1. Heard Shri S.K. Roy Choudhary, Advocate on the Stay Application filed by the appellant. The issue relates to the availability of Cenvat credit of duty paid on capital goods. The capital goods in this case was received in January and February, 2000. The duty involved is 9.25 lakhs and the penalty has been imposed is 11.25 lakhs. The Advocate draws our attention to Rule 57AC(2)(C) which lays down that Cenvat credit may also be taken in respect of such capital goods as have been received in the factory and have not been installed before 1st of April, 2000 subject to the condition that during the Financial year 2000-2001, the credit shall be taken for an amount not exceeding 50% of the duty paid on such capital goods. He submits that in this case the capital goods have been installed after 1-4-2000 and they are entitled to get the Modvat credit in view of the Rule 57AC(2)(c). The Ministry of Finance in their F. No. B 4/7/2000-TRU, dated 3-4-2000 has clarified the same thing.
In view of above he submits that the appellant should be given total dispensation for payment of duty and penalty.
Countering the arguments of the Advocate for the appellant, the learned JDR Shri N.K. Mishra submitted that in this case it is an undisputed fact that the inputs for the capital goods in this case were received in January and February, 2000. The relevant rule applicable at that time was Rule 57Q of the erstwhile Central Excise Rules. This rule says that the Modvat credit is not available for ingots and billets of non-alloy steels falling under : "ingots and billets of non-alloy steel falling under sub-heading Nos. 7206.90 and 7207.90, manufactured in an induction furnace unit, whether or not any other goods are produced in such induction furnace, and hot re-rolled products of non-alloy steel falling under sub-heading Nos. 7211.11, 7211.19, 7211.30, 7211.52, 7211.59, 7211.60, 7211.92, 7211.99, 7213.90, 7214.90, 7215.90, 7216.10 and 7216.90 on which duty is paid under Section 3A of the Central Excise Act, 1944 (1 of 1944)".
The Appellant was working under the compounded levy scheme at the relevant time for availing the Modvat. At that time, the relevant provision was Rule 57 AG which says any amount of credit earned by a manufacturer under Rule 57A, 57B or 57Q as they existed prior to 1st of April, 2000 and removed unutilised at that date shall be utilised as Cenvat credit which is as follows : "RULE 57AG. Transitional provision. - (1) Any amount of credit earned by a manufacturer under Rules 57A, 57B or 57Q, as they existed prior to 1st day of April, 2000 and remaining unutilised on that day shall be allowable as CENVAT credit to such manufacturer under these rules, and be allowed to be utilized in accordance with these rules".
In view of this position Shri Mishra submits that Cenvat available at that time comes under Rule 57Q. A credit can be availed only with reference to Rule 57AG if any credit remaining. Further, he submits that new Cenvat credit scheme has been substituted by Notification No.27/2000-C.E. non-tariff dated 31-3-2000. This scheme specifically says this is applicable on the excisable goods which have been received in the factory on or after 1st day of April, 2000. Since the goods in this case has been received prior to 1-4-2000, Rule 57AC has no application in this case. He submits that in view of above the appellant may be directed to pay the full duty and penalty.
3. After hearing both the sides we find the appellants were working under compounded levy scheme under Section 3A of the Central Excise Act, 1944 for which no Modvat facility was extended. The appellants have received the modvatable capital goods in January and February, 2000. We find considerable force in the argument of the learned JDR that at the material time the credit was available under Rule 57Q of erstwhile Central Excise Rules and the provisions to take Modvat after 1-4-2000 was available only under Rule 57AG.4. In view of above we find that the appellants have not made out a case for dispensation of duty and penalty. In view of the facts circumstances in the case, we direct the appellant to pay Rs. 4.00 Lakhs within a period of 12 weeks from today. Upon payment of this amount, rest of the duty and penalty shall be stayed. Case to come up for compliance and hearing on 18th of May, 2005.