PARASRAMPURIA SYNTHETICS Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) IN these two appeals, filed by M/s. Parasrampuria Synthetics, the issue involved is about the availability of Cenvat credit of the duty paid on capital goods without their being installed in the factory.

(2.) SHRI K.K. Anand, learned Advocate, submitted that the Appellants manufacture Synthetic Filament Yarn/Polyester Chips/Methanol and avail of the facility of Cenvat credit; that they imported certain capital goods under Project Import during the period from November, 1995 to May, 1996; that in terms of erstwhile Sub -rule (7) of Rule 57Q of the Central Excise Rules, 1944 the Credit cannot be taken by them as the capital goods cannot be installed due to factors beyond their control; that the Modvat Credit Scheme was replaced by the Cenvat Credit Scheme w.e.f. 1 -4 -2000; that in view of new Rule 57AC(2)(c) of the Central Excise Rules, 1944 they had taken Cenvat credit in 2000 to the extent of 50% of the Additional Customs duty paid by them on the capital goods imported by them; that further in April, 2001 they had taken the remaining 50% Credit of the duty; that part of the capital goods imported by them had been installed and commissioned, that it has been clarified by the Central Government under Circular F. No. B4/7/2000/TRU, dated 3 -4 -2001 that "for such capital goods which were received prior to 1 -4 -2000 but not installed up to 1 -4 -2000 also, the Cenvat credit would also be admissible."; that the said letter further clarified that the condition that Cenvat credit only up to 50% of the total admissible amount would be available in the financial year 2000 -01 would apply and the balance of the Cenvat credit in respect of such capital goods can be taken in a financial year subsequent to 2000 -01; that accordingly they were eligible to take 50% Cenvat credit during the financial year, 2000 -01 and remaining 50% in the next financial year i.e. 2001 -02. The learned Advocate also relied upon the Ministry's letter F. No. 345/2/2000/TRU, dated 29 -8 -2000 wherein it has been clarified that in cases where capital goods were received before 1 -4 -2000 and also installed before that date but Modvat credit was not taken for some reasons prior to 1 -4 -2000, as the Modvat credit had been earned by the manufacturer he is entitled to take Cenvat credit of this amount; that this letter dated 29 -8 -2000 further clarified that in respect of capital goods which are included in the Project Import the Cenvat credit shall be admissible only to the extent of an amount not exceeding 50% of the Additional duty of Customs paid on capital goods. Reliance has also been placed on the decision in the case of Ballarpur Industries Ltd. v. CCE & C, Nagpur, 2003 (156) E.L.T. 423 (T) wherein it has been held that installation is not a pre -requisite for taking credit relying upon the Board's letter dated 3 -4 -2000. Finally the learned Advocate contended that the word 'Use' mentioned in Sub -rule 2(b) of Rule 57AC for taking the remaining 50% of the Modvat credit in subsequent financial year will mean intended use and not actual use. Reliance has been placed on the decision in the case of State of Haryana v. Dalmia Dadri Cement Ltd., 1988 (14) ECR 292 (S.C.) and SAIL v. C.C.E., 1996 (88) E.L.T. 314 (S.C.).

(3.) WE have considered the submissions of both the sides. We observe that w.e.f. 1 -4 -2000, new Central Excise Rules came into effect relating to credit of duty paid on excisable goods used as inputs or capital goods. Rule 57AA defined capital goods. As per this definition, capital goods means various goods specified under Rule 57AA(a) used in the factory of manufacturer of the final products. Rule 57AB specified the duties, in respect of which Cenvat credit can be taken by a manufacturer. Rule 57AC prescribe the conditions for allowing Cenvat credit. Sub -rule 2(a) provided that Cenvat credit in respect of capital goods received in a 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. Sub -rule 2(c) provided that Cenvat credit may also be taken in respect of such capital goods as have been received in the factory, but have not been installed before 1 -4 -2000 subject to the conditions that during the financial year 2000 -2001, the credit shall be taken for amount not exceeding 50%. Provisions of these two sub -rules of Rule 57AC, read with definition of capital goods, as given in Rule 57A(a), make it very clear that the Cenvat Credit in respect of capital goods can be taken to the extent of 50% of the duty in the financial year in which the capital goods are received in the factory. The condition that these goods should be installed and used in the manufacture of finished goods before the credit could be availed of is not specified under Rule 57AC which deals with the conditions for allowing Cenvat credit. We also observe that such a specific provision was made in Sub -rule (7) of erstwhile Rule 57Q of the Central Excise Rules, 1944 wherein it was provided that the Credit of the specified duty on capital goods shall not be taken on a date prior to the date on which such capital goods are installed or used for manufacture of excisable goods in the factory of the manufacturer as certified by such manufacturer or a person designated by him for this purpose. As such a specific provision prohibiting the taking of Cenvat credit in respect of capital goods does not find place in Rule 57AC of the Central Excise Rules. The learned Counsel has also drawn our attention to Board's Circular F. No. B -4/7/2000 -TRU, dated 3 -4 -2000 wherein the Board has clarified certain aspects which had been raised by the Commissioners as also by the Trade and Industry in respect of Cenvat Rules which came into force from 1 -4 -2000. Para 8 of the clarification clearly mentions that "in the case of capital goods, the Cenvat Rules do not provide installation of capital goods as a pre -requisite for taking Cenvat credit. The credit can be taken as and when the capital goods are received in the factory." In view of this specific clarification given by the Board, it is not open to the Revenue to argue contrary to the clarification contained in the said Circular. Refer Ranadey Micronutrients v. C.C.E., 1996 (87) E.L.T. 19 (S.C.)