2005 (6) TMI 117 - AT - Central Excise

Summary

Issues:
1. Availment of Modvat credit in respect of capital goods.
2. Interpretation of Rule 57AB and Rule 57AG of Cenvat Credit Rules.
3. Applicability of Board Circular dated 29-8-2000.
4. Interpretation of Rule 57AC of Cenvat Credit Rules.
5. Classification of goods as spares or capital goods for credit purposes.

Analysis:

Issue 1: The appellant availed Modvat credit for capital goods in April 2000, leading to a show cause notice citing Rule 57AB of Cenvat Credit Rules, allowing credit for 50% duty in a financial year and the remaining 50% in the subsequent year.

Issue 2: The appellant contended that Rule 57AG applied as the goods were received in March 2000, and they relied on a Board Circular clarifying credit for goods received and installed before April 1, 2000. The Revenue argued the circular did not apply as goods were not installed by that date.

Issue 3: The Board Circular dated 29-8-2000 allowed credit for goods received and installed before April 1, 2000. However, the appellant failed to install the goods by that date, rendering the circular inapplicable as admitted by the appellant.

Issue 4: Rule 57AC of Cenvat Credit Rules limited credit to 50% of duty in the same financial year for capital goods, with the balance available in subsequent years if the goods were in possession and use. The Tribunal rejected the appellant's argument that spares were not covered, as the rules did not distinguish between machines and parts.

Issue 5: The Tribunal distinguished a previous case involving capital goods imported under a different scheme, emphasizing that in the present case, credit was taken in the same financial year as receipt of goods. Therefore, the appellant was entitled to 50% credit for the year of receipt, with the option to claim the remaining 50% in accordance with the law in subsequent years.

In conclusion, the Tribunal dismissed the appeal, affirming the entitlement to 50% credit in the year of receipt of capital goods, with the option to claim the remaining 50% in compliance with the law.