) TMI 248 - HC - Central Excise

Capital goods credit Compounded levy scheme Even if impugned CG were installed after 1.4.2000, 50% credit is entitled because goods had been received prior to 1.4.2000 credit cannot be denied in view of clause (5) in the Circular/Letter dated 31st March, 2000, because later a circular dated 3.4.2000 has also been issued later circular will supersede the earlier one - Dept itself demonstrate that 50% credit is entitled on CG received prior to 01-04-2000 but installed after 01-04-2000

Summary

Issues:
1. Denial of Credit to the Assessee on capital goods received in the factory.
2. Imposition of penalty and interest by the Department.
3. Interpretation of Circular/Letter F. No. B-4/7/2000-TRU dated 03-04-2000.
4. Eligibility of the Assessee to claim CENVAT Credit on capital goods received prior to 01-04-2000.

Analysis:
1. The Department denied Credit to the Assessee on capital goods received in the factory post 01-04-2000. The Commissioner (Appeals) set aside the order of the Assistant Commissioner, Central Excise and Customs, Nanded Division, Nanded, based on admitted facts and Circular/Letter F. No. B-4/7/2000-TRU dated 03-04-2000. The CESTAT upheld the decision of the Commissioner (Appeals), dismissing the Department's appeal.

2. The Department imposed a penalty of Rs. 1,00,000 under Rule 173 (Q) of the Central Excise Rules, 1944, and charged interest under section 11-AB of the Central Excise Act, 1944. However, the Commissioner (Appeals) and the CESTAT ruled in favor of the Assessee, leading to the dismissal of the Department's appeal.

3. The interpretation of Circular/Letter F. No. B-4/7/2000-TRU dated 03-04-2000 was crucial in determining the Assessee's eligibility for CENVAT Credit. The Circular stated that CENVAT credit on capital goods could be taken upon receipt in the factory, even if not installed by 01-04-2000. The clarification allowed 50% CENVAT Credit on such capital goods in the financial year 2000-2001.

4. The Department argued that the Assessee was not entitled to claim CENVAT Credit on capital goods received prior to 01-04-2000 based on an earlier Circular/Letter dated 31st March 2000. However, the Court held that the later clarification superseded the previous clause, entitling the Assessee to 50% CENVAT Credit on capital goods received before 01-04-2000 but installed post that date. The Court rejected the Department's contention that the Assessee, not enjoying MODVAT facility before 01-04-2000, was ineligible for CENVAT Credit, as both Circulars did not make such a distinction.

In conclusion, the Court dismissed the Department's appeal, emphasizing that the Assessee was entitled to 50% CENVAT Credit on capital goods received before 01-04-2000 but installed after that date, as per the later clarification provided in Circular/Letter F. No. B-4/7/2000-TRU dated 03-04-2000. The judgment highlighted the importance of adherence to the relevant circulars and demonstrated the significance of accurate interpretation in tax matters.