GRASIM INDUSTRIES LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) In these two appeals the issue involved is whether M/s. Grasim Industries were eligible to take Modvat credit of the entire duty paid on capital goods in 1999 which was availed by them in 2001.

(2.) Shri B.L. Narasimhan, learned Advocate, submitted that the Appellants had imported certain goods under EPCG Scheme availing the benefit of Notification No. 110/95 -Cus., dated 5 -6 -95; that these machines were installed in their factory during March, 1996 to June, 1997; that since they could not fulfil the export obligation under EPCG Scheme they paid differential Customs duty as well as countervailing duty on various dates in 1999; that after payment of applicable countervailing duty on the various imported capital goods they took the Modvat credit of the countervailing duty on 31 -5 -2001 on the basis of certificate dated 23 -5 -2001 issued by the Dy. Commissioner of Customs certifying the payment of duty; that the Dy. Commissioner under Order -in -Original No. 214/2002, dated 22 -11 -2002 denied them the Modvat credit and imposed penalty; that on appeal, the Commissioner (Appeals) under the impugned Order has held that the Modvat credit cannot be denied to the Appellants where the duty paid character of the goods and their receipt and use within the factory is not disputed; that the Commissioner (Appeals), however, restricted the availment of Credit to 50% in a financial year holding that in terms of existing Cenvat Credit Rules only 50% of the total credit admissible on capital goods could be availed during a financial year.

(3.) The learned Advocate further submitted that Rule 57AC(2) provides that the Cenvat credit in respect of capital goods received in factory at any point of time in a given financial year shall be taken only for an amount not exceeding 50% of the duty paid on such capital goods in the same financial year and the balance of Cenvat credit may be taken in any financial year subsequent to the financial year in which the capital goods is received in the factory of the manufacturer provided that the capital goods are still in possession and use of the manufacturer of a final product in such subsequent financial year; that these provisions are applicable to capital goods which were received on or after 1 -4 -2000 when these rules came into effect; that the rule applicable in the present matter is Rule 57AG which is a transitional provision; that according to this rule any amount of credit earned by a manufacturer under Rule 57A, 57B or 57Q, as they existed prior to 1 -4 -2000 and remained unutilised on that day shall be allowable as Cenvat credit to such manufacturer and allowed to be utilised in accordance with the rules; that the Modvat credit has been earned by them under Rule 57Q when the entire duty was paid by them in 1999; that the credit cannot be utilised by them as the certificate by the Customs certifying the payment of duty was not received. The learned Advocate referred to a Board's letter F. No. 345/2/2000 -TRU, dated 29 -8 -2000 wherein it has been clarified in Para 9 of the said letter that if the Modvat credit on the capital goods was not taken for some reason prior to 1 -4 -2000 the Modvat credit had been earned by the manufacturer and he is entitled to take the Cenvat credit of this amount under Rule 57AG(1). Finally the learned Advocate mentioned that the entire matter has become duty neutral inasmuch as they are eligible to avail of the remaining 50% of the Modvat credit of the capital goods even as per the impugned Order in the subsequent financial year i.e. 2002 -03. Finally he mentioned that the Modvat credit amounting to Rs. 88,266/ - has also been disallowed to the Appellants in respect of Fuzzy Control Equipment which the Appellants undertakes to pay immediately.