2008 (5) TMI 544 - AT - Central Excise

Cenvat/Modvat credit - Capital goods - Held that - They had no justification to take the credit at the time of receipt of the capital goods which were not usable as such for manufacture of dutiable goods - appeal dismissed - decided against appellant.

Summary

Issues:
Appeal against Commissioner's order dated 15-11-2006 regarding Cenvat credit eligibility for capital goods used in manufacturing both dutiable and exempted products.

Analysis:
1. Facts Overview:
The appellants manufactured dutiable aerated waters and exempted "Maaza." They procured capital goods for five plants, with one plant capable of producing both dutiable and exempted goods. They received the capital goods between September 2004 to April 2005 and claimed Cenvat credit, except for goods related to the plant for exempted products.

2. Appellant's Arguments:
The appellants argued that the machinery, though used for exempted products, was capable of producing dutiable goods with modifications. They invested in machinery capable of manufacturing both types of products, indicating intent. They cited subsequent use for dutiable goods in October 2006 and contended that credit should be allowed if goods are capable of producing dutiable items.

3. Case Laws and Precedents:
The appellant relied on various judgments like PSL Limited and Ruchi Health Foods Ltd., emphasizing intent to manufacture both goods. They also cited cases like Bajaj Electricals Ltd. and Ispat Metallics Ltd., highlighting intermittent or future use possibilities for capital goods.

4. Revenue's Position:
The Revenue argued that credit eligibility is not based on capability but on actual use for dutiable goods at the time of receipt. They referenced rules prohibiting credit for goods exclusively used for exempted products and cited cases like Surya Roshni Ltd. and Grasim Industries Ltd. to support their stance.

5. Tribunal's Decision:
The Tribunal noted no dispute on credit eligibility for plants used solely for dutiable or exempted products. The contention revolved around a plant with dual capacity used only for exempted goods. The Tribunal emphasized that credit eligibility is determined at the time of receipt based on actual use for dutiable goods, not just capability.

6. Conclusion:
The Tribunal upheld the Commissioner's order, stating that subsequent use for dutiable goods does not justify credit taken at the time of receipt when goods were not usable for dutiable production. The case laws cited by the appellant were deemed inapplicable to the current scenario, affirming the legality of the Commissioner's decision.

In summary, the Tribunal dismissed the appeal, emphasizing the importance of actual use for dutiable goods at the time of capital goods receipt for Cenvat credit eligibility, regardless of subsequent modifications or use.