Cenvat credit on capital goods installed after receipt was allowed where the statutory ceiling was satisfied and denial was unsustainable.

Cenvat credit was admissible on capital goods received in the factory before 1-4-2000 and installed thereafter, because Rule 57AC(2C) allowed such credit subject to the financial-year ceiling of not more than 50% of duty-paid credit. The balance credit was also held admissible on the footing that the statutory conditions were substantially satisfied and the notification could not be read hyper-technically to deny entitlement. As the credit claim was sustainable, the penalty basis also fell away.

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Issues: Whether Cenvat credit was admissible on capital goods received in the factory before 1-4-2000 but installed after that date, and whether deemed credit could be denied for alleged non-compliance with the payment condition in the notification.

Analysis: Rule 57AC(2C) permitted Cenvat credit on capital goods received in the factory before 1-4-2000 though installed thereafter, subject to the ceiling that not more than 50% of the duty paid credit could be taken in the financial year 2000-2001. The capital goods were installed on 11-4-2000, and there was no dispute that the credit claimed did not exceed the permissible ceiling. For the remaining credit, the cited Tribunal decisions were applied to hold that credit was admissible. In view of the entitlement to credit, the basis for penalty also did not survive.

Conclusion: The assessee was entitled to the disputed Cenvat credit, including the balance amount, and the denial of credit and penalty were unsustainable.

Final Conclusion: The appeal succeeded and the order disallowing credit and imposing penalty was set aside.

Ratio Decidendi: Where capital goods are received before 1-4-2000 and installed thereafter, Cenvat credit is admissible if the statutory ceiling is not exceeded, and credit cannot be denied on a hyper-technical reading of the notification where the conditions are substantially satisfied.

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