2004 (3) TMI 277 - AT - Central Excise

Tribunal Confirms Limitation of Credit on Capital Goods to 75% at Time of Receipt; Amendment Not Retroactive.

The Tribunal upheld the disallowance of excess credit on capital goods, affirming the original authority's decision to limit credit to 75% based on the ... Disallowance of excess credit availed on capital goods - imposition of penalty - HELD THAT:- In the instant case, the quantum of credit permissible was only 75% at the relevant time when the goods were received in the factory. It was on a later date the quantum was raised to 100% by amending Notification No. 11/2000, dated 1-3-2000 and this Notification is not retrospective. Therefore, we are of the considered opinion that the appellants are eligible to claim the benefit that was permissible on the date of receipt of the capital goods in the factory. Thus, we hold that there is no ground to interfere with orders passed by the authorities below and we uphold the same and reject the appeal. Issues Involved: The issue involves the disallowance of excess credit availed on capital goods, imposition of penalty under Rule 173Q of the C.E. Rules, 1944, and recovery of interest under Section 11AA of the C.E. Act, 1944.Summary of Judgment:Issue 1 - Disallowance of Excess Credit on Capital Goods:The appeal was filed against the order disallowing credit of Rs. 2,39,96,904/- being the excess credit availed on capital goods by the appellants. The original authority disallowed the credit in excess of 75% to the extent of Rs. 2,39,96,904/- as the goods were received before the amendment allowing 100% credit. The Commissioner (Appeals) upheld this decision, leading to the present appeal.Issue 2 - Interpretation of Modvat Credit Rules:The appellants argued that Modvat credit should be available upon receipt of goods in the factory, not contingent upon installation. They cited judgments supporting their position. However, the SDR contended that the eligibility for credit is determined at the time of receipt, not installation, and that the amendment allowing 100% credit was not retrospective.Judgment Analysis:The Tribunal observed that the issue of whether the date of receipt or availing of Modvat credit is relevant to the quantum of credit admissible has been settled in favor of the Revenue by various decisions. The Tribunal noted that the appellants themselves acknowledged that credit was available upon receipt of goods in the factory. Therefore, the quantum of credit permissible should be based on the date of receipt, not installation or use.In this case, the quantum of credit permissible was 75% at the time of receipt of goods in the factory, as per the relevant rules. The subsequent amendment raising it to 100% was not retrospective. Consequently, the Tribunal held that the appellants are entitled to claim the benefit permissible at the time of receipt of the capital goods. Upholding the decisions of the authorities below, the Tribunal rejected the appeal.