2009 (8) TMI 923 - AT - Central Excise

Summary

Issues:
- Availment of Cenvat credit on capital goods
- Denial of credit due to non-use of capital goods
- Interpretation of Rule 4(2)(b) of Cenvat Credit Rules, 2004
- Confirmation of interest and reduction of penalty

Analysis:
1. The primary issue in this case revolves around the availment of Cenvat credit on capital goods, which was denied by the lower authorities citing non-usage of the goods by the appellant. The Commissioner (Appeals) noted the amendment in Rule 4(2)(b) of Cenvat Credit Rules, 2004, which allowed credit if the capital goods were in possession of the manufacturer, irrespective of use. The Commissioner directed the appellant to pay interest for the period when credit was availed and reduced the penalty imposed.

2. The appellant was dissatisfied with the interest confirmation, while the Revenue contested the penalty reduction. The Tribunal referred to a previous case involving M/s. Ispat Industries Ltd. v. CCE, where it was held that denial of credit based on goods not being in use at the time of availing credit was not sustainable. The Tribunal emphasized that the word 'use' in the rule did not necessitate actual usage, supported by a circular from the Board allowing credit upon receipt of capital goods, even if not yet installed.

3. Consequently, the Tribunal set aside the impugned order, allowing the appeal filed by the assessee. As a result of the assessee's appeal being upheld, the Revenue's appeal seeking an enhancement of penalty became irrelevant and was rejected. The judgment clarified the interpretation of the rule regarding the availment of Cenvat credit on capital goods, emphasizing possession over actual use as the determining factor.

4. In conclusion, the judgment highlighted the importance of possession of capital goods for availing Cenvat credit, overruling the requirement of immediate usage. The decision provided clarity on the application of Rule 4(2)(b) and set a precedent for similar cases where denial of credit based on non-usage was deemed unjustified.