BALIA, J. - (1.) THE following substantial questions of law have been raised for consideration in this appeal arising out of the order passed by customs, Excise & Service Tax Appellate Tribunal in Appeal No. E/4471/04/nb (S) dated 10. 6. 2005: " (i) Whether in the facts and circumstances of the case, the learned Tribunal was legally justified in dismissing the Appeal, filed by the Appellant? (ii) Whether in the facts and circumstances of the case, the Appellant was not entitled to avail credit of Rs. 2,45,867/- in the Financial Year 2000-2001, particularly in wake of the fact that the spare parts (capital goods) in question were received in fag end of financial year and there was no condition of installation for taking of the credit with respect to spares? (iii) Whether in the facts and circumstances of the case, the Appellant was not entitled to avail entire credit in the Financial Year succeeding the year, in which the goods have been received in the factory as provided under Rule 57ag (1) of Central Excise Rules, 1944? (iv) Whether in the facts and circumstances of the case, the learned Tribunal was legally justified in confirming the order of Assessing Officer and Appellate Authority recovering Duty and also upholding the levy of penalty of Rs. 1. 00 lacs imposed under Rule 173q (1) (bb) of Central Excise Rules, 1944?"
(2.) THE basic facts in the back drop of which the aforesaid questions have arisen are that the appellant is engaged in the manufacture of concentrates from the ores of lead and zinc. Until 31. 3. 2000, the appellant was entitled to avail modvat credit only on the installation of the capital goods even though received by it and meant to be used by it in the manufacture of the products. With effect from April 1, 2000, new CENVAT Rules came into force. Under the new rules, instead of waiting until installation of such capital goods, it could avail CENVAT credit of the duty paid on capital goods used by it in the manufacture, on receipt of such capital goods in the factory in two installments the first installment of 50 per cent of the duty paid on capital goods could be availed in the year in which the capital goods were received in its factory and balance 50 per cent of duty later on in subsequent financial year after its installation. The new rules created a transitory position in respect of capital goods received during financial year ending on 31. 3. 2000 but were not installed before commencement of financial year on 1. 4. 2000, the date with effect from which the new CENVAT Rules had come into force. Since the manufacturer of goods had received such duty paid capital goods prior to 31. 3. 2000, they were not entitled to avail CENVAT credit in respect thereof on receipt basis until 31. 3. 2000. Under CENVAT Rules, too, they could not have received the benefit of credit on receipt basis during the financial year 2000-2001 on the principle adopted under the Rules for availing MODVAT in two installments. In the present case, the appellant has received the capital goods in its factory prior to March 31, 2000 but, under the existing scheme, it was not entitled to avail mod-vat credit until the capital goods were installed prior to March 31, 2000. The case of the appellant is that it claimed modvat credit in respect of the capital goods though received in the factory prior to March 31, 2000 but which were installed in April 2000 and, on installation, the appellant availed modvat credit of full amount which was objected to by the authorities of the Central Excise. After issuing the show cause notice for alleged wrongful availing of the 100 per cent modvat credit, the Assistant Commissioner disallowed the excess modvat credit availed by the assessee and ordered recovery of the same and also imposed a penalty in respect of such excess availed CENVAT credit by resorting to the provisions of the Central Excise Rules 1944.
(3.) ON appeal, the aforesaid order was affirmed by the Commissioner (Appeals) and, on further appeal, the order was affirmed by the Tribunal by order referred to above. The appellant contended before the Tribunal that for the transit period the appellant's case is governed by the circular of the Board of Central Excise & Customs clarifying the position in respect of the situation like the one in which the appellant was placed. However, the Tribunal did not find itself convinced by the aforesaid contention on the ground that the circular referred to was applicable only in the case where the capital goods were installed prior to March 31, 2000 and not to those factories where goods were installed after 1. 4. 2000. The modvat credit on the capital goods under the Central Excise Rules, 1944 was allowable under Rule 57q. Under clause (vii) (vii) of Rule 57q, in respect of capital goods received in the factory on or before March 31, 2000, modvat credit in respect of the duty paid on capital goods was not allowable on a date prior to the capital goods were installed in the factory. Thus according to the existing rule 57q, as on the date, the assessee has received the capital goods in his factory he was not entitled to avail the modvat credit in respect of such capital goods until the capital goods were installed prior to March 31, 2000. ;