2007 (7) TMI 535 - AT - Central Excise

Summary

Issues involved: Denial of Cenvat credit on capital goods received, reliance on Tribunal decisions, eligibility for credit based on time of receipt of goods, comparison with previous judgments.

Summary:

Issue 1: Denial of Cenvat credit on capital goods received
The ld. Commissioner denied Cenvat credit of Rs. 23,63,534/- to the appellants for capital goods received during 2003-04 and 2004-05, along with imposing a penalty of Rs. 2 lakhs. The denial was based on the ground that the final product was exempted from duty during the period of removal of capital goods from the factory. The appellants, however, relied on a Tribunal decision where a job worker was allowed to avail Modvat credit in a similar scenario. The Tribunal noted that eligibility for capital goods credit is determinable at the time of receipt in the factory, and if the final product is duty-exempt at that time, credit on capital goods would not be admissible.

Issue 2: Reliance on Tribunal decisions
The appellants cited the Tribunal's larger bench decision in favor of the assessee, along with another decision affirmed by the Supreme Court, to support their claim for Cenvat credit. The Tribunal compared these decisions with the one relied upon by the ld. Commissioner, emphasizing that the eligibility for credit is linked to the time of receipt of capital goods in the factory.

Issue 3: Eligibility for credit based on time of receipt of goods
The Tribunal clarified that eligibility for Modvat credit on capital goods is determined at the time of receipt in the factory, regardless of the subsequent dutiability of the final product. The decision in Surya Roshni Ltd. was upheld, stating that the manufacturer does not become entitled to the benefit if the final product becomes dutiable later. The civil appeal against this decision was dismissed by the Supreme Court, maintaining the Tribunal's ruling.

Issue 4: Comparison with previous judgments
The Tribunal concluded that the larger bench decision and the judgment affirmed by the Supreme Court would govern the present case, favoring the assessee's claim for Cenvat credit on capital goods. As a result, there was a waiver of pre-deposit and stay of recovery for the duty and penalty amounts. The decision was dictated and pronounced in open court.