2004 (6) TMI 178

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....y scheme and during the relevant period, duty was payable under Notification No. 19/2000, dated 1-3-2000. In terms of Compounded Levy Scheme, the appellants duty liability was Rs. 2.5 lakhs per month. The appellants remained under this Scheme from May, 2000 to February, 2001. With the rescinding of Notification No. 19/2000 w.e.f. 1-3-2001, collection of duty on processed fabrics went back to the normal ad valorem basis. Thereupon, the appellants sought to use the Modvat credit of about Rs. 5.7 crores which they had earned on the capital goods procured in 1999-2000. The lower authorities rejected this claim relying mainly on Para 5 of the compounded levy Notification No. 19/2000, dated 1-3-2000 which reads as under :- "Notwithstanding any....

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.... that notification and under that scheme. It has no application outside that scheme and to the capital goods modvat scheme in general. The appellant has relied on the judgment of Hon'ble Supreme Court in the case of Thungabhadra Industries Ltd. v. Union of India [2000 (118) E.L.T. 545 (S.C.)] and the judgment of Hon'ble Rajasthan High Court in the case of Shakeshwar Fabrics v. Union of India [2002 (142) E.L.T. 42] in support of their contention. The learned Counsel has also relied on the clarification of the Central Board under Circular No. F. 345/2/2000-TRU, dated 28-9-2000 that credit once earned by a manufacturer is available for use subsequently. Para 9 of that circular reads as under :- "Referring to sub-rule (2)(c) of Rule 57AC, it....

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....cheme. Compounded levy is a unique scheme of collecting duty on specified goods based on the capacity of production of machinery installed. The duty liability is fixed based entirely on the capacity of production. It has no relation to actual production, unlike under the normal scheme of excise collection. In view of this, compounded levy notification prohibited the use of input credit as well as the capital goods credit for discharging compounded levy liability. In the present case, the appellants remained under the compounded levy scheme only for a short period. Various terms of notification can apply only during the operation of that notification. The Notification involved in the instant case also does not say that the conditions and pro....