Modvat credit on capital goods depends on installation and statutory compliance, not mere prior receipt before the relevant date.

Modvat/Cenvat credit on capital goods could not be denied merely because the machinery was received before 1-4-2000 when installation occurred after that date and the credit was taken only after installation within the permitted 50% limit. The material consideration was actual installation and compliance with the statutory conditions for availment; prior receipt alone did not amount to use or otherwise defeat eligibility. The credit was therefore held admissible on the stated facts, and the challenge to denial failed.

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Issues: Whether Modvat credit on capital goods could be denied merely because the machinery was received before 1-4-2000 when it was installed after that date and credit was restricted to 50%.

Analysis: Rule 57AC(2)(c) permitted availment of Cenvat credit to the extent of 50% during the relevant financial year, and the material fact was that the machinery had not been installed on 1-4-2000. Mere receipt of capital goods before 1-4-2000 did not amount to their use or confer any benefit so as to justify denial of credit. The assessee had taken credit only after installation and within the permissible limit.

Conclusion: The denial of Modvat credit on the ground of prior receipt of the capital goods was not justified, and the issue was decided in favour of the assessee.

Final Conclusion: The appeal was rejected after holding that the date of receipt alone could not defeat eligibility for credit on capital goods where installation occurred after the relevant date and the prescribed limit was observed.

Ratio Decidendi: Eligibility for Modvat or Cenvat credit on capital goods turns on the statutory conditions for availment and actual installation or use, and mere prior receipt of the goods is insufficient to deny the credit.

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