Modvat and Cenvat credit on pre-1-4-2000 capital goods was disallowed under the transition rules.

Capital goods received before 1-4-2000 but installed on that date were not eligible for Modvat or Cenvat credit. Under the pre-1-4-2000 regime, the goods were received when the assessee was governed by Section 3A of the Central Excise Act and the final products fell within Rule 57Q's exclusion, so no credit accrued on receipt. The post-1-4-2000 Cenvat scheme applied only to capital goods received on or after that date, while Rule 57AG allowed transition only where Modvat credit had already been earned and remained unutilised. The credit disallowance was therefore sustained.

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Issues: Whether Modvat credit or Cenvat credit was admissible on capital goods received before 1-4-2000 but installed on that date.

Analysis: The capital goods were received when the appellant was governed by Section 3A of the Central Excise Act, 1944 and the final products fell within the exclusion clause of Rule 57Q. Credit was therefore not earned on receipt of the goods. With effect from 1-4-2000, the scheme changed to ad valorem levy and Cenvat credit, but that credit was confined to capital goods received on or after 1-4-2000. Rule 57AG permitted conversion only where Modvat credit had already been earned before 1-4-2000 and remained unutilised on that date. The Board circular also clarified that capital goods received during the earlier period were not eligible for credit.

Conclusion: The appellant was not entitled to Modvat credit or Cenvat credit on the capital goods in question, and the credit disallowance was sustained.

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