2006 (4) TMI 437 - AT - Central Excise

Summary

Issues:
1. Whether the assessee is entitled to avail the balance 50% credit in respect of capital goods if cleared in the first year when the first 50% has been availed.
2. Whether the Cenvat credit rules allow for the whole amount of duty paid on capital goods in the same financial year if the goods are cleared as such in the same financial year.

Issue 1 Analysis:
The dispute revolves around the interpretation of Rule 4(2)(a) and (h) of the Cenvat Rules, 2001, which limited the Cenvat credit on capital goods to 50% of the duty paid in the financial year of receipt. The case involved the appellant availing 100% credit on capital goods and transferring them to another unit, leading to a contention that only 50% credit should have been taken in the year of receipt. The Tribunal analyzed the legislative intent behind the rule, emphasizing that the balance 50% credit can be claimed in a subsequent year only if the goods are in possession for use in the manufacturing process. The Tribunal highlighted the change in the rule effective from 1-3-2002, allowing full credit if goods are cleared in the same financial year, which was not the case in the appellant's situation.

Issue 2 Analysis:
The second issue involves the interpretation of the Cenvat credit rules regarding the clearance of capital goods in the same financial year. The respondent contended that subsequent clarifications in the rules allowed for immediate availment of the balance 50% credit if capital goods on which 50% credit was availed are cleared in the same year. The respondent also relied on a decision by the Larger Bench of the Tribunal, which held that the amount required to be paid upon clearance of capital goods should be equal to the credit availed. The appellant raised concerns regarding the Tribunal's decision in a previous case and the appeal filed by the department against it. The Commissioner (Appeals) followed the Tribunal's decision, citing binding precedent and the absence of a stay or reversal of the decision.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue after considering the provisions of the Cenvat credit rules and relevant case law, finding the Revenue's case devoid of merits based on the interpretation of the rules and precedents cited during the proceedings.