2003 (9) TMI 499 - AT - Central Excise

Summary

Issues:
1. Stay application for waiver of pre-deposit of duty and stay of recovery proceedings.
2. Disallowance of Cenvat credit on capital goods under Rule 4(2)(a) of Cenvat Rules.

Analysis:
1. The applicants filed a stay application seeking waiver of pre-deposit of duty amounting to Rs. 2,43,720 and stay of recovery proceedings. The issue revolved around the Cenvat credit on capital goods, specifically the disallowance of credit by the Department under Rule 4(2)(a) of Cenvat Rules due to non-fulfillment of the requirement to avail 50% of the credit within the financial year.

2. The Counsel for the applicants argued that the maximum limit prescribed by the Rules was the only requirement, and since the unit commenced operations at the end of the year, they could not avail the credit within the financial year but did so on 1-4-2001. Reference was made to Circular No. 199/33/96-CX, dated 23-4-96, which acknowledged the challenges in availing credit for capital goods within a specific timeframe. Additionally, reliance was placed on the Tribunal's decision in the case of Surya Prabha Mills Ltd. to support the argument that there was no time restriction for availing credit on capital goods under the Modvat Rules.

3. The Revenue's representative contended that the Circular and decision cited by the Counsel pertained to Modvat Rules, whereas the current issue concerned Cenvat Rules. Under Rule 4(2)(a) of Cenvat Rules, it was mandatory to avail at least 50% of the credit by the end of the financial year. Since this requirement was not met, the Department's rejection of the claim was justified.

4. Upon careful consideration of the relevant rules and precedents cited, the Judge found a prima facie case in favor of the party. Consequently, the stay application was allowed unconditionally, indicating a favorable stance towards the applicant's position regarding the Cenvat credit on capital goods.