Transitional Modvat credit on capital goods received before installation was upheld under the CENVAT scheme.

Capital goods received in the factory before 1-4-2000 but installed later remained eligible for Modvat/CENVAT credit under the transitional scheme, subject to the prescribed 50% condition. The authorities below failed to apply Rule 57AC(2)(c) and the Board's circular dated 3-4-2000, both of which supported admissibility where receipt preceded installation after the new rules came into force. On that basis, denial of credit was unsustainable and the assessee was entitled to the disputed credit.

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Issues: Whether Modvat credit was admissible on capital goods received in the factory before 1-4-2000 but installed thereafter, and whether the denial of credit could be sustained in view of Rule 57AC(2)(c) and the Board's circular.

Analysis: The CENVAT Rules, notified on 1-3-2000 and brought into force from 1-4-2000, permitted credit in respect of capital goods received before 1-4-2000 but installed later, subject to the stipulated 50% condition. The record showed that the capital goods had been received before 1-4-2000 and were installed thereafter. The authorities below ignored the transitional provision in Rule 57AC(2)(c) and the Board's circular issued on 3-4-2000, which supported admissibility of credit in such circumstances.

Conclusion: The assessee was entitled to Modvat credit on the disputed capital goods, and the order denying credit was unsustainable.

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