2006 (9) TMI 389 - AT - Central Excise

Summary

Issues involved: Appeal against denial of Cenvat credit on capital goods and penalty imposition.

Summary:
The appellant received capital goods before the new Cenvat rules came into effect on 1-4-2000. The appellant installed the goods in June 2000 and took 50% credit in August 2000. The factory ceased manufacturing activities in December 2000 but continued clearing stock on duty payment. The appellant took the second installment of credit in April 2001, which was deemed irregular by the Central Excise authorities. The appellant argued that Rule 57AC(2)(c) governs credit eligibility for goods received before 1-4-2000, and usage should not be a precondition for credit availability. However, the Tribunal held that the usage condition under Rule 57AC(2)(b) applies to all capital goods, even those received before 1-4-2000. The Tribunal confirmed the demand for Cenvat credit but set aside the penalty, considering the appellant's bona fide interpretation of the rules.

The Tribunal upheld the denial of Cenvat credit on capital goods due to irregularity in taking the second installment of credit after the factory ceased manufacturing activities. The appellant's argument that the usage condition should not apply to goods received before 1-4-2000 was rejected, emphasizing the fundamental principle of using goods for manufacturing excisable goods. The Tribunal accepted the appellant's plea regarding the penalty, considering it a genuine interpretation of the new Cenvat rules. The demand for Cenvat credit was confirmed, but the penalty imposed on the appellant was set aside.

The Tribunal's decision highlights the importance of adhering to Cenvat rules regarding the eligibility and utilization of credit on capital goods, even for goods received before the implementation of new rules. The judgment provides clarity on the application of Rule 57AC and emphasizes the necessity of using capital goods for manufacturing excisable goods to avail of Cenvat credit. The Tribunal's consideration of the appellant's bona fide interpretation in setting aside the penalty showcases a balanced approach to enforcing compliance with excise regulations.