Per Jeet Ram Kait : This appeal filed by M/s. Grasim Industries Ltd. (herein after referred to as the appellants) is directed against the Order in Appeal No. 57/03 SCN (TRY-II) dated 25.2.2003 passed by the Commissioner of Central Excise (Appeals), Trichy whereby the Commissioner has rejected the appeal of the appellants and upheld the order passed by the original authority wherein the original authority has disallowed the credit of Rs. 2,39,96,904/- being the excess credit availed by the appellants on capital goods, besides imposition of penalty of Rs. 2,000/- under Rule 173Q of the CE Rules, 1944. He had also ordered for recovery of interest in terms of Section 11AA of the CE Act, 1944.

2. The brief facts of the case are that the appellants are engaged in the manufacture of cement and clinker falling under Chapter 25 of the Schedule to the CETA 1985. They are availing Modvat Credit of duty paid on the inputs as well as capital goods under Rule 57A and 57Q of the CE Rules. The appellants after filing necessary declaration for Modvat credit of duty paid on capital goods, imported certain capital goods under Project Import Regulations falling under Heading No. 98.01 of the Customs Tariff Act, 1975. Though these items were received in the factory before 29.2.2000, they were installed in the factory only on 6.3.2000. The appellants availed Modvat Credit on 31.3.2000 and 1.4.2000, that is after the installation of the capital goods. Rule 57Q as it existed between 1.3.97 and 29.2.2000 permitted Modvat credit to the extent of 75% of the countervailing duty on the capital goods imported under Project Import Regulation. This restriction was however removed vide Notification No. 11/2000-CE (NT) dated 1.3.2000. Since installation of the capital goods was completed only on 6.3.2000 the appellants availed 100% credit of countervailing duty pursuant to the amendment. The original authority disallowed the credit in excess of 75% to the extent of Rs. 2,39,96,904/- on the ground that the goods were received into the factory prior to 29.2.2000 as at that time the credit available was only to the extent of 75%. He has also ordered recovery of interest apart from imposing penalty as noted above. The appellants filed appeal before the Commissioner (Appeals) who rejected the appeal and hence the present appeal.

3. Shri N. Venkataraman, learned Counsel for the appellants referred to the written submissions made by appellants wherein it is inter alia stated as under:

(1) The capital goods were received in the factory before 29.02.2000 but were installed only after 1.3.2000. Modvat credit was availed only on 31.3.2000 and 1.4.2000. Rule 57Q as it existed between 1.3.97 and 29.2.2000 permitted Modvat Credit on CVD under project import only to the extent of 75% of the CVD paid under Section 3 of the Customs Act, 1962 and the limitation was removed vide Notification 11/2000 (NT) dated 1.3.2000.

(2) Since installation was completed only on 6.3.2000 pursuant to the amendment by Notification No. 11/2000 (NT), appellants availed 100% CVD.

(3) The modvat credit on capital goods scheme came into force with effect from 1.3.1994. At the time of inception of the scheme there was no embargo as to the point at which credit ought to be availed. Therefore, like the input modvat scheme, the credit was available the moment goods were received inside the factory.

(4) With effect from 1.1.1996 availment of capital goods credit is not automatic on the basis of receipt of goods. No credit shall be taken unless otherwise the capital goods are either installed or used for manufacture of excisable goods. In other words, eligibility was contingent upon installation of the capital goods in the factory of the manufacturer. Sub rule 2 of Rule 57Q during the relevant time became Rule 57Q of the CE Rules ibid.

(5) From 1.3.1997 to 29.2.2000, Rule 57Q (3) restricted the eligibility of capital goods credit falling under 98.01 to the extent of75% of the CVD paid on such goods and the e