2004 (7) TMI 520 - AT - Central Excise

Summary

Issues involved:
Interpretation of Cenvat Credit Rules, 2002 regarding availing of credit on capital goods cleared to other units of the same manufacturer.

Analysis:
The appellants, engaged in the manufacture of Pre-cured Tread Rubber, were required to pre-deposit duty and penalty for two appeals. The issue revolved around availing Modvat credit on capital goods cleared to their other units. The department alleged that only 50% credit could be taken initially, with the remaining 50% in the next financial year if the capital goods remained in the possession and use of the manufacturer. The consultant argued that as long as the capital goods were with the manufacturer's units, credit could be rightfully taken, regardless of the specific factory. He requested a waiver of the pre-deposit amounts.

The department, represented by the learned SDR, referred to a new proviso in Rule 4(2) of the Cenvat Credit Rules, 2002, allowing full credit if capital goods were cleared in the same financial year. Since the appellants had availed 50% credit initially and the remaining 50% in the subsequent year, and had transferred the capital goods to their other units, they contended that the appellants were not eligible for the credit. The SDR prayed for the appellants to be put to terms.

Upon consideration, the judge deliberated on whether the appellants could be considered in possession and use of the capital goods when transferred to their own units, and if credit could be denied for being taken in two financial years. The judge noted that the rules required the capital goods to be in the possession and use of the manufacturer, without specifying the factory. As the goods were cleared to the appellants' other units on full duty payment, the judge found a prima facie case in favor of the appellants. Consequently, the judge granted a waiver of the pre-deposit of duty and penalty, scheduling the appeals for a hearing on merits in due course.