Interpretation of "year of use or fraction thereof" limits excise deduction on capital goods removed after Modvat credit.

The second proviso to Rule 57S(1) of the Central Excise Rules was construed to mean that the phrase "a year of use or fraction thereof" links the fraction to a year of use, not to a quarter. On that reading, the 2.5% deduction for removal of capital goods applies by reference to each quarter of a year of use and cannot be extended to treat part of a quarter as a full quarter for a larger deduction. The lower authority's method of duty computation on removal of capital goods after Modvat credit was affirmed, and the appellant's broader interpretation was rejected.

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Issues: Whether, under the second proviso to Rule 57S(1) of the Central Excise Rules, the expression "a year of use or fraction thereof" permits deduction of 2.5% for a full quarter even where the capital goods were used only for part of that quarter.

Analysis: The dispute concerned the manner of calculating duty on removal of capital goods after availing Modvat credit. The wording of the proviso was read as linking "fraction thereof" to "a year of use", not to a quarter. On that construction, the deduction of 2.5% is to be applied with reference to each quarter of a year of use, and the phrase does not enlarge the deduction to cover a part-quarter as a full quarter. The reasoning adopted by the lower authority was held to be correct.

Conclusion: The appellant's interpretation was rejected and the duty computation confirmed.

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