TMI Blog1997 (8) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... can be utilised for payment of duty on clearances of any of the final products but the same does not mean that the credit can be taken without using the capital goods at all. Provisions under Rule 57Q which spells out the scope of the scheme refers to allowing `credit of specified duty paid on the capital goods used by the manufacturer in his factory and for utilising the credit so allowed towards payment of duty of excise leviable on the final products....subject to the provisions of this Section. It follows therefore, the directions contained in Rule 57Q(1) determines the utilisation of the credit as permitted under Rule 57-S(2). Reading of the provision makes it clear that utilisation of the credit of duty paid is available only on capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, by the above incorrect utilisation of Modvat credit accrued on capital goods, the party had violated the provisions of law, they are also liable to be penalised under Rules 173Q and 209 of the Central Excise Rules, 1944. However, keeping in mind the otherwise fine track record of tax compliance by the party, I am inclined to take a lenient view while fixing the quantum of penalty. 9. In view of my findings and conclusions foregoing, I order as below : (i) amount of Rs. 17,30,206/- being the Modvat credit taken on capital goods and utilised incorrectly is disallowed/confirmed for recovery under Rule 57U of the Central Excise Rules, 1944. (ii) A penalty of Rs. 17,000/- (Rupees Seventeen Thousand only) is imposed on the party under Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for the manufacture of the final product, but are to be used in the factory of the manufacture of the final product. After considering the submissions of the appellants, the ld. Collector of Central Excise confirmed demand of duty and also imposed a penalty as indicated above. 4. Shri V. Sridharan, the ld. Advocate appearing for the appellants, submits that Rule 57T lays down the procedure for taking Modvat credit on capital goods; that a declaration was filed describing the capital goods as well as the final product; that Modvat credit was taken in terms of Rule 57T(1); that entry was made in Form RG 23C Parts I and II regarding the receipt of capital goods and credit particulars; that there was no provision in Rule 57T stipulating tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The ld. Counsel submitted that the Modvat scheme under Rule 57A is in force for the last 10 years and that the Department has not objected to the taking of credit and utilising the said credit of duty paid on inputs even though the said inputs are not yet utilised in the manufacture of the final product. The ld. Counsel also submitted that one-to-one co-relation between the inputs and final product is not the intention of the Modvat scheme. He submitted that the Tribunal in the case of M/s. Gujarat Narmada Valley Fertilisers Ltd. reported in 1997 (18) RLT 625, held that when the capital goods for the manufacture of Acetic Acid and Hydrogen had not entered the production process at all, they did not satisfy the user criterion, and taking o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally brought into production of excisable goods on the date of such availment and utilisation." 5. He submitted that the decision of the Tribunal in the case of M/s. Gujarat Narmada Valley Fertilisers Ltd. is distinguishable. He submitted that in view of the above submissions, the impugned order may be set aside and the appeal allowed. 6. Shri P.K. Jain, the ld. SDR, submitted that Board Circular cannot prevail over the Rules. He submitted that Rules required that Modvat credit on capital goods can be taken and utilised only after their installation. He submitted that the ld. Collector Central Excise has carefully analysed the position as available under the rules and, therefore, prays that the impugned order may be upheld and the appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the factories which are in existence and where the specified final product is already manufactured and cleared. We also note that the Tribunal s judgment on the issue is clearly distinguishable inasmuch as the same was based mainly on a circular of the Board issued on 26-12-1994 and that circular was amended subsequently by issuing another circular on 2-12-1996. 8. Having regard to the above findings and discussions, we hold that Modvat credit can be taken and utilised on capital goods in the case of a factory which is already in existence and where the specified final product is being manufactured and cleared. In the result, the appeal is allowed. Consequential relief, if any, shall be admissible to the appellant in accordance with law. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
