LexCOMMNR OF CENTRAL EXCISE, BHAVNAGAR versus M/S. SAURASHTRA CHEMICALS LTD.
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COMMNR OF CENTRAL EXCISE, BHA VNAGAR
v.
MIS. SAURASHTRA CHEMICALS LTD.
MAY 10, 2007
[S.B. SINHA AND MARKANDEY KA TJU, JJ.)
Central Excise Act, 1944/Central Excise Rules, 1944: R 57 AC and
57Q{3):
CENVAT Credit on inputs/capital goods-Import of Generator set-
Amendment-R. 57 Q (3) replaced by R. 57 AC-Scope and ambit of R. 57
AC-Held: R. 57 (2) (a) and (b) of the Rules does not restrict grant of credit
A
B
c
on capital goods in a financial year-In terms whereof 50% of the credit
could be taken in a financial year and ba/ai ice may be availed in subsequent
years-A beneficent statute may ha\'e to be construed liberally-Capita/
goods received after the amendment in the Rules governed by clauses (a) and D
(b) of R. 57 AC (2) of the Rules but if received prior thereto it is governed
by clause C of R. 57 (AC) (2)-The provisions allowing the credit
circumscribed by the phrase "subject to" which is limited to an amount not
exceeding 50% of duty paid on capital goods-Hence, High Court was not
justified in holding that CENVAT credit to the extent of 100% could be E
allowed in terms of R. 57 AC of the Rules-Thus, impugned judgment cannot
be sustained, which is set aside accordingly-Interpretation of Statute-
Litera/ interpretation.
Words and Phrases"
'Subject to'-Meaning of in the context of R. 57 AC of the Central
Excise Rules, I 944.
F
Respondent-assessee, engaged in the manufacture of Soda Ash, Sodium
Bicarbonate and Caustic Soda, has been availing the benefit of MODVAT/
CENV AT credit on inputs as well as capital goods under the provisions of the G
Central Excise Rules. The respondent imported two generator sets. Although
one of the generators was received by the assessee on 24.10.1998, the same
was installed only on 1.04.2000. In the relevant financial year, Rule 57Q(3)
of the Rules was in operation. However, the said Rule was replaced by Rule
371
H
372
SUPREME COURT REPORTS
[2007) 6 S.C.R.
A 57 AC by way of amendment in the Rules, which came into force with effect
from 1.04.2000. A show cause notice was issued to the assessee on or about
5.05.2001 by the Superintendent Central Excise, directing it to show cause
as to why certain amount of credit as questioned in the notice should not be
recovered from them. The matter was determined by the Assistant
B Commissioner of Central Excise, holding that the respondent was entitled to
CENVAT credit only to the extent of 50%. However, an appeal preferred
thereagainst by the respondent was allowed by the Commissioner (Appeals).
An appeal preferred by the Revenue was dismissed by the Tribunal An appeal
preferred by the Revenue has been dismissed by the High Court. Hence, the
present appeal.
c
Allowing the appeal, the Court
HELD: 1.1. Sub-rule (1) of Ru!e 57 AC of the Central Excise Rules
refers to 'inputs'. Clauses (a) and (L) of Sub-Rule (2) of Rule 57AC of the
Rules governs the receipt of the capital goods in a factory. It does not restrict
D grant of credit in a given financial year. Whereas 50% of the credit can be
taken in one financial year, the balance may be availed in the subsequent years,
subject to the condition that the capital goods are still in possession and use
of manufacturer of the final products in subsequent years. Clauses (a) and
(b) of Sub-Rule (2) of Rule 57 AC of the Rules, therefore, provide for a
composite scheme. [Para 71 [377-E, F, G)
E
1.2. By reason of the provision under clause (c) of sub-R 12 of R 57 AC
of the Rules, the credit sought to be given by reason of Rule 57Q(3) has not
been taken away in its entirety, but merely postulates that if the credit had
not already been availed, the same merely be obtained but limited only to the
F extent of 50% thereof. [Para 7) (378-A, BJ
1.3. A beneficient statute may have to be considered liberally but where
a statute does not admit of more than one interpretation, literal interpretation
must be resorted to. The provision allows taking of credit but the same is
circumscribed by the condition as is apparent from the use of the words
G "subject to" which is limited to an amount not exceeding 50% of the duty
paid on such capital goods. The term "subject to" in the context assumes
some importance. (Para 8) [378-B, CJ
Ashok Leyland Ltd v. State of Tamil Nadu and Anr., [2004) 3 SCC 1
and S.N. Chandrashekar and Anr. v. State of Karnataka and Ors., [2006) 3
H sec 208, referred to.
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