Per Shri S.L. Peeran :

This is a revenue appeal against the order of Commissioner (Appeals) dated 09.04.97 permitting the assessee to avail MODVAT credit on capital goods. The Assistant Commissioner had dis-allowed the credit by holding that the declaration filed under Rule 57T(1) was time barred. Therefore, he directed them to re-credit them and also imposed a penalty of Rs. 5 Lakhs. The Commissioner has noted that under Rule 57T(1), every manufacturer intending to take credit of the duty paid on the capital goods should file a declaration indicating the particulars of capital goods, description of the final product etc. The Second Proviso clause shows that where a manufacturer is not in a position to do so and makes such a declaration subsequently, but within a period of one month or such further period as may be allowed by the Assistant Commissioner for a maximum period of another two months (from the date of receipt of the said capital goods in the factory), the Assistant Commissioner may on sufficient cause being shown, condone the delay in filing the declaration. He has noted that as per Section 2(e) of the Central Excise Act, 'Factory' means "a place where in excisable products are produced or any process in connection with the production is carried on". Therefore, he has held that for the purpose of the Central Excise Act, the factory comes into existance only after it is registered under the Central Excise Law. He has noted that the assessee had registered themselves on 11.07.94 and they had filed the declaration on 22.07.94 and, therefore, there was no delay in the matter and hence they are entitled to avail the MODVAT credit on capital goods. He has concluded that date of receipt of capital goods in such cases has to be reckoned from the date of Central Excise registration for the purpose of second proviso to Rule 57T(1) and hence held that there was no delay in filing the declaration.

2. I have heard both sides in the matter and have carefully considered the submissions made by both sides in this behalf.

3. Learned DR relied on the Circular No. 88/88/94-CX dated 26.12.94 issued by the Board, wherein, it has been clarified on this very point that a manufacturer intending to take credit of the duty paid on capital goods in such cases shall continue to file a declaration as required under Rule 57T irrespective of the fact that such a factory has come into existance and/or got registered. Therefore, the DR submits that they ought to have filed the declaration irrespective of their obtaining licence and commencement of the factory. Learned DR submitted that the goods were received in the factory in the month of April'94 and hence declaration filed in the month of July'94 is barred by time.

4. Learned Advocate pointed out that this clarification came only in December'94 and had only prospective effect. Earlier to this circular, the department was not receiving declaration from the factories who had not obtained licence and it is only after this circular they have been receiving declarations and, therefore, the order passed by the Commissioner is sustainable.

5. On a careful consideration of the submissions, I am of the considered opinion that the decision arrived at by the Commissioner is sustainable in law and requires to be upheld. The factory started operating only after obtaining the registration after 11.07.94 and the declaration was filed on 22.07.94 within the stipulates period and in terms of the provisions of Rule 57T(1). The Board circular has only enabled the department to receive declarations in cases where registration of the factory had not been done. This circular has got only prospective effect and not retrospective effect. The party had clearly explained that the declarations were not received by the department prior to the issue of licence and, therefore, they filed in immediately on obtaining and hence, their availing credit was in time. The revenue's ground that the date of entering the factory in Apr