2006 (1) TMI 152 - HC - Central Excise

Summary

Issues:
1. Interpretation of provisions regarding eligibility for Modvat credit on the date of receipt of capital goods.
2. Validity of decision by CESTAT and Commissioner (Appeals) in light of a Supreme Court decision.
3. Determining eligibility for Modvat credit based on provisions applicable on the date of receipt of capital goods versus the date of installation.

Analysis:
1. The appellant-revenue raised concerns regarding the eligibility of the assessee to avail Modvat credit based on the provisions in force on the date of receipt of capital goods, specifically a generator. The revenue argued that the assessee could only avail 50% of 75% entitlement of the duty paid on the capital goods, as per the notification in force on that day. However, both the Commissioner (Appeals) and the Tribunal disagreed with this view. They held that subsequent notifications had removed the limit of entitlement, allowing the assessee to claim the entire amount of duty paid on the capital goods. The Tribunal confirmed that on the date of installation of the capital goods, the assessee was entitled to 100% of the duty paid, with 50% available in the year under consideration and the remaining 50% in the subsequent year.

2. The appellant also questioned the validity of the decision by the CESTAT and Commissioner (Appeals) by citing a Supreme Court decision in another case. The Tribunal, however, found no error in the application of the subsequent notification, which allowed the assessee to claim the entire duty paid on the capital goods. The Tribunal emphasized that the revenue cannot selectively apply notifications to restrict entitlement and must adhere to the provisions in force at the time of installation of the capital goods. Consequently, the Tribunal dismissed the appeal, stating that the impugned order did not raise any substantial question of law.

3. The crux of the issue revolved around determining the eligibility for Modvat credit based on the provisions applicable on the date of receipt of capital goods versus the date of installation. The Tribunal's decision clarified that the subsequent notification, which removed the limit of entitlement, should be applied in its entirety. The Tribunal upheld the Commissioner (Appeals)'s order, emphasizing that the revenue cannot apply notifications selectively to restrict the assessee's entitlement to claim the duty paid on the capital goods. The Tribunal's decision provided clarity on the application of notifications and upheld the assessee's right to claim the full duty paid on the capital goods based on the provisions in force at the time of installation.