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TMI Blog2017 (12) TMI 1231X X X X Extracts X X X X X X X X Extracts X X X X ..... is correct in holding that as Rules 57A to 57V of C.Ex. Rules, 1944 were substituted from 3132000 vide Notification 27/2000CE (NT) without any saving clause, no action of seeking to disallow Modvat credit can be initiated." 3. Appeal No.173 of 2008 was admitted by order dated 10th September, 2008 by framing following substantial questions of law which read thus : "(a) Whether the MODVAT Credit availed by M/s Ispat Industries Ltd. on capital goods acquired by them on lease in terms of Rule 57(R) (3) of Central Excise Rules, 1944 can be availed prior to reimbursing the leasing company the Excise Duty component, or the same can be availed only after reimbursing the leasing company for the excise duty portion? (b) Whether in the facts and circumstances of the case and in law the Hon'ble CESTAT is justified in dismissing the appeal of the Revenue in view of the Respondents not being eligible for credit as claimed?" 4. The first substantial question of law in both the Appeals is the same. 5. The proceedings originated on the basis of the show cause notice issued by the Revenue to the respondent - assessee on 4th February, 2002. The OrderinOriginal d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s will also include excise duty. It was provided that in case the respondent avails MODVAT benefit against the same, the respondent shall deposit the said MODVAT amount with IFCI. As far as the lease agreement between the respondent and the State Bank of India is concerned, it was provided therein that in case lessee proposes to avail MODVAT on the specific excise duty paid in terms of the erstwhile Central Excise Rules, 1944 (for short "Unamended Rules") of which due intimation will be given by the lessee (respondent) to lessor (SBI). In such case, the cost of acquisition will not include excise duty payable on the equipment. 9. In the show cause notice, reliance was placed on the letters of 30th March, 2000 and 28th March, 2000 issued by IFCI and SBI respectively. As far as IFCI is concerned, it was stated in the said letter that the respondent has not commenced payment lease rentals/or installments. It was stated that only interest is being paid by the respondent. 10. As far as the letter addressed by the SBI is concerned, it was confirmed that the payment of lease rentals had not commenced and assets subject matter of lease are not capitalized in the books of accounts. 11. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that there is no basis provided in the notice for alleging that credit of Rs. 13,69,64,121/ had been availed. As observed earlier, the Commissioner held that the respondent - assessee had rendered himself liable for penalty under Section 11AC. However, on the directors of the respondent, penalty under Rule 209A of the unamended Rules was not imposed. 14. In ordinary course, the Appeals preferred by the Revenue and the assesse against the same order dated 31st January, 2006 ought to have been decided together. The Appeal was preferred by the Respondent on 1st March, 2006. As copy of Memorandum of Appeal of the Appeal preferred by the appellant is not on record, the precise date on which the said Appeal was filed is not on record. The Appeal was preferred by the appellant - Revenue in April, 2006. Nevertheless, the Appeal preferred by the appellant - Revenue was decided on 10th September, 2007 by which the order of Commissioner of not confirming the demand to the extent of approximately Rs. 10 Crores was confirmed. As far as the Appeal preferred by the Respondent - Revenue is concerned, the Appellate Tribunal held that as far as transaction with SBI is concerned, there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by and between the respondent and IFCI as well as by and between the respondent and SBI. The submission is that the fact that the lease agreement with IFCI was cancelled and converted into NonConvertible Debentures with effect from July, 2001 is completely irrelevant. The submission is that reliance placed by the Appellate Tribunal on the decision in the case of Sunrise Structurals and Engineering Ltd. Vs. CCE 2004 (117) ECR 307 (Tri-Mum). is completely misplaced. He submitted that the credit could not have been availed by the Respondent on the admitted facts. The learned counsel appearing for the Respondent supported the impugned judgment and order. 16. We have given careful consideration to the submissions. We have perused the show cause notice and other documents on record. The show cause notice proceeds on the footing that the Respondent availed of MODVAT credit in the sum of Rs. 13,69,64,121/. It appears that the show cause notice is in respect of credit availed during the period from April, 1997 to March, 1998. 17. Firstly, it is necessary to advert to the findings recorded by the Commissioner in the OrderinOriginal. We have carefully perused the Orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, shall produce a certificate from the financing company to the effect that the duty specified on such capital goods has been paid by the said manufacturer to such financing company prior to payment of first lease rental instalment or first hire-purchase instalment or first instalment of repayment of loan, as the case may be, along with a copy of the agreement entered into with the said financing company. (iii) The manufacturer and the financing company shall not claim depreciation under the Incometax laws on that part of the value of capital goods which represents the amount of specified duty paid on such capital goods. (iv) The relevant documents required for the purpose of availing credit of the specified duty paid on such capital goods under rule 57T shall bear the name of the manufacturer along with that of the financing company." SubRule (3) basically provides that the credit of the specified duty paid on the capital goods shall be allowed to a manufacturer if the capital goods are acquired by the manufacturer on lease, hirepurchase or loan agreement, from a financing company subject to following the procedure provided in clauses (i) to (iv) in SubRule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omponent to the financing company. The clauses (i) to (iv) of SubRule (2) of Rule 57R provide for procedure and not a condition precedent. The finding of fact recorded is that till the date of conversion into NonConvertible Debentures, no installment was paid towards repayment to IFCI. A letter of IFCI placed on record shows that only interest was paid. 21. Paragraph 2.2 of the impugned order takes a note of the fact that in the substituted rules, no such requirement as specified in SubRule (3) of Rule 57R of unamended Rules has been incorporated. There is an observation made in paragraph 2.2 which reads thus : "We agree and find that for such premature availment of credit, assessee could at best be liable for interest, if any applicable as per law, if the credit was utilized by debit entries before the eligibility de hors the certificate as per Rule 57R (3) (iii)." 22. As far as the penalty is concerned, reliance was placed on the decision of Kapadia Enterprise Vs. Union of India 2013 (287) ELT 255 (Guj.) in paragraph 17, the Division Bench of this Court held thus : "To our mind, the stand of the Department suffers from legal fallacy. Proviso to Section 11A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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