ORDER
Archana Wadhwa, Member (J)
1. After dispensing with the condition of predeposit of duty amount of Rs. 5,61,407.57 and penalty of Rs. 5000/-, I take up the appeal itself with the consent of both the sides.
2. The above amount of duty has been confirmed against the appellants by denying them the benefit of modvat credit in respect of capital goods received in their factory in the year 1994 for the initial setting up of the factory on the ground that the credit has been taken in their RG 23C records without first installing the said capital goods and utilisation of the same in the manufacturing of final product. The appellants’ contention is that the provisions of Rule 57Q were amended vide Notification No. 1/96-CE (NT) debarring taking of credit before installation of the capital goods in the factory. As such, the said Rules cannot made applicable to the period prior to 1.1.1996. They have also clarified that though the credit was entered into the modvat account, the same was not utilised by them prior to actual installation and utilisation of the capital goods in their factory. As, such they have substantially satisfied the provisions of modvat rules on the capital goods.
3. Shri S.P. Ghosh, Ld. Consultant appearing for the appellants, submits that the authorities below have wrongly relied upon the Board’s Circular No. 88/88/94-CX dt. 26.12.1994 inasmuch as the said Circular only debars the utilisation of credit. In any case, the entire exercise is revenue neutral inasmuch as the availed credit account becomes admissible to them on installation of the capital goods in their factory. He also refers to the Tribunal’s decision in the case of Hind Spinners Industries Growth Center v. CCE Indore reported in 1997 (96) ELT 651 (Tribunal) wherein it was held that modvat credit can be taken and utilised before installation of machine or accessories. Reliance has also been made to the Tribunal’s decision in the case of Gujarat Narmada Valley Fertilisers Co. Ltd. v. Commissioner of Central Excise & Customs reported in 1997 (70) ECR 75 (Tribunal) wherein it was observed that on debiting back of the modvat credit, the appellants will be entitled to corresponding credit in their capital goods modvat account subject to the plant having since gone into production. He also submits in their case that they have already started the production by using the said capital goods.
4. Shri A.K. Mondal, ld. JDR appearing for the Revenue strongly relies upon the Board’s Circular referred supra. He submits that in terms of provisions of Rule 57Q, the appellant was entitled to take credit only after installation of the machineries. They have taken credit in the year 1994 when the machinery was put to use in the year 2000, they have definitely contravened the provisions of modvat rules in respect of the capital goods and as such the credit so availed by them is liable to be reversed.
5. After considering the submissions made from both the sides, I find that the only objection by the Revenue is that the appellants were required to take credit in the modvat account in the year 2000 when the capital goods were installed and used in the manufacture of final product in spite of taking the same in the year 1994 when the machines were received in the factory. Even if the above objection of the Revenue is accepted, the net result of the same would be that the credit so entered in modvat account is to be reversed by the appellants and they are again entitled to take the same in the year 2000 when the capital goods were installed and used. In any case, it is not disputed that though the credit was entered into records, the same was lying on unutilisation (sic) till 2000 and the same was used only after the production of the final product in the appellants’ factory in which the capital goods in question was used. As such, the impugned order passed by the authorities below denying the credit to the appellants on the sole ground that the entries were made in the year 1994, is not justified. The same is accordingly set aside and I allow the appeal with consequential relief to the appellants. SP also gets disposed of.
Dictated and pronounced in the open Court.