Judgment

1. Leave granted.

2. Interpretation of Rule 57 AC of the Central Excise Rules, 1944 (for short “the Rules”) is in question in this appeal which arises out of the judgment and order dated 12.01.2006 passed by the High Court of Gujarat at Ahmedabad in Tax Appeal No. 862 of 2005.

3. Respondent is engaged in manufacture of excisable goods, viz., Soda Ash, Sodium Bicarbonate and Caustic Soda. It is registered under the Central Excise Tariff Act, 1985. Its products are governed by the provisions of the Chapter VIIA of the Rules. It has been availing the benefit of credit of duty paid on inputs as well as capital goods under the provisions of the Rules.

4. On or about 24.09.1996, the respondent imported two generator sets. We are herein concerned with the second one Although it was received by the respondent on 24.10.1998, the same admittedly was not installed prior to 1.04.2000. In the relevant financial year, the rule which was in operation was Rule 570(3) of the Rules was as under:

“57Q(3). Notwithstanding anything contained in sub-rule (1), the manufacturer of the final products shall be allowed credit of additional duty leviable under section 3 of the Customs Tariff Act, 1975(51 of 1975) on goods falling under' Chapter Heading No. 98.01 of the first schedule to the Customs Tariff Act, to the extent of 75% of the said additional duty paid on such goods.”

Indisputably the said Rule was replaced by Rule 57 AC of the Rules, which came into force with effect from 1.04.2000. It reads as under:

“57AC. Conditions for allowing CENVAT credit.- (1) The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacture.

(2)(a) The CENVAT credit in respect of capital goods received in a factory at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent of the duty paid on such capital goods in the same financial year.

(b) The balance of CENVAT credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer, provided that the capital goods (other than components, spares and accessories, refractoriness and refractory materials and goods falling under heading No. 68.02 and sub- heading 6801.10 of the First Schedule to the Central Excise Tariff Act) are still in the possession and use of the manufacturer of final products in such subsequent years.

(c) CENVAT credit may also be taken in respect of such capital goods as have been received in the factory, but have not been installed, before the 1st day of April, 2000 subject to the condition that during the financial year 2000-2001, the credit shall be taken for an amount not exceeding fifty per cent of the duty paid on such capital goods. illustration.- A manufacturer received machinery on April 16, 2000 in his factory. CENVAT of two lakh rupees is paid of this machinery. The manufacturer can take credit up to a maximum of one lakh rupees in the financial year 2000-2001, and the balance in subsequent years.

(3) The CENVAT credit in respect of duty paid on the capital goods shall be allowed to a manufacturer even if the capital goods are acquired by the manufacturer on lease, hire purchase or loan agreement, from a financing company.

(4) The CENVAT credit in respect of capital goods shall not be allowed in respect of that part of the value of capital goods which represents the amount of duty on such capital goods, which the manufacturer claims as depreciation under Section 32 of the Income-tax Act, 1961 (43 of 1961).

(5)(a) The CENVAT credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re-conditioning or any other purpose, and it is established from the records, challis or memos or any other document produced by the assessee availing the CENVAT credit that the goods are received back in the factory wi