CENVAT Credit on capital goods - Amendment vide Notification No 25/1996 is only clarificatory and has retrospective application - CESTAT order denying credit on goods falling under CETH 84.74 is set aside: Madras HC
By TIOL News Service
CHENNAI, SEPT 13, 2013: THE issue involved in the appeal is admissibility of MODVAT credit on goods falling under CETH 84.74 for the period from 23.7.1996 to 31.8.1996. For the period prior to 23.7.1996, there is no dispute on admissibility. However, with effect from 23.7.1996, after the insertion of new definition of capital goods under Rule 57Q, goods falling under CETH 84.74 were specifically excluded from the eligibility in sub-clause (a) of Rule 57Q(1). Also with effect from 31.8.1996, vide Notification No 25/1996 CE (NT), the definition of capital goods was amended again and goods falling under CETH 84.74 became eligible for credit. So this dispute is limited to the period from 23.07.1996 to 31.8.1996.
Aggrieved by denial of credit by the lower authorities, the assessee went on appeal before CESTAT, where the assessee took the contention that as Notification No.25/96- CE( NT) dated 31.8.1996 was clarificatory in nature, retrospective effect had to be given to the said amendment. Further, considering the fact that prior to 23.7.1996, the assessee had availed the benefit of modvat credit on components, spare parts and accessories thereof, that benefit should have been taken as available to the assessee in respect of those goods received during the disputed period, when Notification No.14/96-CE dated 23.7.1996 was in vogue. The claim of the assessee was however rejected by the Tribunal on the ground that Notification No.25/96-CE (NT) dated 31.8.1996 could not be taken as clarificatory in order to read retrospective effect to it to cover the period from 23.7.1996 to 31.8.1996 to grant the benefit of MODVAT credit in respect of those specified items, which were excluded from the list of eligible capital goods under Notification No.14/96-CE dated 23.7.1996. Aggrieved by this, the present appeal has been filed by the assessee.
After hearing both sides, the High Court held:
The dispute herein related to goods falling under Chapter Heading 84.74. As is evident from the reading of the amended Rule 57Q( 1)(d) under Notification No.14/96-CE dated 23.7.1996, the provision reads as follows:
"(d) components, spares and accessories of the goods specified against items (a) to (c) above."
Going by the liberal meaning given to Clause (d) in Rule 57Q that the position prior to 23.07.1996 when credit was available for components, spares and accessories irrespective of the classification of specified capital goods, we have no hesitation in accepting the case of the assessee. Quite apart, even going by the circular, we agree with the argument advanced by the learned counsel for the assessee that the amendment under Notification No.25/96 dated 31.8.1996 has to be read only as clarificatory and retrospective effect has to be given for availing modvat credit. In view of this reasoning, we find that capital goods itself were eligible for modvat credit under Rule 57Q.
In the light of the decision of this court following the Apex court decision and in the background of the circular issued by the Government of India dated 2.12.1996 that the benefit of modvat credit under Rule 57Q would be applicable to all components, spares and accessories of the specified goods, irrespective of their classification under any chapter heading, we have no hesitation in granting the relief in favour of the assessee, thereby the order of the Customs, Excise and Service Tax Appellate Tribunal is set aside.
(See 2013-TIOL-690-HC-MAD-CX)
