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2013 (2) TMI 669 - CGOVT - Central ExciseDenial of rebate claim - Simultaneous availment of both notifications from 10-6-2010 - utilization of the Cenvat credit on capital goods received during the period January, 2006 to June, 2007 and taken on 10-6-2010 - whether a manufacturer who have opted for full exemption during year 2007 to 9-6-2010 can take Cenvat credit on capital goods imported during the year 2007 which were used exclusively in the manufacture of exempted goods - Held that - Rule 6(4) of the Cenvat Credit Rules, 2004 is a specific rule which apply when a manufacturer exclusively uses capital goods for manufacturing of exempted goods or in providing exempted services whereas the Cenvat Credit Rules 4(2)(a) & 4(2)(b) ibid are the general Rules which provides the manner and method for allowing Cenvat credit. Hence Government finds much force in the contention of the department that if the capital goods are used exclusively in the manufacture of exempted products Cenvat credit will not be available to the manufacturer. Therefore the admissibility of Cenvat credit on capital goods has to be determined at the time of receipt of such capital goods in the factory and if no cenvat credit was admissible on that date it cannot be allowed subsequently - Decided in favour of Revenue.
Issues Involved:
1. Admissibility of Cenvat credit on capital goods used exclusively for the manufacture of exempted goods. 2. Timeliness of the department's appeal under Section 35EE of the Central Excise Act, 1944. Issue-wise Detailed Analysis: 1. Admissibility of Cenvat Credit on Capital Goods: The core issue revolves around whether a manufacturer who availed full duty exemption from 2007 to 9-6-2010 can claim Cenvat credit on capital goods received during this period. According to Rule 6(4) of the CENVAT Credit Rules, 2004, "No CENVAT credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods." The respondents, M/s. Arthanari Loom Centre (Textiles) Pvt. Ltd., availed Cenvat credit on capital goods received between January 2006 and June 2010, during which their final products were fully exempt from duty under Notification No. 30/2004-C.E., dated 9-7-2004. The department argued that the capital goods were exclusively used for manufacturing exempted goods at the time of their receipt, making the Cenvat credit inadmissible. This stance is supported by precedents such as Binani Cement Ltd. v. CCE, Sengunthar Spinning Mills, and Spenta International Ltd. v. CCE, which collectively establish that the eligibility for Cenvat credit is determined based on the status of the goods at the time of their receipt. The Commissioner (Appeals) allowed the credit based on Rules 4(2)(a) & 4(2)(b) of the Cenvat Credit Rules, 2004, which permit taking credit in installments. However, the Government found that Rule 6(4), being specific to the exclusive use of capital goods for exempted products, overrides the general provisions of Rules 4(2)(a) & 4(2)(b). Therefore, the Government concluded that the original authority's rejection of the rebate claim was legally correct, as the capital goods were used exclusively for exempted goods when received. 2. Timeliness of the Department's Appeal: The respondents contended that the department's appeal was time-barred under Section 35EE of the Central Excise Act, 1944. The statutory time limit for filing a revision application, including condonation, is six months. The department received the order-in-appeal on 31-3-2011 and initially filed an appeal with the CESTAT on 23-6-2011, which was dismissed on 26-9-2011 for lack of jurisdiction. The revision application was subsequently filed before the Central Government, excluding the period spent before the wrong forum. The Government referenced case laws, including judgments from the High Courts of Gujarat, Delhi, and Bombay, which held that time spent pursuing an appeal in good faith before an incorrect forum should be excluded under Section 14 of the Limitation Act, 1963. Consequently, the Government deemed the revision application to be within the condonable time limit and proceeded to decide on the merits. Conclusion: The Government set aside the orders-in-appeal and restored the orders-in-original, thereby rejecting the rebate claims of the respondents. The revision applications filed by the department succeeded, reaffirming that Cenvat credit on capital goods used exclusively for exempted goods is inadmissible, and the appeal was filed within the permissible time limit after excluding the period spent before the wrong forum.
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