2015 (1) TMI 1182 - AT - Central Excise

Waiver of Cenvat credit - penalty imposed under Rule 57U(6) - Held that - Period involved in the present case is from August, 1995 to February, 1997. Undisputedly, during the relevant period, in accordance with sub-rule (5) of Rule 57R and/or sub-rule (8) of Rule 57R, the assessee, who avails Modvat credit on capital goods and claim the value of such capital goods as revenue expenditure, then, they were barred from availing the benefits of Modvat credit on the capital goods. I also find that this position has been changed retrospectively by virtue of Section 149 of the Finance Act, 2003. In view of the above retrospective amendment, I do not find any merit in the impugned order and accordingly, the same is set aside - Decided in favour of assessee.

Summary

Issues Involved: Application for waiver of Cenvat credit and penalty under Rule 57U(6) of Central Excise Rules, 1944 regarding availment of Modvat credit on capital goods from August 1995 to February 1997.

Analysis:

1. Waiver of Cenvat Credit and Penalty: The appellant sought waiver of Cenvat credit of Rs. 5,00,855 and an equal penalty imposed under Rule 57U(6) of the Central Excise Rules, 1944. The issue revolved around the availment of Modvat credit on capital goods during the period from August 1995 to February 1997. The appellant claimed to have followed the law and Rule 57Q of the Central Excise Rules, 1944, while the Department proposed denial of Modvat credit on the ground that the value of the capital goods was shown as revenue expenditure in the appellant's books of account. It was highlighted that the relevant sub-rule (5) of Rule 57R initially barred availing Modvat credit on capital goods if claimed as revenue expenditure, but subsequent retrospective amendments by the Finance Act, 2003, removed this bar.

2. Retrospective Amendment and Dispute Resolution: The appellant's advocate argued that the retrospective amendment under Section 149 of the Finance Act, 2003, nullified the restriction on availing Modvat credit on capital goods if shown as revenue expenditure. The Department's representative did not contest this retrospective amendment. Consequently, after hearing both sides, the Tribunal found that the appeal could be resolved at that stage. The Tribunal acknowledged that during the period in question, the appellant was indeed barred from availing Modvat credit on capital goods if the value was claimed as revenue expenditure, as per sub-rule (5) and sub-rule (8) of Rule 57R. However, in light of the retrospective amendment, the Tribunal concluded that the impugned order was without merit and set it aside, allowing the appeal and disposing of the stay petition.

3. Final Disposition: The Tribunal, after considering the arguments and the retrospective amendment, ruled in favor of the appellant, emphasizing that the change brought about by the Finance Act, 2003, removed the bar on availing Modvat credit on capital goods claimed as revenue expenditure during the relevant period. As a result, the appeal was allowed, and the stay petition was disposed of, bringing the matter to a close.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, the arguments presented by both parties, and the Tribunal's decision based on the retrospective amendment and the legal provisions governing the availment of Modvat credit on capital goods.