2006 (8) TMI 215 - HC - Central Excise

Summary

Issues Involved:
1. Justification of the Tribunal's dismissal of the appeal.
2. Entitlement to avail credit of Rs. 2,45,867/- in the Financial Year 2000-2001.
3. Entitlement to avail entire credit in the Financial Year succeeding the year of receipt of goods.
4. Justification of confirming the order of Assessing officer and Appellate Authority recovering duty and imposing a penalty of Rs. 1.00 lakh.

Issue-wise Detailed Analysis:

1. Justification of the Tribunal's dismissal of the appeal:
The Tribunal dismissed the appeal based on the interpretation that the appellant was not entitled to avail Modvat credit for capital goods received before March 31, 2000, but installed after April 1, 2000. The Tribunal held that the circular from the Board of Central Excise & Customs was applicable only to goods installed before March 31, 2000.

2. Entitlement to avail credit of Rs. 2,45,867/- in the Financial Year 2000-2001:
The appellant received capital goods before March 31, 2000, but installed them in April 2000. Under the previous Modvat scheme, credit could only be availed upon installation. The new Cenvat Rules effective from April 1, 2000, allowed 50% credit on receipt and the remaining 50% in subsequent years. The appellant claimed the full credit upon installation, which was contested by the authorities. The court clarified that under Rule 57AC, 50% credit could be availed on receipt, and the remaining 50% in subsequent years, thus supporting the appellant's partial entitlement.

3. Entitlement to avail entire credit in the Financial Year succeeding the year of receipt of goods:
The court examined Rule 57AG, which provided for the transitional period, allowing credit earned under previous rules to be utilized under the new Cenvat rules. The appellant's case fell under Rule 57AC(2)(c), allowing 50% credit on receipt and the balance in subsequent years. The court concluded that the appellant could avail the remaining credit in the subsequent financial year, aligning with the rules.

4. Justification of confirming the order of Assessing officer and Appellate Authority recovering duty and imposing a penalty of Rs. 1.00 lakh:
The court found no basis for the penalty under Rule 57Q(bb), which pertains to wrongful availing of credit. The appellant's belief in entitlement to credit was deemed reasonable given the transitional provisions and Board clarifications. Hence, the penalty was set aside.

Conclusion:
The appeal was partly allowed. The penalty imposed for availing 100% credit was set aside due to the appellant's reasonable belief in entitlement. The court upheld the availing of credit over two financial years as per the rules, and no costs were ordered.