Capital goods credit under Rule 57Q cannot be denied on a hyper-technical view of factory receipt after amendment.

Rule 57Q of the Central Excise Rules, 1944 was construed to preserve full additional duty credit for capital goods already received before 1-3-1997, even if their physical movement into the factory occurred later for practical reasons. The Gujarat HC treated the relevant receipt requirement in a practical, not hyper-technical, manner and held that temporary storage outside the factory, caused by incomplete construction and made with Departmental intimation, did not justify restricting credit to 75% under the amended rule. Full credit was therefore available and denial of credit on the ground of non-receipt in the factory before the amendment date was unsustainable.

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Issues: Whether the assessee was entitled to 100% credit on additional duty paid on imported capital goods when the goods were received at its administrative office before 1-3-1997 and shifted to the factory only after that date.

Analysis: Rule 57Q(3) of the Central Excise Rules, 1944 curtailed credit on additional duty to 75% from 1-3-1997, while Rule 57Q(5) preserved the earlier regime for capital goods received in the factory before that date. The date of receipt in the factory was relevant, but the expression had to be applied in a practical manner. The capital goods had been imported well before the amendment, received under intimation to the Department, and temporarily stored nearby only because the factory construction was incomplete. Denying full credit on the ground of physical non-shifting to the factory before 1-3-1997 would be unduly technical and inconsistent with the scheme of the rules.

Conclusion: The assessee was entitled to 100% credit and the denial of credit on the ground of non-receipt in the factory before 1-3-1997 was unsustainable.

Final Conclusion: The interpretation of Rule 57Q favoured the pre-amendment credit entitlement where the capital goods were already received and only their physical movement into the factory was delayed for practical reasons, so the appeals succeeded.

Ratio Decidendi: Credit on capital goods cannot be denied on a hyper-technical reading of receipt in the factory where the goods were already received before the amendment and temporary off-site storage was necessitated by incomplete factory construction.

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