Capital goods credit before installation remained admissible where ineligibility under amended Rule 57Q was not proved.

Capital goods credit taken before installation was examined under the amended Rule 57Q, and the record did not establish that the assessee had availed ineligible credit. The relied-on letter was insufficient to prove that the capital goods were installed only in March 1996, and the amendment introduced by Notification No. 1/96-C.E. (N.T.) was not shown to have been effectively known or enforced before credit was taken in January 1996. As the credit was not shown to be wrongly availed, the foundation for penalty under Rule 173Q also failed, and both denial of credit and penalty were not sustainable.

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Issues: Whether capital goods credit taken before installation was inadmissible under the amended Rule 57Q and whether penalty under Rule 173Q was sustainable.

Analysis: The available material did not establish that the assessee had availed credit ineligible under the amended regime. The record did not support the inference that the capital goods were installed only in March 1996 merely from the relied-upon letter, and the amendment by Notification No. 1/96-C.E. (N.T.) dated 01-01-1996 was not shown to have been effectively known or enforced before the credit was taken in January 1996. In the absence of proof that the credit was wrongly availed, the foundation for penalty also failed.

Conclusion: Credit could not be denied, and the penalty was not leviable.

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